{"id":4464,"date":"2015-01-30T15:11:40","date_gmt":"2015-01-30T09:41:40","guid":{"rendered":"https:\/\/staging-imarticus.kinsta.cloud\/?p=4464"},"modified":"2021-02-08T16:57:45","modified_gmt":"2021-02-08T16:57:45","slug":"back-to-basics-in-investment-banking","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/back-to-basics-in-investment-banking\/","title":{"rendered":"Back to Basics in Investment Banking"},"content":{"rendered":"

There was an article in the news this week that got our IFAP class talking. UBS, a global investment bank that is now a shadow of what it used to be, has decided to go back to the drawing board and do \u2018real\u2019 investment Banking. Read the article here Here is an excerpt:
\n\u201cThe goal: Give advice and conduct trades while taking less risk : As head of the investment bank at UBS, Andrea Orcel is trying to revive a lost business model: connecting buyers and sellers of stocks and bonds and advising corporate clients \u2014 without borrowing money to boost returns. \u201cWhat I would very much like to create is a real investment bank,\u201d says Orcel<\/a>, \u201cthe kind that there aren\u2019t anymore.\u201d
\nThis brought us to thinking what is Investment Banking and why did it begin. Investment Banking<\/a> is not Private Equity nor is it lending corporate loans or funding leveraged buyouts. Investment Bankers were transaction experts that brought people together. You want to sell something; a good banker will sell it for you. You then want to buy something else, that same banker might you buy it. You want to go IPO to raise money to expand, if the banker knows how to underwrite they can take you IPO. They were glamorous brokers that brought people together. And traders were only folks who would help you sell a stock by finding you a buyer and then popping the commission. All was simple. But then the corporate banker said, why don\u2019t you let us help him buy the company. Let\u2019s finance the deal as well. Let\u2019s bundle the products. Bundling creates conflict, which increases risk. Suddenly the bank, which would have only made a small transaction fee on the deal, has exposure. Etc etc\u2026we go beyond the mandate of Investment Banking but more than that, bankers get dependent on securing sell side or buy side mandates on the back of the balance sheet and not their ability to run a transaction which is why you have the boutique banks suddenly scrambling for business. While UBS is no boutique, they fired over 5000 bankers post the crisis and are rebuilding both their team and their balance sheet.
\n\u201cUBS ranks 12th among advisers on mergers and acquisitions this year, down from seventh in 2007. It\u2019s struggling to win M&A assignments because it no longer routinely offers to finance deals it advises on, according to two former bankers who asked not to be identified discussing their former employer. Orcel says bankers who can\u2019t build a relationship without relying on lending are focussed on either the wrong clients or the wrong way to serve them.\u201d
\nWe have to wait and see how true Investment Banking products will do especially as Private Equity firms, key players in M&A, are able to originate faster and more effectively reducing costs. They can also run their own deals. For now Orcel is taking a gamble and getting ready to play with the big boys, only they might have to draw with a much smaller gun.
\n–\u00a0Reshma Krishnan<\/p>\n","protected":false},"excerpt":{"rendered":"

There was an article in the news this week that got our IFAP class talking. UBS, a global investment bank that is now a shadow of what it used to be, has decided to go back to the drawing board and do \u2018real\u2019 investment Banking. Read the article here Here is an excerpt: \u201cThe goal: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[22],"tags":[96],"pages":[],"coe":[],"class_list":["post-4464","post","type-post","status-publish","format-standard","hentry","category-finance","tag-investment-banking"],"acf":[],"yoast_head":"\nBack to Basics in Investment Banking - Imarticus Learning<\/title>\n<meta name=\"description\" content=\"UBS, a global investment bank that is now a shadow of what it used to be, has decided to go back to the drawing board and do \u2018real\u2019 investment Banking. 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