Investment Banks

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Submitted To:

Submitted By:

Sir Basharat Raza

Nasir Abbas 31 (1749)

Ahsan Anwar 15 (1735)

Syed Faryad Ali 69 (1780)

Investment Bank

Financial Institutions

Investment Banks

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Table of Content

Topics Pages

Introduction 3

Organizational Structure 4

Front Office 4

Middle Office 6

Back Office 6

Functions of Investment bank 7

How do investment banks make money from offering these services to their clients? 8

Investment Banks in Pakistan 9

NIB Bank 9

IGI Investment Bank 11

CITI Bank 12

Meezan Bank LTD. 13

AL Baraka Bank 15

Some other Investment Banks 16

Criticisms 17

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INTRODUCTION

An INVESTMENT BANK is a financial institution that assists individuals, corporations, and

governments in raising financial capital by underwriting or acting as the client's agent in the

issuance of securities. An INVESTMENT bank may also assist companies involved in mergers

and acquisitions (M&A) and provide ancillary services such as market making, trading

of derivatives and equity securities, and FICC services (fixed income instruments, currencies,

and commodities).

The two main lines of business in INVESTMENT banking are called the sell side and the buy

side. The "sell side" involves trading securities for cash or for other securities (e.g. facilitating

transactions, market-making), or the promotion of securities (e.g. underwriting, research, etc.).

The "buy side" involves the provision of advice to institutions concerned with buying

investment services. Private equity funds, mutual funds, life insurance companies, unit trusts,

and hedge funds are the most common types of buy side entities.

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Organizational structure

INVESTMENT banking is split into front office, middle office, and back office activities

Front Office

Front office is generally described as a revenue generating role.

There are four areas within front office:

Investment Banking

Investment Management

Sales& Trading

Research & Structuring.

INVESTMENT BANKING

Front Office Middle Office Back Office

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Investment Banking

Investment banking is the traditional aspect of investment banks which involves helping

customers raise funds in the Capital Markets and advising on Mergers and Acquisitions (M & A).

Investment bankers prepare idea pitches that they bring to meetings with their clients, with the

expectation that their effort will be rewarded with a mandate when the client is ready to

undertake a transaction. Once mandated, an investment bank is responsible for preparing all

materials necessary for the transaction as well as the execution of the deal, which may involve

subscribing investors to a security issuance, coordinating with bidders, or negotiating with a

merger target. Other terms for the Investment Banking Division include Mergers & Acquisitions

(M&A) and Corporate Finance (often pronounced).

Investment Management

The professional management of various securities (shares, bonds etc) and other assets (e.g.

real estate), to meet specified investment goals for the benefit of the investors. Investors may

be institutions (insurance companies, pension funds, corporations etc.) or private investors.

Sales and Trading

This area is often the most profitable area of an investment bank and is responsible for the

majority of revenue of most investment banks. In the process of market making, traders will

buy and sell financial products with the goal of making an incremental amount of money on

each trade. Sales is the term for the Investment bank's sales force, whose primary job is to call

on institutional and high-net-worth investors to suggest trading ideas (on a caveat

emptor basis) and take orders. Sales desks then communicate their clients' orders to the

appropriate trading desks, who can price and execute trades, or structure new products that fit

a specific need.

Research & Structuring

Research& structuring is the division which reviews companies and writes reports about their

prospects, often with "buy" or "sell" ratings. While the research division generates no revenue,

its resources are used to assist traders in trading, the sales force in suggesting ideas to

customers, and investment bankers by covering their clients.

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Middle Office

The main role of this area is Risk Management. Risk Management involves analyzing the market

and credit risk that traders are taking onto the balance sheet in conducting their daily trades,

and setting limits on the amount of capital that they are able to trade in order to prevent 'bad'

trades having a detrimental effect to a desk overall.

Another key role is to ensure that the above mentioned economic risks are captured accurately

(as per agreement of commercial terms with the counterparty) correctly (as per standardized

booking models in the most appropriate systems) and on time (typically within 30 minutes of

trade execution).

Back Office

There are two areas within back office

Operations

This involves data-checking trades that have been conducted, ensuring that they are not wrong,

and transacting the required transfers. Many banks have outsourced operations. It is, however,

a critical part of the bank.

