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Future of Investment Banking

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Future of Investment Banking
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Sunanda K. Chavan
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Future of Investment Banking - October 14th, 2010

The European Investment Banking Analysis 2001 predicts the global revenues of the investment banking industry to increase by 80% in 10 years and contribute to 1% of World GDP.

It also foresees Europe as the leading force in global revenues growth.

"India has reached critical mass in M&A. And, while international companies are focusing on consolidation of their existing business base in India, it is Indian companies that are expanding, rationalising and restructuring, all of which are healthy signs for the future of M&A industry."

JM Morgan Stanley (JMMS) has topped the charts for the third consecutive year, handling total business of Rs 19,091.63 crore including public, rights and international issues as well as mergers and acquisitions (M&As). Of this, the total value of M&A deals handled by JMMS was Rs 11,400 crore.

DSP Merrill Lynch comes in second at Rs 14,751.73 crore worth of business handled with Rs 6,260 crore worth of M&A deals. DSP is followed by Kotak Mahindra, handling business worth Rs 7,172.81 crore of which the size of M&A deals amounted to Rs 1,750 crore.

The situation as it stands now resembles an oligopolistic competition where the bulge bracket firms increasing their market shares in times of uncertainty at the cost of the smaller firms.

If the economic downturn does not improve, the smaller firms will be squeezed out of margins by the bulge bracket firms and would end acquisition victims to large commercial banks wanting to expand their clientele. Ownership of a large asset management operation, securities lending and borrowing can create additional revenue generation opportunities for investment banks.

Investment banks will have to use their creative ingenuity to come up with new financial vehicles based on derivatives, guarantees and non-directional strategies targeted at rich private consumers.

Smart management and an equally diligent staff to deal with the uncertainties of the investment banking world is a must if the Investment Banking industry were to achieve its target of 80% growth by 2010.

In an environment fraught with uncertainty, the industry can be sure of one thing: blue-blooded MBA's will continue flocking to its folds and would love being willing "serfs and indentured servants of the Investment Banking Industry"!

The future definitely holds a lot of potential in area for Investment banks.

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