Investment bank

Research Paper

About

Investment Banks and How can Syrian Economics benefit?

Prepared by

Mr. Mazen MARDINI (Msc.)

Spring 2011

After this presentation you will be able to talk about:

What is the Investment Banking?Development of Investment BankingProducts and ServicesInternational Investment BanksStarting of Investment Banking in SyriaWhy in Syria?Syrian Investment Fields for Investment Bank

What is Investment Banking?is the term used to describe the

business of raising capital for companies and advising them on financing and merger alternatives.

Capital essentially means money and Companies need cash in order to grow and expand their businesses.

Investment banks sell securities to public investors in order to raise this cash

No bank can name it own as the oldest investment bank in the world because at that time banks – which were commercial and investment- were locally and not well-connected like these days.

But according to some historical bankers, Union Bank of Switzerland (UBS) was the first bank which offered investment banks products and services founded in 1854.

In the U.S. the Glass-Steagall Act, we experienced the first phase of Investment Banking, after the Stock Market Crash in 1929, and the Investment Banks were separated from Commercial Banks.

Starting & Development

The investment banks revenues for 2010 was:

Starting & Development

U.S. & Canada; 53%

Europe; 24%

Asian Countries; 15%

Middle East; 6% Others; 2%

U.S. & CanadaEuropeAsian CountriesMiddle EastOthers

Source: Official Website of World Bank 2010

List of Top 10 Investment Banks worldwide:Investment Bank Revenue (in $B) Net Earnings (in $B)

Bank of America 18.1 2.5Barclays 17.7 3.7

Goldman Sachs 45.2 12.2Lazard 27 1.53

Deutche Bank 36.6 6.5Morgan Stanley 24.74 4.96

Citigroup 80.2 1.7JP Morgan Chase 28.1 6.9

Credit Suisse 35.2 7.3UBS 43 2.2

Starting & Development

Source: Balance Sheet of respective banks (2010)

Why Commercial Banks

Create an Investmen

t Operations Division at their groups?

The Surplus of money at the wealthy people bank accounts which don’t know how to use it effectively to raise their numbers

The high percentage of rich category who have no financial education or no available time to follow-up their business volume

Companies desire in institutions that can be as a partner through financing their business or helping in complete their capital and

investment operations

The financial firms want to increase non-interest income through using their human resources possibilities in analyzing and advising

Why Commercial Banks Create an Investment Operations Division at their groups?

The Financial firm can’t allocate all its funds to loans because some of them illiquid so they are risky

Some Financial firms work in a local environment, so that can restrict their business in small area full of competition

The Financial firms search about taxes sheltering but loans income is usually taxable

Why Commercial Banks Create an Investment Operations Division at their groups?

Investment

Banking

Asset Manage

ment

Capital & Money

Markets

Research

Investment Manageme

nt

Private Banking

Asset Manageme

nt

Private Banking

Developing a comprehensive wealth management strategy in order to reach the clients’ specific financial targets

Market and product analysis and researchPlan implementation and ongoing monitoring

of investment

Foreign Exchange ManagementCommodities tradingEquities: (Stock and Bonds speculations)

Fixed Income: Treasury Securities, Municipal Bonds, Mortgaged-Backed Bonds, etc

Swap, Futures and Options Process

Stocks, bonds, commodities, future and options

Mutual fund, hedge funds and Islamic fundsStructured productsMedium-to-long term deposits

Capital & Money

Markets

Investment Manageme

nt

Research

Corporate Finance:o Merger and Acquisitionso Equity Raising :

Valuation Initial Public Offerings Private Placement

o Medium-to-Long term Debt raising Project Finance:

o Debt (Medium-to-Long term)o Sharing Equityo Financial Project Management

Providing the clients on daily basis with information and analysis on:

Capital Markets: Stocks, Funds, Indices, etc. Economy: Country, Industry, etc. Research from top international banks Stand-by experts to cover the prerequisites

necessary for making an informed investment decision

Starting of Investment Banking in Syria

Presidential Act No.56 in 2010, was the first step of investment banking in Syria, which set the regulations and organized restriction for investment banks under supervision of Central Bank of Syria and the minimum capital is 20 Billion SYP (400 Million US $ as 1$=50SYP) fully paid.

Central Bank of Syria is studying now some applications such as (Audi Capital, FransaInvest, BLOM Capital,

Global Capital, Sham Capital, Pioneers for Invest, etc.)

Excellent Opportunity in new banking market with fresh banks experience.

Governmental tendency toward investment issues in many various projects can be financed by Investment Banks e.g. Infrastructure Projects.

Growth rate 5% for 2010 with GDP equals to 2833 Billion SYP.

Total Deposit reach 1238 Billion SYP with Extra Deposits reach 260 Billion SYP without any revenues.

The variety of the Syrian economic resources which diversify the opportunities.

Why in Syria?

Source: Central Bank of Syria 2010

Low inflation rate 5% in 2010.Syria has a big and diversified reserves of foreign

currencies reach 807 Billion SYP in 2010.Credit facilities balance about 1047 Billion SYP in

2010Industrial Areas and Zones provided with good level of

infrastructure and need more flexible finance methodsHigh Accessible Trade Level about 12340 Million USD.Unemployment rate 8.5% (Governmental Issue)Set the Syrian Investment Map with 4000 investment

opportunities

Why in Syria?

Source: Central Bank of Syria 2010

New Projects: Syria still suffer from the lack of the finance sources needed to start-up any new projects, so with existing of flexible finance sources anyone who has a good feasibility study can find maybe partner or financer for it.

SME Expansions: SMEs are the main sector that will benefit from the investment banking as financing, advising at M&A process or project management which reflect on all economical indicators and set a strong base for chain economics.

Where can we offer investment bank products in Syria?

Where can we offer investment bank products in Syria?

Entering in the governmental projects through buying the CDs, sharing equity or direct investment which could return good revenues if we benefit from the indicators that we mentioned previously.

Damascus Securities Exchange: new and fresh market founded recently full of investment bank products that could be a targeted market for many investors, individual and corporations in addition to the banks sector rule.

Real estate: with the caper that Syria experienced recently, we can say that this section will posse a good part of investors vision for future.

Recommendations to develop the investment banks in Syria?

Focusing on creating and developing the Human Resources that will work at the banking and financing section.

Giving incentives for investment banks that join in the governmental developing plans.

Promoting for Syria in international forums and committees to enter the banking section and develop it.

Giving more integrity for the Central Bank reports in addition to generate its reports more fast and accurate.

Recommendations to develop the investment banks in Syria?

Creating corporations as Loans Guarantor or Investment Guarantor which give guaranty on mortgage base in favor of it, may reach 80% of loan amount.

Giving permission to the investment banks to finance the Venture Capital projects.

Developing the insurance companies to offer re-insurance products for investment banks which may minimize the risk and revolve the capital in safe method.

With the new 11’th plan 80 Billion USD for the next five years, Investment Banks can take a good portion in financing and managing the developing process.

Any Question ?!

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