1 / 33

4 October 2003

4 October 2003. 12. Bankenforum Dr. Hanns-Alexander Klemm. Recent developments in Investment Banking – Business Models and Differentiation. Contents. 1. Introduction to Cazenove What do Investment Banks do? The Investment Banking market Different business models in Investment Banking

fayre
Download Presentation

4 October 2003

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 4 October 2003 12. Bankenforum Dr. Hanns-Alexander Klemm Recent developments in Investment Banking – Business Models and Differentiation

  2. Contents 1.Introduction to Cazenove What do Investment Banks do? The Investment Banking market Different business models in Investment Banking Recent challenges

  3. Section 1 Introduction to Cazenove

  4. Equities • Manages assets of close to €10 billion • Initial Public Offerings • Market intelligence • Financial advisory • Over 110 analysts • Specialist investment management services and independent advice • Sector based approach for large caps • M&A advisory • Equity offerings • Country based approach for mid caps • Private Equity / alternative investments • Global distribution capability with c.100 sales people • Debt advisory • Execution services internationally 1 – Introduction to Cazenove Independent since 1823 Investment Banking Fund Management Corporate Finance Equity Capital Markets Institutional & Retail Charities Private Clients Research Distribution & execution Cazenove is a relationship based advisory firm, combining high quality impartial advice with strong distribution • London•Frankfurt•Paris •Milan•Hong Kong•Beijing•Singapore •Johannesburg•New York

  5. 1 – Introduction to Cazenove History and Background 1823 1930s 1980s 1990’s 2001 The origins of Cazenove can be traced to the early Huguenot financiers who left France in the late seventeenth century. In 1819 Phillip Cazenove joined the business of his brother-in-law John Menet: in 1823 they became partners, and the modern firm of Cazenove was established In the mid-1930s the business reached its position as one of the City of London’s pre-eminent stockbroking partnerships In the 1980s Cazenove played an important part in most of the British Government’s privatisation issues and, as the only major independent firm in the London securities industry, successfully built its business both domestically and internationally Growing internationalisation. Development of pan-European equities, research and distribution. Build-up of advisory capabilities, including Mergers & Acquisitions. The firm changed from a partnership to corporate status in April 2001, raising finance from some of the leading institutional investors in the UK. Nevertheless, the firm remains substantially owned by its employees. Set up Frankfurt and Beijing offices

  6. 1 – Introduction to Cazenove A leading financial adviser in German M&A German M&A activity 1st half year 2003 Selected transactions 2001 - 2003 Advised Procter & Gamble in its € 6.7 billion takeover of Wella AG. Advised Securicor in the disposal of its 50% stake in Securicor Omega Express to Deutsche Post for €247 million Advised Gerling NCM in the €655 million sale to Swiss Re and Deutsche Bank.  Advised Agiv Real Estate in its disposal of the internet businesses myLoc and Taxxus Internet Solutions to GlidePath Source: Merger rmarket Advised De La Rue in the €22 million disposal of its 6.28% stake in Koenig & Bauer AG to an investor group Advised Abbot Group in its £134 million acquisition of Deutag from Preussag / TUI

  7. 1 – Introduction to Cazenove At a glance…international capital markets transactions in 2002 Sweden Intrum Justitia,IPO D Carnegie,Placing UK & Ireland IPO Burberry Engelfield Intertek Group John Wood Group Mouchel William Hill Wolfson Microelectonics Xstrata Global Offering Allied Domecq BPB Centrica HBOS Serco Group Placing Amphenol Bookham Technology Christian Salvesen Govett Strategic Trust Independent Investment Trust Premier Farnell Stanley Leisure TNS Vernalis Rights Issue Royal & Sun Alliance Bonds Daily Mail & General Trust GUS Land Securities Yorkshire Water Eurobond Issue BG Group John Lewis EMI Group Allied Domecq BOC Group FirstGroup Convertible Bond Issue Anglo American BAA Cable & Wireless Dimension Data Friends Provident International Power lastminute.com Japan Daido Life,IPO Arrk Corp,Primary Offering D&M Holdings,Bought Deal Norway Aktiv Kapital,Placing Italy ASM Brescia,IPO Hera, IPO Taiwan Fubon Financial Holding, Convertible Bond Issue China China Telecom,IPO France Autoroutes du Sud de la France,IPO Wanadoo, Placing Hong Kong BOC Hong Kong (Holdings), IPO Chen Hson, Secondary Placing China Oilfield Services, IPO CNOOC,Guaranteed Notes Comba, IPO Fong’s Industries Company, Secondary Placing Fountain Set, Placing Harbin Brewery,IPO Kowloon Development Co,Placing Lee & Man Paper Manufacturing, IPO Lerado Group,Placing Lianhua Supermarket, IPO Linmark Group,IPO Moulin, Placing Shanghai Real Estate,Placing Sinotrans, Placing Standard Chartered, IPO Techtronic Industries,Follow-On Offering Victory City International, Placing Malaysia PLUS Expressways,IPO Maxis Communications,IPO Spain Enagas,IPO Singapore Lindeteves Jacoberg,Warrants Noble Group, Placing Callable Notes Barclays Bank Egg HSBC Secured Bonds London Merchant Securities Tier One Notes Bank of Ireland Bought Deal Intertek Perpetual Capital Subordinated Securities Prudential plc USA Chicago Mercantile Exchange Holdings, IPO Regal Entertainment Group,IPO Travelers Property Casualty,IPO Alcon Laboratories,IPO Accenture,Global Offering, Secondary Offering The Thomson Corporation, Follow-On Offering Peabody Energy Corporation,Follow-On Offering UT Starcom,Secondary Offering

