Investment Banking: The Changing Competitive Landscape



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Code : COM0079

Year :
2005

Industry : Banking, Insurance and Financial Services

Region : US Europe

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:In 2003, investment banks globally earned $160 billion in revenues, $49 billion in profits - a margin of over 30%. Investment banking, with its characteristic high margins, has always lured commercial banks, as margins in commercial banking are comparatively lower. By the turn of the 21st century, giant commercial banks like Citibank and J.P. Morgan Chase started entering the traditional investment banking business by leveraging on their financial strengths and wide networks to grab corporate deals. The traditional investment banks started losing their turf to the commercial bank giants as, "Historically, the production technology of investment banking has depended heavily on the capacity of investment bankers to maintain networks of relationships with institutional investors and client firms." With the foraying of the commercial banks into investment banking, traditional investment banks began to rethink on their business strategies and organisational sizes. The latest example being Credit Suisse First Boston, which on December 7th 2004 announced that, it wouldmerge with its parent group, the Zurich-based Credit Suisse Group - "Switzerland's financial-services powerhouse." This announcement intensified the debate on the importance of the organisational structure and size in themodern investment banking industry that traces its roots back to medieval Europe.

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