Investment Banking

U.S.-based investment banks have undergone what many would consider substantive changes in the last

eleven years, over the period 2007 to 2018. This period coincides with the Great Recession, which was a

significant driver of changes to investment bank business and characteristics. Such changes include

wider fluctuations in mergers and acquisitions, reduced initial public offering underwriting, reductions in

staffing, and associated impact on investment bank balance sheets.

For this case study, address the following items:

1. Identify one of the top ten investments banks as of 2018.

2. Provide a concise description of the banks core competency with examples of recent activities

or transactions. Be sure to provide specific $ data on the magnitude of the banks recent

activities.

3. How has the size of your selected investment bank changed in the last decade? Use $ valuations

to illustrate the change. In which investment bank functions did their overall business increase

and/or decrease?

4. Prepare a balance sheet analysis of the bank, comparing 2007 B/S $ values to the most recently

published B/S (either 2017 or 2018). Be sure to include the following items, in Excel

spreadsheet format:

a. % change in total assets, liabilities, and equity positions over this period

b. Past and current leverage position of the investment bank, and % change over this

period

c. Comparison of book to market value of the bank, 2007 to current value

5. Refer to the following short article and address the question in detail:

a. Article: Edelmann, C., & Hunt, P. (2017). How the Great Recession Changed Banking.

Harvard Business Review Digital Articles, 29

b. Question: Compare the financial analysis completed in item #3 above to the main points

in the article, including changes in B/S valuation.

Answer the following questions for a fictitious public offering, and show all calculations:

An investment bank offers underwrites an IPO of up to 18.5m shares for ABC Company at a price of

$12.50 per share. Show the $ return to the investment bank under both scenarios:

1. The 18.5m shares sell at $13.25 per share.

2. What happens if the IPO price is overstated and the shares sell for $12.25 per share?