Technology

Every major Investment bank has considerable amounts of in-house software, created by the

technology team, who are also responsible for technical support. Technology has changed

considerably in the last few years as more sales and trading desks are using electronic trading.

Some trades are initiated by complex algorithms for hedging purposes.

Firms are responsible for compliance with local and foreign government regulations and

internal regulations.

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Functions/Role of Investment Bank

An Investment bank has many functions to perform some of them are given below:

IPO

Investment Banks facilitate Public n Private Corporation’s initial public offering known as

IPO by providing underwriting servicers. Other services include acting as intermediaries

in trading for client and foreign exchange management.

Giving advice

Advising clients on buying and selling companies, the structuring of their financial

affairs, raising money, economic risk management and the purchase of financial

products.

Providing financing:

Making loans to and purchasing the shares of corporate, and assisting corporate in

finding other parties to do so.Investment bankers can also arrange financing for

companies. Through their relationships with big investment funds, they can help obtain

equity financing (by issuing shares) or debt financing (by issuing corporate bonds), as

well as bank loans.

Investment Management :

Investment banker also provide advice to investor to purchase, mange and trade various

securities (share, bonds, etc) and other assets like real estate, hedge fund mutual funds

etc. investors may be financial institution or big fund houses or private investors.

TRADING:

Buying and selling shares, debt products, commodities, derivatives and related products

on behalf of clients and to make money for the bank.

Research:

Monitoring industry trends and economic developments for the bank’s own purposes

and for clients.

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Raise equity capital

This includes helping launch an IPO or creating a special class of preferred stock that can

be placed with sophisticated investors such as insurance companies or banks

Mergers and Acquisitions (M&A)

Another major function of Investment bank is providing the facilities of an advisory on

sale, merger and purchase of companies.

Risk Management

This is a continuously going activity which involves analyzing the market and credit risk

that traders are taking onto the balance sheet in conducting their daily trades.

How do investment banks make money from offering these services to

their clients?

Investment banks get their income from the following sources:

Fees: charged for advice, providing finance, keeping money available for clients,

arranging financing for clients from other parties, TRADING SERVICES, investment

services, and research.

Dividends: income from investments made in shares.

Interest: income from loans made.

Investments: profits from investments made.

TRADING: profit made from buying and selling securities.

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Investment Banks in Pakistan

The investment banks vary from the commercial banks and the other retail banks is that,

investment banks do not take deposits however the commercial banks take deposits. Therefore

there is a great difference between these categories of banks, for this reason United states

have separated both kinds of banks. Following are the few investment banks in Pakistan:

NIB BANK

NIB Bank is one of the largest foreign banks in Pakistan in terms of its branch network and one

of the largest corporate entities of the country with a paid up capital of Rs. 103 billion. Through

an extensive network of branches spread across Pakistan, the Bank continues to serve its

customers for all their financial needs. The Bank’s resolve to provide world-class financial

products and services to the banking population of Pakistan is driven by its key business units

including Consumer Banking, Commercial Banking and Wholesale Banking.

NIB Bank is headquartered at the P.N.S.C. Building in Karachi. Six floors of this iconic building

serve as the nerve centre of our banking footprint in Pakistan.

NIB Bank started operations in October 2003 when National Development Leasing Corporation

(NDLC) and Pakistan operations of IFIC Bank were amalgamated. The Bank grew rapidly and

further acquisitions took place – the Pakistan operations of Credit Agricole Indosuez were

acquired in April 2004, and in 2007, PICIC Commercial Bank Limited merged with the Bank.

Temasek Holdings of Singapore continues to be the largest single investor in NIB Bank with a

stake in excess of 88%.

Investment Banking in NIB Bank

Following are the services offered by the NIB BANK

Dept Capital Markets

Their team of specialists is dedicated to providing you with the best solutions structured

to your needs, from origination to distribution. Their experience and execution ability

are core strengths that have enabled them to win the trust of clients across the entire

spectrum of industries.

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Merger & Acquisition and Equity Capital Markets Advisory

Their strength lies in our team of specialists who are focused on delivering superior

execution across various transactions. They focus on creating value and raising capital in

local and international markets. They provide M&A and valuation advice and also

provide access to local and international capital.

