While it is no secret that Investment Banking has forever been, one of the most alluring fields, especially with the sophistication and grace that stock exchange and the Wall Street have both gathered, in the recent few years.
To begin with, we should perhaps be clear about what Investment Banking is. For instance, not everyone who works for Goldman Sachs or Edelweiss is an Investment Banker engaging in Investment Banking. Investment banking roles can also be found across different types of companies. While the most popular investment banking jobs are found at Bulge Bracket Investment Banks like JP Morgan and Morgan Stanley, they can also be found in the Investment Banking units of commercial banks like ICICI Bank and Citibank. They are also found in smaller regional firms like Avendus Capital and Jeffries or more sector focused banks like Piper Jaffray. These are often called Boutique Banks in India and middle-market banks around the globe.
Also Read : How Do I Get Into Investment Banking?
Investment Banking jobs can also be found in large private Equity institutions like Blackstone. But an area a lot of people completely ignore is similar Investment Banking career paths at corporate firms like Reliance and Mahindra & Mahindra, large Multinational companies that engage in large amounts of fundraising, restructuring and, M&A. Many of these companies have in-house Investment Banking units.
This is the reason why you’d find almost everyone quoting some of the other famous investment related movie. Investment banking as a field branches out to various subfields, which include corporate finance, wealth management and mergers and acquisitions to name a few. Of these, mergers and acquisitions have gone on to become one of the most sought-after fields, in terms of career choices. A lot of M&A aspirants are more often than not, on the lookout for getting thoroughly trained so as to master this amazing field. This is why a lot of candidates. Imarticus Learning, which offers excellent industry endorsed, specialization programs on subjects like Corporate Finance, M&A, Valuation, Financial Modelling, Operations and so on.
While getting professionally trained is extremely important, when it comes to pursuing a career in Investment Banking, it is equally important supplement your knowledge with the help of books.
Here’s a list of some of the best books and movies about Investment Banking, which would serve novices as well as professionals, very perfectly.
- Intelligent Investor: The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing. The Intelligent Investor also marks a significant deviation to stock selection from Graham’s earlier works, such as Security Analysis. Graham’s philosophy of “value investing” – which shields investors from substantial error and teaches them to develop long-term strategies – has made The Intelligent Investor the stock market bible ever since its original publication in 1949.
- Barbarians at the Gate: The Fall of RJR Nabisco is a book about the leveraged buyout (LBO) of RJR Nabisco, written by investigative journalists Bryan Burrough and John Helyar. The battle for the control of RJR Nabisco in the Autumn of 1988, which became the largest and most dramatic corporate takeover in American history, sent shock-waves through the international business world and became a symbol of the greed, excess and egotism of the eighties. Twenty years on, the world is once again recovering from a period of financial extravagance and irresponsibility.
The Rules were simple:
Never Pay in Cash
Never Tell the Truth
Never Play by the Rules
- Rogue Trader (film): Rogue Trader is a 1999 British biographical drama film written and directed by James Dearden in which we get the insights of the maker-checker concept of Investment Banking operations. The film centres in the life of former derivatives broker and the 1995 collapse of Barings Bank. It was based on Leeson’s 1996 book Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World.
- The Big Short (film) is a 2015 American biographical film, based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis about the financial crisis of 2007–2008 which was triggered by the United States housing bubble.
Related Article : The Difference between Investment Banking And Equity Research
Today, technology is key in turning trading strategy into trading profit. Technology enables new pricing models and products to be delivered to the market. The IB industry thrives on the flow, analysis, and interpretation of information and technology is often the edge that gives a bank competitive advantage.
Technology spans across IB functions and underpins every deal that is made. When a system is unavailable, millions of dollars can be lost. So robust systems and infrastructure are more than important, they are fundamental to IB’s ability to operate & make profits.
Another challenge is the evolving regulatory burden of the financial sector. Technology has to do more than keeping up; it has to drive the changes and developments necessary to keep IB’s ahead of the competition.
IB’s rely on advanced technologies in the front office to enable high-speed and high-frequency trading. Until now, the upfront benefits from this activity have been so enormous that the complexity and inefficiency of post-trade processes and systems have often been overlooked.