  8. Cazenove recently received the prestigious EuroWeek 2002 Awards for ‘Best Global Accelerated Issue’ and ‘Best European Accelerated Issue’ for our performance in the HBOS £1.3bn Global Offering 1 – Introduction to Cazenove Raising new capital for European companies • A recent survey by IFR ranked Cazenove 1st as bookrunner in 2002 for all primary equity activity in the UK and 4th in Europe (as well as the Middle East and Africa)

  9. 1 – Introduction to Cazenove Long term player in Europe • With the exception of Germany where the capital markets opened up much later to foreign banks, Cazenove has been active in Europe for up to 20 years, starting in each country with the deals shown opposite France 1982 with Bongrain Holland 1984 with Wessanen Spain 1982 with Banco Hispano Americano Belgium 1985 with Société Générale de Belgique Italy 1985 with STET (precursor of Telecom Italia) Sweden 1982 with SCA Switzerland 1983 with Société Générale de Surveillance Norway 1988 with Rieber & Son Denmark 1984 with Radiometer Portugal 1988 with Corticeira Amorim Finland 1984 with Nokia Germany 1996 with Deutsche Telekom I

  10. March 2002 (France) Initial Public Offering €2,633m Co-Manager November 2000 (UK/Netherlands) Global Offering £711m & €961m Joint Bookrunner June 2000 (Germany) Global Offering €13,300m Co-Manager March 2002 Initial Public Offering £1bn Joint Bookrunner June 2002 (Spain) Initial Public Offering €917m Co-Manager Current Initial Public Offering tba Co-Lead Manager 1 – Introduction to Cazenove Key European transactions - examples

  11. 1 – Introduction to Cazenove Equity research • Over 100 analysts worldwide • Integrated Pan-European approach to Eurotop 300 research out of London – nearly 90% by value under coverage • Establishing global teams in key sectors • Experienced lead analysts with an average of over eight years coverage of a sector and over eleven years relevant industry experience • Country approach to researching small and midcap stocks through specialist teams

  12. 1 – Introduction to Cazenove Global institutional equity sales 63 sales people selling UK and Continental European Equities in London and New York Over 2,000 global roadshows Asia (ex Japan), 456 Austria, 2 Belgium, 6 Denmark, 120 Finland, 130 France, 409 Germany, 184 Iberia, 91 Iceland, 1 Ireland, 61 Italy, 141 Netherlands, 138 Norway, 170 Sweden, 243 Switzerland, 5 US, 253 15 Asia Pacific (ex Japan), 6 US and 6 South African sales people based in London, New York, Johannesburg and Asia Pacific

  13. Section 2 What do Investment Banks do?

  14. 2 – What do Investment Banks do? Basic functions Investment Banks mainly perform three functions: • In the secondary market for existing securities, they assist buyers and sellers by acting as a broker or dealer • Derivatives • Lending • Balance sheet transactions • Principal investments Primary market Secondary market Advisory • In the primary market they float new securities for cash • Mergers & Acquisitions • Debt Advisory • Equity advisory • Valuations