Advisory services

They also offer some advisory services in matters like Privatizations, Financial modeling,

Equity issuances and listing, Equity placements and Project finance advisory for power

projects including renewable energy projects

Mutual Funds

NIB Bank is distributing Mutual Funds managed by PICIC Asset Management Company, a

wholly owned subsidiary of NIB Bank. Currently we are offering PICIC Cash Fund and

PICIC Income Fund from selected branches.

PICIC Cash Fund PICIC Income Fund Ideal for risk-averse investors.

This fund is suitable for investors seeking

better returns with a calculated risk.

Mainly INVESTS in low risk portfolios of short

duration (primarily Government Bonds and Bank Deposits) to provide competitive

returns.

The fund INVESTS in various medium to long

term fixed income instruments (Government Bonds, Bank Deposits and Term Finance

Certificates) for greater potential.

No lock-in period, INVEST and redeem at any time at the applicable Net Asset Value.

No lock-in period, invest and redeem at any time at the applicable Net Asset Value.

Multiple payment options (monthly returns or the option to re-INVEST) to meet individual objectives

Multiple payment options (quarterly returns or the option to re-invest) to meet individual objectives.

Amazing Tax benefits for salaried and self-employed individuals (as per tax laws)

Amazing Tax benefits for salaried and self-employed individuals (as per tax laws)

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IGI Investment Bank

IGI Financial Services is a brand that represents strength, integrity and professionalism in the

non-banking financial services arena providing Insurance, INVESTMENT banking, Brokerage

and Asset Management under one umbrella. IGI Financial Services the brand, was established

as a collaboration of 3 companies; IGI Insurance, IGI Investment Bank and IGI Securities, each

independently pursuing excellence in their field of services under the leadership of the

Packages Group.

IGI INVESTMENT Bank provides a host of specialized products and services designed to meet

the financing needs of businesses throughout the country. Pakistan Credit Rating Agency

(PACRA) has awarded IGI INVESTMENT Bank’s long-term credit rating of ‘A-’ and short-term

rating of ‘A2’. With this credibility, IGI INVESTMENT Bank today stands as the

largest INVESTMENT bank in Pakistan with a paid-up capital of PKR 2.1 billion, being one of the

leading mutual funds distributor, as well as a trusted and credible advisor.

IGI Investment Bank deals with a wide variety of clients, including homeowners, small

businesses and many respected multinational corporations..

Corporate Finance IGI Investment Bank reinitiated its Corporate Finance Division in December 2005. The Division’s activities are oriented to provide novel and innovative solutions to its clients

so as to assist them in successfully meeting the challenges of a dynamic market. The service includes:

Arrangement and Advisory Service

Debt and Equity Private Placement of Debt and Equity

Listing of Debt and Equity Issues

Underwriting of new Equity and Debt Issues

Lease and Debt Syndications

Corporate Restructuring – Mergers/ Acquisitions and Divestitures

Commercial Financing and Leasing

IGI INVESTMENT Bank is a progressive commercial financing company, providing its

customers with commercial loan financing as well as leasing products and equipment,

and advisory services.

The Bank’s lending, leasing and factoring products include direct lease, sale and

leaseback, short term loans, acquisition and expansion, and project financing.

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Mutual Funds Advisory Service

Fund Select is IGI Investment Bank’s Mutual Funds Advisory Service; it has been

established to assist you in making informed decisions through different investment

strategies. These strategies offer attractive returns, choice, diversification, convenience,

liquidity, tax benefits and are handled by qualified professionals.

Fund Select is designed to help you build your personal portfolio and provides a clear

understanding of how the combination of different Mutual Fund Investment Strategies

can provide you with potential growth and peace of mind.

Investing through Fund Select carries minimum risk as compared to investing directly in

stocks and money market. Your money is simultaneously invested in various securities

thereby reducing your total risk that can arise if investments are made in just one kind

of securities.

CITI BANK

Combining some of the most respected brands in the financial services business -- the Global

Consumer Bank and the Global CorporateINVESTMENT Bank - are uniquely positioned to offer a

complete array of financial products. Citigroup operates in a global economic environment

which requires the expertise of a true market leader.