This is changing at a fast pace. The highest performing investment banks are now using their front-office technologies in bold, innovative ways as a source of competitive advantage for the whole business. By concurrently enabling interdependent business functions, such as risk management, settlement and financial reporting, these technologies are transforming the way organizations ‘think’, ‘react’ and ‘operate’.
There are a number of reasons for the change in this trend:
• Management requires integrated, proactive technology infrastructures that can anticipate the impact of new market and regulatory developments and adapt to the same.
• Technical leaders are under mounting pressure to get a return on their massive investments in technology by using these assets to drive down costs, as well as increase revenues (traditionally the principal focus for front-office technologies)
• This increasing emphasis on ROI means Technology leaders need to develop flexible IT systems/assets, that, by adapting to business change, can appreciate in value over time.
Understanding complex technology is one aspect, but a firm grasp of business problems is also essential. IB technologists work closely with the sales, trading floor, middle office operations to develop the software that enables them to make the split-second decisions or use their creativity and initiative to enhance state-of-the-art front-to-back systems and databases. Whatever the task may be, IB technologists work in a fast-moving environment where solutions move from concept to implementation in weeks and months rather than years.
This could easily be asked as an interview question and one that seemingly causes a lot of confusion for aspirants in the Finance domain. To help you understand investment banking, it’s best to differentiate it from the type of banking that you have experience with: commercial or retail banking – the banks that you see on the street.
The banking sector is split into two fundamental divisions: Investment banking and retail banking.
Let’s understand what Investment banking is. Investment banks are huge financial institutions that assist their clients – mostly corporates and government agencies – in raising capital by underwriting and acting as the agent or an underwriter in the issuance of securities.
An investment bank assists these organizations with complex financial solutions such as Mergers and Acquisitions, Equity Underwriting, Private Placement, Valuation and Fairness Opinion, Corporate Restructuring, Structured Refinance, Management Buyouts, among others.
In a way, Investment Banks serve as a bridge between large corporations and investors.
Investment banking is split into the front office, middle office, and back office activities. Think you want to be an investment banker? Chances are the role you are imagining is a front office role.
On the other hand, The bank where you maintain your current (UK), checking (USA) or savings account is a commercial or retail bank. You cannot go into an investment bank and deposit your money, get your ATM card, or ask for a student loan. This is what commercial or retail banks do. – The value of transactions that happen in a retail bank is very low in nature but the number of transactions is significantly higher than those of investment banks Some retail banks have an investment banking unit, others do not. For example, SBI Bank is primarily a Retail Bank and has established a subsidiary company SBI Cap Securities, which carries on investment banking operations. Retail Banking encompasses a wide variety of products and services like Savings Accounts, Bank Guarantees, Certificate of Deposits, Mortgages, Personal Loans, Letter of credits, Foreign Exchange services for retails clients, Insurance business, Wealth Management Services, Personal Banking, Stock Brokerage Services, Locker Facilities etc. which are not provided by Investment Banks.
Some of the well-known Investment Banks include:
- JP Morgan and Chase
- Bank of America
- Wells Fargo
- Morgan Stanley
Some of the well-known Retail Banks include:
- HDFC Bank
- ICICI Bank
- Bank of Baroda
- SBI Bank
To sum up, here are the key differences between investment and retail banks:
Think investment banking is a career option for you? Interested in learning more? Join our CIBOP (Certified Investment Banking Operations Professional) program to learn about Investment Banking in more detail…
The key factor denoting a company’s growth and existence is the level of profitability attained. There is a direct relationship between utilizing financial resources and the profit generation for a business firm. Financial analysis is required to determine the financial health and stability of a company. It helps in determining the current financial position and upcoming financial requirement. In order to assess the financial health and performance of a company, a financial analyst is required.
