The major investment banks perform numerous transactions every day across national and international markets. The investment banking transaction could be varied in nature from huge mergers and acquisitions to derivatives, commodities, basically, deals of many natures. Now imagine how is this possible? Or was this possible for investment banks to conduct their business in this form, say a decade or two ago? Not really, for investment banks to function like this, they need to have a strong IT support, right from the front end support, like in sales and trading applications, quantitative analytics and risk analysis support to data warehousing, settlement, and position keeping systems.
For investment banks to thrive, especially in a global landscape, would need details like value at risk for portfolio, and information of global markets, and this information has to be valuable, accurate and in real time. It is established that the availability of this information is only possible with appropriate IT intervention. Especially things such as value at risk can only be calculated using statistical tools and historical evaluation over a period of time.
Information technology thus becomes an enabler for investment banks in conducting their business more efficiently, from within the bank. The objective of this department is to enable the bank function in an optimal way using technology, and to provide smarter and futuristic solutions. The function of the IT applications used in investment banking either integrate with the legacy technology or are built on new platforms which are user friendly, fast, flexible and automated.
An investment bank, to function at par with global standards and meeting client and customer expectations, needs to adapt smart technology. Effortless and efficient front and back end IT systems, risk management systems, multiple trading platforms are some of the major technological advancements being used by investment banks for effortless functioning. If one is part of the investment banking industry or the financial sector on the whole, they will use technology at every level, maybe the impact will change but the technological exposure will be there for sure. From as elementary to using excel, word and databases for managing client information, using power point for presentations, to using and managing information tools to compile the financial reports.
It is not only in the daily functioning, but also to match the volatile nature of global markets, there is a constant need to develop new financial products and make changes in the investment flows. The IT departments of any investment bank have to keep up with this demand and be innovative in providing solutions. So they not only need to keep up with the technical requirements of the investment banks but also the business needs and come up with innovative solutions on how to integrate them both.
Investment banks are in the need of building an IT leadership that has clear communication skills, a great technological vision, and the ability to blend well with the business need along with good global governance. Investment banks have realised the importance of change management, and opening up doors to embrace technology, perhaps building a strong coalition from executives to the leadership, with the endeavour to embrace digital capabilities.
The investment banks of tomorrow will successfully build a team that reduces operation dependency from archaic legacy solutions to effective IT structures while reducing the cost base to create financial incentives for transformation.
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 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 are 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:
- J P 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.
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Organizations that alter their association and culture to join canny mechanization as collaborators, as opposed to individuals substitutions, could receive vital benefits: more dependable execution and understanding, expansion of administrations to beforehand unrewarding markets, (for example, bring down end retail showcases and littler establishments) and proceeding with cost decreases.
The future ‘virtual workforce’ inside investment banks will probably include a suite of advances—from fundamental mechanical autonomy prepare robotization through subjective registering and characteristic dialect handling. Not exclusively will this workforce have the capacity to give cost reserve funds, it liberates its human partners so they can concentrate on parts that include the most esteem—from development to customer relations.
Simply investigate an extract from this article by MIT Technology Review that turned out half a month back: At its stature in 2000, the U.S. money values exchanging work area at Goldman Sachs’ New York home office utilized 600 brokers, purchasing and offering stock on the requests of the venture bank’s huge customers. Today there are only two value brokers left.
We should give this information time to sink. Those fellows (yes, they were most likely all fellows) were bringing home a normal pay of $500K a year. Presently they’ve been compelled to “proceed onward to more esteem included exercises”. The times of Liar’s Poker have everything except kicked the bucket. Those 600 brokers have now been supplanted by innovation, and 200 PC specialists (or “geeks” as they were once called by the dealers whose occupations they supplanted). Crosswise over Goldman Sachs, more than 30% of their staff are currently PC engineers. What’s more, it’s not simply Goldman. A week ago, JP Morgan procured a “Worldwide Head of Machine Learning” from Microsoft. The person is one the world’s principal NLP experts, and doesn’t have any foundation in fund at all.
The greatest piece of work in this piece of the bank is mergers and acquisitions or M&A alongside IPOs. While you’ll generally have the “rainmakers” at the Managing Director level who encourage the arrangements, all the snort work to set up the arrangement books is performed by generously compensated investigators. We’ve just perceived how computerized reasoning is beginning to assault bookkeeping. A ton of the work performed by investigators in readiness for a corporate occasion is everyday information assembling and rounding out worksheets.