Citi is the pre-eminent INVESTMENT bank in Pakistan; their unparalleled Advisory credentials

and leadership position have been built up through consistent performance and delivery over the past decade.

Their INVESTMENT Banking team provides comprehensive financial advisory and international equity capital raising services to leading corporations (both in the private and public sector), financial institutions and the Government. Clients receive strategic advisory services on a wide range of transactions, which include mergers and acquisitions ("M&A"), financial restructurings,

project finance, underwriting and distributing of equity securities in the international markets.

Merger & Acquisition Advisory Citibank is the leading provider of financial advisory services in Pakistan. To date,

citibank has been actively involved in all major privatization deals, and have advised leading foreign and local corporate groups. This can be evidenced by the number of

transactions undertaken by Citibank in the recent past.

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Foreign Capital Market Transactions Citibank is the leader in international capital market transactions for Pakistani issuers. Through the development of innovative financial products and the ability to successfully tap international capital markets, Citibank has raised long term financing in the form of

Global Depository Receipts ("GDRs"), Euro-convertibles and Floating Rate Notes ("FRN")

Local Capital Market Transactions Citibank has been the leading player in the syndicated loans business. It has nurtured a diverse local investor base, demonstrated by its unmatched track record of raising

financing in excess of PKR 20 billion for the local market. Citibank is also one of the leading players in the distribution business, which involves arranging syndicates for Initial Public Offerings ("IPOs"), rights issues and distribution of term finance certificates. As a result of its involvement in these transactions, Citibank has achieved a clear understanding of the various complex regulatory, legal and business issues that form an integral part of the capital markets business.

Securitization

Securitization offers a strategic funding alternative, since it allows for the conversion of assets, with strong cash flows, into a capital source. Citibank has pioneered both local

and foreign currency securitization transactions. It has completed local currency transactions worth PKR 2.5 MMM. Moreover, Citibank successfully arranged the first

ever local currency future receivables securitization in Pakistan.

MEEZAN BANK LIMITED.

Meezan Bank Limited, a publicly listed company, was incorporated on January 27, 1997 and started operations as an INVESTMENT bank in August that year. In January, 2002 in an historic initiative, Meezan Bank was granted the country’s first full-fledged commercial banking license as a dedicated Islamic Bank, by the State Bank of Pakistan. Meezan Bank has developed an extraordinary research and development capability by

combining INVESTMENT bankers, commercial bankers, Shariah scholars and legal experts to develop innovative, viable, and competitive value propositions that not only meet the

requirements of today’s complex financial world, but do so with world-class service excellence which our customers demand; all within the bounds of Shariah.

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INVESTMENT BANKING IN MEEZAN BANK:

Realizing the increasingly diverse needs of our customers for advis ory and structured finance

transactions, a specialized department focusing on INVESTMENT Banking services has been established at Meezan Bank. The department is geared towards providing comprehensive and

innovative financial solutions through a diverse product offering, providing a broad array of

financing solutions to the bank’s clients. The focus is on nurturing and developing long -term relationships with clients by understanding their unique financing requirements and providing

Shariah-compliant financing solutions.

In a short span of time, the INVESTMENT Banking department has been able to develop core expertise in arranging syndicated, structured and Project finance and providing advice on

mergers and acquisitions, buy-side / sell-side advisory, financial restructuring, structured equity and venture capital investments.

Syndications & Structured Finance Structured finance involves highly complex financial transactions. It is useful in cases where standard financing products do not meet a company’s requirements. MBL’s INVESTMENT banking department offers uniquely structured transactions for its customers based on various modes of Islamic finance including Ijarah, Diminishing Musharakah and Istisna.

Project Financing Project financing involves financing of long-term infrastructure and industrial projects. These are non-recourse or limited recourse financings where project debt and equity used to finance the project are paid back from the cash flows generated by the project.

Meezan Bank’s INVESTMENT Banking department has a proven track record of successfully executing numerous Project Finance transactions despite its recent entry in

the financial market. Meezan also has the honor of being the pioneer in successfully executing the first ever project financing transaction in the Islamic banking sector of the

country.