The role of the financial analyst is very challenging, and includes the following:
- Guiding the financial need and requirement of the company
- Assessing the performance of bonds, stocks, commodities, and other investment instruments
- Making decisions regarding market investment
- Analyzing the performance of securities, insurance
- Determining future earnings and expenses of business firms
- Evaluating the effect of tax rates, government policies, competitor strategies, commodity prices etc
They deal with the balance sheet, spreadsheets, and databases in order to gain a better insight into firm’s prospects. Having a strong hold on the market economic trends and business scenarios, they often give recommendations regarding buying and selling of investments.
There is a vast scope of career advancement for financial analysts. Many professional, as well as certification courses, are there for developing the financial knowledge and skills. With rigorous academic curriculum, ‘Imarticus Learning’ has successfully developed many financial professionals with outstanding quantitative and analytical skills, through our business analytics certification course.
The field of Finance has always been considered as a very attractive career option, because of the adrenaline rush that one gets, due to working for high profile companies, the exciting hours of the stock exchange and being able to close, deals worth multi-million dollars. Investment Banking and Equity Research are two of the most famous professions in the field of Finance. Although both the professions enjoy a lot of demand from aspirants, but only one of these offers limelight and importance, while the other enjoys being the game changer, behind the curtains. If you are a finance aspirant, looking to make it big and get entry among the big leagues, then either one of these careers can be your sure shot chance. If you are someone, who is very goal oriented and does not need any acknowledgment, equity research would be the best option for you. While on the other hand, if you happen to be someone, who thinks of acknowledgment and appreciation as the biggest motivators, then investment banking is the way to go.
While these differences don’t make much of a difference for someone, who is absolutely fascinated by numbers and logic, there are quite a few nuances in both of these fields, which make them very different from each other. In the earlier days, there were quite a lot of assumptions and reservations regarding both the fields. Equity Research for instance, was thought as the dark horse of the lot and was considered as a dull, unglamorous field to work in. The recent times have brought about a lot of changes, including the much deserved recognition that the field of equity research requires. On the other hand, the field of Investment Banking was always looked up to as an amazing, awe-inspiring career option.
Roles Of An Investment Banker
The professionals in this field, are said to be the major decision makers of the industry. Their job is basically to conduct an extensive research on various financial deals, go ahead and be an intermediary between the deal makers and close the deals. They are said to add tremendous value to their firm, probably which is why they earn handsomely.
Roles Of An Equity Researcher
Equity Research Analysts, are hailed as the real financial heroes, because it is these people, who create valuation models, research reports, which later on assume the status of major decision makers. These professionals are experts in financial modeling, financial statement analysis, valuation of companies and have a clear idea about, how the economy as well as the currency works.
While both the roles are diverse, they are equally important for any financial corporation, in the market. A huge number of aspirants vie to be working in either of these fields. It is well known that, having just a mere graduation degree, will not really get you there. Which is why a lot of candidates opt for, specialization training programs in both investment banking, equity research as well as, financial modeling, corporate finance and so on.
What surprises our IFAP and students the most during the program is not how difficult and subjective Valuation and interpreting Financial Statements can be but how quant work is not the be all and end all of Financial Analysis. In fact, once they learn the logic behind the CAPM and it’s elements, the calculation of the WACC and the formula for the free cashflow, all of which are easy once you understand the steps and the theory, what flummoxes is forecasting basic numbers like sales, working capital and capital expenditure. They realize it’s not just a case of dragging cells and using historical growth rates but understanding the company’s future in context of the industry it operates in. The best analysts are industry experts, which is why Investment Banks work in Industry teams because, like man, no company is an island.
This blog post is a part of a longer series where we try and understand the importance of Industry Analysis, its role in financial services and of course, try and develop quick frameworks that help you ask the right questions. Let’s start with its role, which goes right back to strategy and the principals of why companies exist.
There are two principles to running any firm:
- Increase Top line or Sales or Revenue year after year and in a sustainable manner.
- Increase the bottom-line, margin, profit, income year after in a sustainable manner
The word ‘sustainable’ is critical because a company is an entity that lives to perpetuity. So to create wealth and fundamental value, growth and profitability have to be recurring forever. That’s what creates great companies like Saint Gobain (founded in 1665) Citigroup (1812), Harpers Collins (1817) Bowne (RR Donelly 1775) and Kikkoman (the Japanese food company that can trace its heritage back to 1630). No PE firm wants to invest in a one hit wonder because selling it again would require them to prove sustainable returns over a lifetime.