Artificial Intelligence advances like intellectual figuring are prepared to change the way experts play out their occupations. Subjective figuring exploits propels in computational speed, machine learning, and characteristic dialect preparing. These techniques can address complex issues in light of investigation of huge measures of information to computerize procedures and improve the nature of basic leadership.
AI arrangements won’t supplant analysts – there are excessively numerous nuanced human connections and informed decisions made in single day that can’t be imitated by any product “robot”. In any case, work processes that take after a tenets based approach are alluring focuses for robotization. In these occasions, intellectual figuring can increase examiner capacities by lessening the time related with basic assignments including organization valuations and pitch book refreshes.
Investment banks are thinking about intellectual processing arrangements conveyed through a SaaS display that give simple to-utilize usefulness to investigators with a plan of action that gives banks a brisk start sans any restrictions.
Investment Banking prospects in India are very promising. Planning a shift in careers or a fresher, this is one stream worth considering. Specially, if you are an individual who finds the idea of making money from money exciting.
In simple words, investment banking is a profession where you match the expectations of people who have the capital with those who need it. Although it is not as simple as it sounds. As you will be advising people or institutions on money matters across various phases of a life cycle of a project, ranging from the start up stage to the listing of stock markets, you need to maintain the optimum valuation. It requires great understanding of the market so that you can offer the most optimum advice to your client, on options like mergers, acquisitions, joint ventures etc…,
Certain skill sets required to excel in this choice of work are, high research and an analytical mind-set, par excellence communication skills, an innovators mind set, troubleshooting capability, genuine ease of working and analysing numbers, forecast sales and budget, technical knowledge. A person from any steam can think of starting their career in investment banking, but it important to have a good understanding in math, economics, business studies. Although you can pursue an MBA, to have a specialised course will serve as a spring board to your efforts and help you secure a job in a reputed company, or help you get that promotion you are waiting for since long.
There are very limited options you have in terms of getting a holistic training on investment banking, however one that has proven to be closest to giving you the best exposure and highly recognised in the industry is, the Certified Investment Banking Operations Professionals (CIBOP), it is a flexible program for both fresher’s and experienced professionals. And CIBOP can be considered as a pre prep for the CISI IOC certification program, it is highly regarded by investment houses globally and passing this certification echoes the thought that an individual does have a sound understanding of the financial services industry.
The CIBOP program offered by Imarticus, is a 180 hours’ program dedicated in understanding complex securities and derivatives, their trade life cycle, along with operational risk and regulation. CIBOP offers operations and domain training augmented with a personal development program. CIBOP has an industry relevant program, supplemented with industry stalwarts as faculty, and real case studies.
On completing the CIBOP course from Imarticus learning you will get an industry endorsed CIBOP certificate along with the optional CISI certified IOC certificate, besides this, Imarticus has career services and their placement team will guide and assist you throughout the program, providing the best career opportunities.
CIBOP is a hybrid program with online self-paced videos and live classes, along with classroom training. The CIBOP program also has a host of guest lectures, by experienced industry veterans, which presents abundant opportunities for students to raise questions and clarify doubts and get clear actual industry insights.
On completing CIBOP course you will have a sound understanding of every aspect of Investment banking along with practical aspects of the sector. So if you have an inclination towards this field and have some of the prerequisites in place, don’t wait and enrol with Imarticus Learning and take the CIBOP certification.
The finance and banking industry employs a wide range of professionals from brokers, including individual, business, and Investment financiers. While the parts and obligations of these brokers may vary, they all must administer the monetary needs of their customers. Individual brokers may work one-on-one with customers opening private company accounts and administering budgetary exchanges, for example, sending cash requests and dealing with stress.
Business investors prepare advances to planned business people, while venturing brokers, associate lenders with conceivable speculation openings. Additional time and travel are regularly required in these employments, particularly for venture brokers. By and large, financiers spend many work hours sitting at a work area. Payscale.com detailed a mean yearly pay of $35,226 for individual investors in January 2016.
Despite the fact that degrees in speculations and managing an account might be hard to discover, many projects have specialisations in these territories as a major aspect of different projects. Back, bookkeeping and business are the doubtless decisions, however, speculation firms and banks may likewise be satisfied to see degrees in financial matters, arithmetic or designing. Notwithstanding the program name, what employing boards truly need to see is that you’re great with numbers, and each of these degrees requests that of their graduates.