  15. 2 – What do Investment Banks do? Information and product flow Research Capital Markets Feedback Sales Corporate Finance M&A Ideas Derivatives Product Trading Other Chinese Wall

  16. 2 – What do Investment Banks do? Product needs over a company´s life cycle Investment banking approach Private Client M&A Private Placement IPO Secondary Convertible Debt Commercial banking approach

  17. 2 – What do Investment Banks do? Revenue mix

  18. Section 3 The Investment Banking market

  19. 30% • 60% • 50% • 25% Industry Revenue Brokers • 40% • 20% Banks • 30% • 15% • 20% • 10% • 10% • 5% • 0% • 0% • -10% • -5% • -20% • 1980 • 1981 • 1982 • 1983 • 1984 • 1985 • 1986 • 1987 • 1988 • 1989 • 1990 • 1991 • 1992 • 1993 • 1994 • 1995 • 1996 • 1997 • 1998 • 1999 • 2000 • 1977 • 1978 • 1979 • 1980 • 1981 • 1982 • 1983 • 1984 • 1985 • 1986 • 1987 • 1988 • 1989 • 1990 • 1991 • 1992 • 1993 • 1994 • 1995 • 1996 • 1997 • 1998 • 1999 • 2000 Source SIA Source SIA 3 – The Investment Banking market Cyclicality of the industry Industry revenue percentage change, year over year banks Profitability of securities firms versus commercial

  20. 3 – The Investment Banking market Industry growth rates Growth rates (Revenues)

  21. 3 – The Investment Banking market Mergers & Acquisitions Global announced & completed M&A Global M&A volume down by 65% (1997 – 2002) European M&A volume down by 52% (1997 – 2002)

  22. 3 – The Investment Banking market German M&A down by 50% German inbound M&A transactions by value German outbound M&A transactions by value Deal value (US$m) Deal value (US$m) Source: Thomson Financial Source: Thomson Financial

  23. 3 – The Investment Banking market Global Underwriting Equity underwriting activity Debt underwriting activity +98% +31% -28% -31% Source: Thomson Financial Data

  24. 3 – The Investment Banking market Fund flows US mutual fund flows 1985 - 2001

  25. Section 4 Different business models in Investment Banking

  26. 4 – Different business models in Investment Banking Segmentation CSFB Deutsche Bank Goldman Sachs JP Morgan Lehman Brothers Merrill Lynch Morgan Stanley UBS Warburg Global „bulge bracket“ banks SEARCH SLIDE International Independent banks Cazenove Lazard Rothschild Other Commerzbank, Dresdner KW Cooperative/Landesbanks Sal Oppenheim HSBC

  27. 4 – Different business models in Investment Banking Significant differences (examples) Large integrated firms • Balance sheet • Lending • Proprietary trading • Derivatives • Broad product offering • Broad infrastructure • Capacity utilisation • Cross selling / product sales • Specialisation / Divisionalisation • Opportunity cost Independent and other firms • Limited balance sheet • Limited or no proprietary trading • Limited or no lending / derivatives • Focused products / services • Independent advisory • Impartiality / limited or no conflict • Long-term client focus • Entrpreneurship

  28. 4 – Different business models in Investment Banking Competitive dynamics in Germany – generic view Followers GS ML Leaders DB MS CSFB LAZ Independents SSSB Roth CAZ DB USBW Franchise LB DKW Coba DG 0 2 4 6 8 10 12 Market share

  29. 4 – Different business models in Investment Banking Investment banks vs. MSCI World 2001 to date Quoted investment banks performed in line with the MSCI global index Source: Datastream

  30. 4 – Different business models in Investment Banking Results considerably better than a year ago Q2 2003 vs. Q2 2002 Q2 2003 : 31.0% Q2 2002 : 26.9%  +4.2%  +18.8% Note: Average calculated on a revenue weighted basis; operating revenue for investment banking and institutional sales and trading; extraordinary charge-offs excluded; Morgan Stanley´s profit margin skewed by compensation payments accrued for following quarters

  31. 4 – Different business models in Investment Banking Revenues / employee (2002) Revenues, no. of employees Revenues by employee

  32. Section 5 Recent challenges

  33. 5 – Recent challenges Challenges / Issues Market • Cyclicality • Low activity • Desintermediation • Fee levels / margins Regulatory • „Spitzer“ / research • Sarbanes Oxley • Basle II An industry in change Internal / Institutional • Cost structures • Management • Staff turnover • Reputation • Capacities

More Related