For firms to achieve their two principles they begin with a vision and a mission statement followed by an execution plan which we broadly call Corporate Strategy, quite simply, a plan of attack. Why attack? Well because most of what we know about strategy comes from war strategy and the wisdom of the Romans, the Greeks and the Mauryas and the political treatise like Arthashastra by Chanakya, The Prince by Machiavelli and The Art of War (the one most adapted to business and investing) written by Sun Tzu.
FACT: Japan is home to the world’s oldest lots of things. Sudo Honke, the world’s oldest sake brewer, has been around since 1141. Before being absorbed into a subsidiary in 2006, the oldest continuously operating family business in the world was Kongo Gumi, which built temples, and had been doing so for 14 centuries.
The origin of Strategy
Military War strategy focused on two things, how to acquire power, stay in power once you get it and how to expand your reach, creating more wealth for your treasury and, unfortunately, yourself. They rarely did it for their people. Nothing much has changed. Strategy wouldn’t have been needed of course if there were only ONE people and ONE king who ruled the earth completely, leaving no land to conqueror or no usurper to vie for the throne. We would call this a Monopoly. A state of play where there is no competition for customers or demand making me the sole provider, which enables me to charge anything, I want. Anyone or anything come to mind? OPEC has been doing it for years. Controlling supply and price because our demand for oil can never be satiated, that was until Russia and the US entered the picture and we suddenly went from a Monopoly to an Oligopoly where there were other players.
What about De Beers, the South African diamond miner? For years they controlled who they made sightseers, a selected group of people who would be given a velvet bag in exchange for money, a bag they could not open. The aspects (four C’s) of the stones unknown to the buyer, and they had to live with it for over a 100 years until Alrosa broke open the market in 1992 and became the largest miner in the world.
When you stop being the only one, you have only two ways to grow. You either conquer unchartered territory or you take someone else’s. Unchartered territory is ofcourse the easiest and most cost effective. You lose fewer people, spend less on feeding and housing armies and don’t lose sleep over being knifed by the resistance. But alas, much like the world has run out of unchartered territory, product demand is not infinite. This means I am going to have to step on your toes, and perhaps take what is yours. To do that successfully I need to master three things.
- Have a single simple long term goal
- Have a comprehensive understanding of my environment
- Have a critical and honest appreciation of the strength of my resources.
In the next series, we will look at the above in more detail. This is a small taste of what you will learn in IFAP, the industry’s leading Financial Analyst program. Learn more about the program here.
Mr. Harish Thakkar, Chief Faculty at Imarticus Learning, comes with 17 years of experience in investment banking operations and 8 years of experience into training in financial markets. In this video, he talks about CIBOP and the various levels of training students are exposed to. This 3 month training programme is designed in such a way that students get practical exposure and knowledge that is relevant, timely and interesting. According to Mr. Harish Thakkar, Investment Banking is a very knowledge intensive industry. Hence, CIBOP plays a major role in imparting the right skills and knowledge to students. Watch this video to know more…
Imarticus Learning introduces the first batch of the program ‘Certified Investment Banking IT Professional’ (CIBIT 2012) at its Mumbai campus.
Information Technology plays an integral part in the financial services industry, particularly in investment banking. A key enabler for success, technology touches every aspect of an investment bank and acts as a key differentiator in providing effective solutions to clients globally. While the significance of technology and need for special skill sets to understand the application of IT in investment banking has been cited as a necessity by many industry veterans, it has been observed that not too many special training programs exist for this purpose.
It gives us great pleasure to announce the commencement of the first batch of ‘Certified Investment Banking IT Professional’ (CIBIT) program at Imarticus Learning through which we aim to provide a certification in investment banking technology to eligible students to help them get an in depth understanding of the application of IT in investment banking. Taught by industry veterans with years of experience, our students will be trained in areas like Microsoft Technologies (VB/ASP, .Net, Sql Server DB), data modeling, project management (Water-fall/Agile) and capital markets.