While in school, understudies ought to start sharpening the abilities they’ll be effective speculation brokers. Honing introductions, acquainting yourself with Microsoft PowerPoint and Excel, figuring out how to talk about numbers in a legitimate yet open way, and interfacing with a wide range of sorts, of individuals, are only a couple of the approaches to fabricate auxiliary aptitudes while likewise diving into coursework.
A banking entry level position might be a piece of a degree program or an open door an understudy seeks after amid the mid-year. Taking an interest in a temporary position gives imminent financiers involvement in the field and a comprehension of keeping money arrangements and controls. Furthermore, a temporary position may assist acquaint them with the obligations they’ll have once they start work. Entry level positions are likewise a route for people to start making associations in the exchange and systems administration for planned work openings.
Consider managing an accounted speciality. When investigating conceivable temporary positions, consider the distinctive sorts of investment banking and finance options as claims to fame. For instance, if you are inspired by venture banking, then apply for an entry level position with a speculation bank, which might be situated in a noteworthy metropolitan region.
Banks offer Investment Banking certification preparing programs that will plan people to find out about the procedures required in making ventures and working with customers. Those enlisted in the program are acquainted with business works with, saving money administrations, and customer relations. So as to start finding out about these practices, banks furnish people with contextual investigations, introductions, and displaying sessions.
So when you are looking to start a career in banking, it is always better to look up for certification training programs like these. Imarticus Learning offers a number of certification programs in finance and banking which would be of interest to you.
Investment banks, in the true sense, are financial intercessors, amongst people who need funds and people who can provide funds. They ensure that there is a flow of cash and distribution of capital. In a simple example, they are the bridge that brings together, those who need money to invest in businesses, like factories with equipment demands, with those, who have the money to invest, all the while, forming the markets which allow capital and controls price for these monetary trades.
Over time these financial intermediaries have evolved and have gotten more complex and competitive. And hence have started offering many supplementary amenities.
Investment Banks essentially have two lines of activities.
- Sell Side – here securities are traded not only for cash but at times for other securities like for example, in facilitating transactions.
- Buy Side – this is the advising lateral, where to advise on entities like, Private Equity Fund, Mutual Funds, Hedge Funds, is given to establishments that are concerned with buying investment services.
Core activities of Investment Banking can be better explained in three major divisions.
Front Office, the Middle Office and the Back Office.
Front Office, is generally known as the revenue generating unit, this is where most of Investment Banking contracts take place. It offers many services, namely assisting firms in Mergers and Acquisitions, Corporate Finance I.e. managing fund requirements for daily operations. It also offers Professional Investment Management for establishments. For certain high net worth clientele, preparing Market Research Reports, around Strategy Management and Wealth Distribution and Risk Reports. And lastly, it also involved in Sales and Trading activities for their clientele.
Middle Office, includes functions of Compliance with government regulations and restrictions for professional clients like the banks and financial divisions etc…,
It also manages Capital Flow, basically, the function is to monitor the flow of cash in and out from an establishment, to ensure required liquidity for it to function, without getting into any financial difficulties.
Back Office, it is the glue that holds the investment bank together. It primarily manages the Operations and Technology, for things such as Trade Confirmations, safeguarding that the securities bought are correct, sold and settled for the right amount. To ensure the software and technology platforms are efficient, at times creating relevant trading algorithms, so that traders can function effortlessly.
Investment Banking is significant for corporates as they need to raise capital. By taking the above-mentioned functions into reflection, the area of opportunity for investment banking is huge. Therefore, to stay updated, financial handlers should take stock of the development around them, so that they can adapt and take advantage of the offerings.
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Indian Capital Markets have shown remarkable growth in the post-Liberalization era and it remains one of the most resilient globally and poised to be one of the Top destinations for domestic and global businesses to expand and invest in. Raising capital is a strategic priority across India and role of Capital Markets has assumed far greater importance and urgency.
India’s capital markets are currently valued at $140 billion, according to a report by McKinsey & Co. The consulting firm further states that India can unlock a further $100 billion in fresh funding each year for India Inc. if policymakers implement the right policies and fiscal measures to deepen the country’s capital market.
The size of the market can rise even further to $240 billion in a year’s time, but as it stands today, India’s ability to receive funding at scale is moderate at best with shallow pricing efficiency. In comparison, Australia and Japan rank much higher in funding. India needs policies to channel its substantial savings into productive endeavours and accelerate economic growth to potentially lift millions from poverty.
