Industry ResearchIndustry Research

Group 1Group 1

1.1. Fundamental differences of Fundamental differences of Commercial Banks and Investment Commercial Banks and Investment Banks, the different job nature and Banks, the different job nature and how to make moneyhow to make money

Definition of commercial bankDefinition of commercial bank

An institution which accepts An institution which accepts deposits, loan and offer servicesdeposits, loan and offer services

Can be classified into 4 groups: Can be classified into 4 groups: – Community BankCommunity Bank– Regional BankRegional Bank– Super-regional bank Super-regional bank – Money center or international bank Money center or international bank

Definition of Investment BankDefinition of Investment Bank

An institution which acts as an An institution which acts as an underwriter or agent for corporationunderwriter or agent for corporation

to issue securities to issue securities – Maintain dealer or broker operationMaintain dealer or broker operation– Maintain market for previously issued Maintain market for previously issued

securities.securities.– Offer advisory services for investorsOffer advisory services for investors

Differences between the Differences between the commercial bank and commercial bank and

investment bankinvestment bank　　　　

Commercial Bank Investment Bank 1) Types of Institution Depository Non-Depository 2) Nature of Job Accepts deposits, Act as underwriter or agent

makes loans and offers for corporation, municipalities financial services. issuing securities but doest not

accept deposits or make loans, andoffer advisory services to investors

maintain broker/dealer operations,markets for previously issued securities

3) Classification Community Bank, Regional NILBank, Super-regional bankand Money center orinternational bank.

Job Nature of Investment BanksJob Nature of Investment Banks

Leading Investment Firms:Leading Investment Firms:-Goldman Sachs Group,-Goldman Sachs Group,-Merrill Lynch-Merrill Lynch-Morgan Stanley Dean Witter-Morgan Stanley Dean Witter

3 main types of activities:3 main types of activities: Investment BankingInvestment Banking Trading and Principal InvestmentsTrading and Principal Investments Asset Management and Securities Asset Management and Securities

ServicesServices

1.1. Investment BankingInvestment Banking

Corporate Advisory ServicesCorporate Advisory Services– MergersMergers– AcquisitionsAcquisitions– RestructuringsRestructurings

Securities UnderwritingSecurities Underwriting– buying all the shares of IPO for resale at a pre-estabbuying all the shares of IPO for resale at a pre-estab

lished price per share lished price per share Private Placement of Debt and Equity SecurPrivate Placement of Debt and Equity Secur

itiesities– place, negotiate and close transactions of private pplace, negotiate and close transactions of private p

lacement lacement

2.2. Trading and Principal InvestTrading and Principal Investmentsments

Fixed Income, Currency and CommoditiesFixed Income, Currency and Commodities– products are: bank loans, commodities, currencies, products are: bank loans, commodities, currencies,

derivatives derivatives EquitiesEquities

– trades equities and equity-related productstrades equities and equity-related products

Principal InvestmentsPrincipal Investments – make principal investments directly and through thmake principal investments directly and through th

e funds they raise and managee funds they raise and manage

3.3. Asset Management and SecuAsset Management and Securities Servicesrities Services

Asset ManagementAsset Management– Assets under management include mutual funds, separate accounts Assets under management include mutual funds, separate accounts

managed for institutional and individual investors, merchant bankinmanaged for institutional and individual investors, merchant banking funds and other alternative investment fundsg funds and other alternative investment funds

Securities ServicesSecurities Services– includes prime brokerage, financing services and securities lending, includes prime brokerage, financing services and securities lending,

all of which generate revenues primarily in the form of fees or intereall of which generate revenues primarily in the form of fees or interest rate spreadsst rate spreads

CommissionsCommissions– include fees from executing and clearing client transactions on majoinclude fees from executing and clearing client transactions on majo

r stock, options and futures markets worldwide r stock, options and futures markets worldwide – also include revenues from the increased share of the income and gaalso include revenues from the increased share of the income and ga

ins derived from our merchant banking funds.ins derived from our merchant banking funds.

How Investment Banks Make How Investment Banks Make Money?Money?

Investment BankingInvestment Banking– fees charged for financial advisoryfees charged for financial advisory– Commissions from Underwriting businessesCommissions from Underwriting businesses

Revenues earned through Trading and PRevenues earned through Trading and Principal Investmentsrincipal Investments

Asset ManagementAsset Management– generates management fees by providing ingenerates management fees by providing in

vestment advisory services vestment advisory services

Personal Banking of Standard Charted Personal Banking of Standard Charted BankBank

Job dutuiesJob dutuies

Personal Banking

Basic services Personal banking plans Banking services Life stage plans

DepositsLoans

InvestmentCredit card

Retirement serviceInsurance

Priority bankingExcel bankingEasy banking

MobileWAPPalm

Automated ATM

Getting startedYoung couples

Getting establishedPrime

Corporate banking --Trade servicesCorporate banking --Trade services

Assist firm in international tradeAssist firm in international trade Factoring/Account Receivables servicesFactoring/Account Receivables services Import and export Letters of Credit Import and export Letters of Credit Documentary collections and guarantees Documentary collections and guarantees Document Against Acceptance Document Against Acceptance Document Against Payment Document Against Payment Credit Bills Negotiation Credit Bills Negotiation Tailored trade services packagesTailored trade services packages

Credit facilitiesCredit facilities

Credit facilities help meet financial Credit facilities help meet financial needsneeds

Working CapitalWorking Capital Cheque ProtectionCheque Protection Professional Firm OverdraftProfessional Firm Overdraft Merchant Overdraft Merchant Overdraft Residential and Commercial Property FiResidential and Commercial Property Fi

nancingnancing

Cash managementCash management

Help firms manage moneyHelp firms manage money Transactional accounts (e.g. Savings Account and CurTransactional accounts (e.g. Savings Account and Cur

rent Account)rent Account) Time Deposit AccountTime Deposit Account Remittances and bank drafts Remittances and bank drafts 24-hour phone banking services 24-hour phone banking services Consolidated statement Consolidated statement ATM ServicesATM Services Fax banking and courier services Fax banking and courier services Electronic banking services Electronic banking services International and local collection and payment servicInternational and local collection and payment servic

es es

Protection and employee serviceProtection and employee service

Offer protection and employee servicesOffer protection and employee services provide products such as: provide products such as: insuranceinsurance payroll payroll provident fund productsprovident fund products

How to make money?How to make money?

lending and accepting deposit lending and accepting deposit to earn net interest incometo earn net interest income charge transaction fees and commission charge transaction fees and commission from the financial services they providefrom the financial services they provide

dd

Service charges and commissionService charges and commission

Net fees and commissions Net fees and commissions (HK$ millions)(HK$ millions) (HSBC) (HSBC) 20012001 Account services 1214Account services 1214 Credit facilities 1534Credit facilities 1534 Import/export 2193Import/export 2193 Remittances 856Remittances 856 Securities /stock broking 1530Securities /stock broking 1530 Cards 2723Cards 2723 Other 3584Other 3584

Thank You !Thank You !

The End!The End!