Advisory Services The INVESTMENT Banking department at Meezan Bank has recently set up a team to

handle its Corporate Advisory business. The department is currently strengthening its existing expertise of providing Advisory Services by employing professionals to help the bank’ customers decide the best financial approach for their businesses.

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Al Baraka BANK

With a vision for unrivaled services, dedication to Islamic principles of banking, increasing network points, and innovative product line, Al Baraka Bank (Pakistan) Limited is committed to

the Banking Industry in Pakistan.

Al Baraka Bank (Pakistan) Limited (ABPL) is the result of a merger between Al Baraka Islamic Bank Pakistan (AIBP), the branch operations of Al Baraka Islamic Bank (AIB) Bahrain and

Emirates Global Islamic Bank (Pakistan). The merged entity commenced operations on November 1st 2010.

The merger, a first in the Islamic Banking sector in Pakistan, positions ABPL to play an important

role in further growing an industry which has witnessed tremendous growth over the last 12 years.

With assets in excess of Rs. 85 billion; a workforce of 1400 professionals and a network of 110

branches in 58 cities and towns across Pakistan, Al Baraka Bank (Pakistan) Limited is devoted in

providing customers with a range of Shariah compliant products to suit their banking needs.

Investment Banking INVESTMENT Banking addresses the increasingly diverse needs of our customers for advisory

and structured finance solutions. The department is currently offering comprehensive and innovative financial solutions covering corporate finance, oil & gas exploration, real estate,

trade management, capital and debt market products and international banking services.

The primary aim is to partner with our customers by suggesting practical, cost-effective tailor made solution to make the most of the business opportunities that arise.

Following range of advisory and structured finance solutions help our customers in pursuing

their business strategies:

Advisory:

Raising Funds

Corporate Re-organization Infrastructure Development

Mergers & Acquisitions Project Financing

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Structuring:

Structured Finance

Securitization IPO’s

Specialized Roles:

Private Equity

Trusteeship

Access to regional financial markets through Al Baraka’s global network that spreads across 15 countries

Some other Investment Banks

Some of the other investment banks are

1. Standard Chartered Bank

To invest one’s income in the best place so as to get perfect profit is an important decision.

Standard chartered investment services helps its customers to invest the hard earn income.

This bank provides its perfect services to maximize the returns and to minimize its profits.

For the perfect return a customer can invest in the categories involving, fixed income,

government securities, mutual funds and the retail term finance certificates.

2. KASB Bank

KASB Bank also operates at its best in providing its services as investment banking. The group

concerned with investment banking serves as a trusted adviser to premier clients, which helps

in developing and achieving their strategic objectives and it helps them to achieve financial

needs. This bank provides its services in the following ways, merger and acquisitions,

privatization, corporate restructuring, project finance, debt servicing and many more.

3. Dubai Islamic Bank

With a professional team for the purpose DIBPL provides its perfect services in order to raise

their capital for the local and regional clients in the short span of time. This bank operates

under Shari principles therefore it is mostly preferred to all others. The investment banking

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team at the bank provides the services including Project finance, mergers and acquisitions

advisory, privatization advisory, real estate advisory, balance sheet restructuring, private

placements, syndication, sukkuk issuance.

4. JS Bank

JS bank investment banking group has been the pioneer of land mark transactions to the

domestic capital markets. It provides the following services, corporate finance advisory,

arrangement and placement of securities, trust and security services, underwriting, and

bankers to the issue.

With due efficiency the bank provides market leading investment banking services.

5. UBL

UBL Investment Banking Group which was established in 2002 is one of the most experiences

banking group in the field of investment banking and it is one of the largest banking group. The

specific attributes of the UBL is that it is consist of a specialist team of 19 investment bankers,

who have a very standard academic records and they have also experience in Pakistan as well

as in UAE.

Criticisms

The main criticism on investment banking is conflicts of interest. Potential conflicts of interest

may arise between different parts of a bank, creating the potential for financial movements

that could be market manipulation. Authorities that regulate investment banking require that

banks impose a Chinese wall whichprohibits communication between investment banking on

one side and research and equities on the other.

Since investment banks engage heavily in trading for their own account, there is always the

temptation or possibility that they might engage in some form of front running.