Emerging economies, including India, do not have access to predictable capital market funding at scale and investors lack the financial instruments to channelize long-term savings. This often leads to poor allocation resources pulling down growth prospects. The report suggested that deeper capital markets in emerging Asia could free up a cumulative $800 billion in funding annually, mostly for mid- to large-sized corporations and infrastructure.
The biggest challenge for India is to develop the corporate bond and securitization market, the report further iterates. Emerging market issuers lack options to diversify funding and to match funding with their needs. The absence of a long-dated bond market diminishes corporate borrowers’ flexibility to align funding structure with assets. The listing of government-controlled entities is a step in the right direction as it may lure investors to capital markets. Further, mandating state-controlled entities to tap debt capital for funds instead of going for bank loans is a step in the right direction as well.
Issues in emerging markets face a more volatile and higher cost of capital compared to developed economies. They pay roughly a 120 percentage point higher real cost for debt securities, making it difficult to raise funds for new ventures and to grow existing large companies or conglomerates.
Apart from more prudent fiscal policies and implementation measures by the Government of India, what this essentially is a change management challenge that requires a new mindset. Back in 2015, the US and Indian Governments were in serious talks to discuss potential avenues of technical collaboration between the Ministry of Finance and the US Department of Treasury in developing deeper and more robust Indian capital markets. In April 2017, the capital markets regulator SEBI introduced new products and stricter control measures to deepen the Indian capital markets. For instance, SEBI now allows investors to use e-wallets to buy mutual funds, which would potentially increase inflows into India’s Rs18 trillion MF markets. These are welcome moves indeed!
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The Financial services industry, is one place where change is a constant factor. This is why the most challenging thing for any person or organization in this field, is to ensure that they keep are always on top of their game, adapting and evolving to the various changes. One of the most important tasks, is to ensure that a financial services company, must provide innovative services to respond perfectly to the needs of their customers.
Apart from this, there are a few standard challenges that every company out there has to deal with, say for example higher capital charges, market electronification, digitalization, a fixed cost base, inflexible and layered technology, with an increase in complexity or regulation and reporting. All the various changes in this field can be classified as just the start of a steadily developing ecosystem.
While the aforementioned statement is entirely true, there are certain standard things that every bank needs to be well aware of. While this may include the following things, but it certainly is not just limited to them. These four things are going to be a constant variable when it comes to Investment Banking, the decreased consumer profitability and heightened competition, as opposed to margin driven profitability, its more about volume driven profitability, financial engineering requirements and the most common of all, the introduction of digital currency, in trade dealings.
As a direct result of these few constant factors, it is very likely that banks, as opposed to the olden times will experience a shift in the way they are supposed to conduct their business. Soon will come a time, when a bank will have to focus more on data optimization through concepts like accuracy, timelines, and financial reporting requirements and so on. It is a commonly accepted phenomenon, as the time passes by, the value of money goes on decreasing, which is inversely proportional to the need of it. Thus, the future holds a number of reviews of existing business models, mainly due to higher capital requirements.
Financial technology, which is also known as fintech, is considered to play the most pivotal role in the banking sector. It is said that soon will come a time, when banks would be looking to hire more technical professionals, as opposed to traders.
Thus we can infer that the area of Investment Banking has gone through a number of changes, since its inception. The pop culture and other forms of entertainment also play a great part in inspiring its evolution. They are basically the reason why so many people have been attracted towards the good, satisfied life that the field of Investment Banking offers. This is mainly the reason why a number of finance aspirants, usually opt to become Investment Bankers or Corporate Finance professionals, as they view these jobs as extremely rewarding. This is also the reason for the popularity of professional training institutes. One name is particular outshines the others, Imarticus Learning. This institute is renowned for offering industry endorsed courses in the field of Finance and Analytics, helping candidates achieve their goals and ambitions.
Recently, a study was conducted by the capital financial technology giant, C2FO, regarding European treasures. Herein, it was found that 75% of these treasurers are supposedly focussing on investing in trade finance technology, in the following year of 2017.
Colin Sharp, who holds the position of senior vice-president, EMEA at C2FO, is of the opinion that the shifts within the microeconomic environment, are resulting in the pressuring of corporates, in order to refocus their efforts to trade finance. He further goes ahead to say, “Treasurers are facing a lot of uncertainty, both from the United States of America and as result of the on goings around Brexit. This is putting immense pressure over the supply chain, and with the demand increasing and decreasing. Treasurers want the ability to use their assets to make returns and give some certainty.”