In a span of 3 months, the CIBIT programs will give the students a practical understanding of the various roles under technology in IB through advanced application development skills, real life case studies and live project experiences.
The batch which has currently enrolled with us at Imarticus for the CIBIT course is an eclectic mix of freshers and engineering graduates. Here’s a brief insight into the student profiles:
Here’s what some of our students have to say about the experiences gained at Imarticus in the short span of time that they have been with us:
To know more about our CIBIT batch, please visit https://imarticus.org/certified-investment-banking-technology-professional/. For more details, contact us on: +91 22 6643 3777/8
The third bi-monthly monetary policy review for 2015 was held recently by RBI on 4th August, 2015, and as was widely expected, there was no drop in the repo rate and it stayed firm at the previous rate of 7.25%. The repo rate is the rate at which the commercial banks borrow money from the RBI, which directly affects the rate at which us, the customers, borrow money from banks. Thus, what is the direct implication is that the loans you take from banks will carry about the same interest rate, and not drop. So is this a good move or a bad one?
It’s hard to pick one. A higher repo rate would encourage people to deposit money, while a lower repo rate means that people will prefer to borrow more, which they would spend into the economy, and consequently increase the inflation rate. And keeping this in mind, RBI has lowered its inflation forecast for the Jan-Mar quarter by 0.2%. While there might be many other motives behind maintaining the same repo rate, controlling or reducing inflation is very likely one of them, especially considering the poor monsoons this year (which would cause inflation).
It is a prudent move by the RBI to not tinker with the repo rates at this stage, and whether this move makes sense or not will take time to ascertain. However, there is definitely lots of speculation that the RBI will reduce repo rates in future, which will surely boost investment and growth in the economy.
-Shrey Mehta, Imarticus Learning
Imarticus Learning is proud to announce the Financial Services Round Table conference on Risk Management, which is an opportunity to engage with leading industry experts in the areas of Market, Credit and Operational Risk. This conference hosts three panels (comprised of distinguished leaders from Global and Indian banks) that will provide detailed insights on the ’New Paradigm of Risk Management.’ The audience of the event will be comprised of CEO/COO/CRO/CTO’s, Senior Operations and IT Managers, Risk and Compliance Managers and Sr. HR Managers from leading firms.
The eminent panelists include:
- Arun Kumar Iyer – Director, Risk Solutions, CRISIL
- Ashish Agarwal – Chief Risk Officer, Yes Bank
- Deepak Balachandran – Head of Enterprise Risk, Reliance Capital
- Jayna Gandhi – Head of Treasury, NSE
- Loknath Mishra – General Manager, ICICI Bank
- Murali Subrahmanyam – Managing Director, MSCI
- Navneet Munot – Chief Investment Officer, SBI MF
- Pratik Shah – Partner, Financial Services Risk Management, Ernst & Young
- Satrajit Bhattacharya – Joint General Manager, Treasury, HDFC Ltd
- Sachin Singh – MD, Risk, BNY Mellon India
- Shalinee Mimani – Chief Risk Officer, Edelweiss
- Somak Ghosh – Managing Partner, Contrarian Capital; Ex-Cofounder, Yes Bank
- Thakur Bibhuti Verma – Director, Deutsche Bank
- Vikram Bhorawat – Director and Head, Market Risk Management, Deutsche Bank
- Vaidyanathan Krishnaswamy – Faculty, ISB & University of Connecticut
The Areas of Discussion include:
Market Risk: Globalization of Market Risk, Market Risk Analytics Frameworks, and Best Practices in Risk Management.
Credit Risk: Credit Risk Global Roundup, Alternate Mediums of Evaluating Risk, Setting up a Credit Risk Management Culture.
Operations and IT Risk: Big Data and Operational Risk, Emerging Operational Risk Practices, Adaptation of Technology.
For all the folks in the relevant domain and interested to attend, please contact Lourdes Miranda: [email protected] or call 022 40792323/ 91 9967800393
For all the folks who are unable to be a part of this conference may look forward to our upcoming blog revealing the detailed outcome of the conference.