There have been more and more efforts, which are offering insight into, finding out how blockchain can supposedly be used, in order to benefit small as well as medium size ventures. Any said digital trade chain, supposedly wants to achieve a perfect balance, between identification of opportunities and connecting them with each other and their banking partners. This would be made even simpler, when banks would bring in their own client bases herein, thus eliminating rigorous on-boarding.
Anne Claire Gorge, who holds the position of the head of the product management department, trade services, and finance of Societe Generale, is of the opinion that, treasurers believe that more control over trade finances, can help them greatly in the other areas of business. She says, “Better use of trade finance helps theses treasurers, to have a greater overview of their working capital positions. Offering financial solutions to suppliers, for instance, in order to improve the terms of payments, helps greatly in guaranteeing cash flow.” She is of the firm thought that the deployment of latest technology will definitely end up simplifying the process. In her words, “Trade happens to be very heavy on letters of credit or invoicing solutions, making it complicated to finance receivables and payables. Doing all this, as a part of a digital solution, has great potential of making it easier”.
The experts believe that a little rocking, cannot cause any harm to the ship, in financial jargon, they are basically hinting at the climate of uncertainty. Especially when it comes to Banks, a little uncertainty does not seem to be a negative thing. This actually makes for a rather encouraging temperature for the requirement of trade finance tools, in order to offer stronger guarantees. The solution for the entire thing can finally come from block chain, is the combined belief of all the trade finance gurus. But for this concept to see the light of the day, there needs to be a rigorous industry wide effort, in the direction of implementation.
As many changes take place, in order to develop and strengthen the field of Trade Finance, the number of aspirants herein also multiplies. This is why professional training institutes like Imarticus Learning seem to be getting popular by the day.
This report analysis would be mainly dealing with all the key investments and developments in Indian banking sector.
Starting from the basic, central level, the RBL Bank Limited, a private sector bank in India, has reportedly raised about Rs. 330 crore as a result of their association with CDC Group Plc. This is a UK based financial development institution and will be helping the RBL bank, to strengthen their capital base, in order to meet their future needs.
The World Bank has reportedly signed an agreement with The State Bank of India, which is worth Rs. 4200 crore. This agreement basically deals with connecting all the solar rooftop projects in India, which are also known as GRPV, and will be receiving financing as a part of this agreement.
JP Morgan Chase, which is considered to be the largest bank in America, has been in talks of expanding their operations in India. They have gotten a head start on the same, with three new branches in, Delhi, Bangalore and Chennai which will be an addition to the current branch in Mumbai.
An investment management company, known as the Canada Pension Plan, has reportedly bought a large stake, which it bought away from a Japan based, banking corporation called Sumitro Mitsui. These said stakes were in Kotak Mahindra Bank Ltd.
India’s very first small finance bank, began its operations by launching about ten branches in the state of Punjab. The Capital Small Finance Bank as it is officially known aims at increasing the number of its branches to about twenty nine, in the current financial year of 2016-17.
Taking a step towards making India, as cashless economy, an e-wallet company, Freecharge, has partnered with Yes Bank and Mastercard. This partnership is in order to launch a new concept of Freecharge Go. This would be a virtual card, with the help of which consumers can pay for goods and services, at online shops as well as offline retailers.
This year, the economy of India would be majorly targeting at being self-sufficient and in the lieu of the same, te government of Andhra Pradesh has signed a Memorandum of Understanding (MoU) with Exim Bank of India, in order to promote exports within this state.
Moody’s, a Global Rating Agency, seems to have upgraded its outlook towards the Indian Banking System. This move is to stabilize its negative based on the assessments of about five drivers, which include improvement in operating environment, stable asset risk and capital scenario.
Rockefeller Foundation, a non-profit organization based out of America, has backed a private Equity Investor known as Lok Capital. This investor has a plan of investing up to USD 15 million in a couple of proposed small finance banks in India, over the period of next year.
The RBI, has reportedly given in principal approval, to about 11 applications, which were in favour of establishing payment banks. These banks may accept deposits, but they are to refrain from extending any loans.
With the chances of the economy and the cash inflow looking bright, the banking and investment industry shows great promise for aspirants.