Introduction

to Banking

© 2024 Financial Edge Training

 Contents

How a Commercial Bank Works

How an Investment Bank Works

Emerging Trends in Financial Services

Skills Heatmap

© 2024 Financial Edge Training 2

 Banking Sectors

Retail Private Commercial Investment Universal

Banks Banks Banks Banks Banks

Individuals High Worth Companies Companies

Combination of
Deposits Deposits Deposits Raising capital retail, private,
Loans Loans Loans Loans commercial and
Advice Forex Advice investment banks
Forex

© 2024 Financial Edge Training 3

 Banking Trends

1930 1960 1980 1990 2000 2010

s – s s s s
1970s

Great Growth of global New issues into Commercial Securitization New more
depression. markets, their high yield banks erodes severe bank
Banking act of sophistication market, new increasingly turn underwriting regulation.
1933 separated and increasing global banking to investment quality and
broking and deregulation. regulation banking to increasingly
banking. JPM and local counter dis- banks trade
becomes JPM deregulation of intermediation loans.
and MS. financial Glass-Steagall
markets. repealed.

© 2024 Financial Edge Training 4

 How a Commercial Bank Works

Balance Sheet
Borrowing RISK MANAGEMENT Depositing
clients: clients:
Corporations Corporations
Deposits
Retail Retail
Loans
Governments Governments

Equity
Regulatory requirement
A commercial / retail bank intermediates
through its balance sheet

© 2024 Financial Edge Training 5

 How an Investment Bank Works

Financial Services
Sector

Debt & Equity

Investors Issuers
Cash

Clients wanting to invest

Clients wanting to raise money
money

Corporations Investment Banks Corporations

Governments Governments
Individuals Private Equity

An investment bank intermediates

through the capital markets
© 2024 Financial Edge Training 6
 How Investment Banks Help

Maximize profits for shareholders

Return on
Capital
> Cost of
Capital

Returns increase Lowering cost of capital

• Internal efficiency • Cheap debt
• External acq’ns disposals • Managing equity
• = Financial Advisory / • = Equity, Debt and
M&A Credit
Managing risk
• Commodities
• FX
© 2024 Financial Edge Training 7
 How an Investment Bank Works
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SALES
M&A MARKETS
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ADVISORY RESEARCH MINUTE TO

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1 DAY – 1 MTH MINUTE

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© 2024 Financial Edge Training 8

 M&A / Financial Advisory

Teams Skills

Industrials Financial institutions Attention to detail Accounting

(FIG)

Healthcare Financial modeling Maths

Financial sponsors

Analytics Valuation
Natural
resources Consumer retail
Industry knowledge Financing

Real estate Technology media

and telecoms (TMT) Deal structuring

Specialised analytical Written and verbal communication

methodologies (including PowerPoint)

Execution M&A
© 2024 Financial Edge Training 9
 Capital Markets (Financing)

Teams Skills

Derivative Equity capital Attention to detail Accounting

markets

Struc. Finance Financial modeling

Debt capital
markets
Municipal Maths (in DCM)
Finance Leverage finance

Analytics Valuation
High yield

Written and verbal communication

Typically, biggest team (including PowerPoint)

© 2024 Financial Edge Training 10

 Research

Teams Skills

Commodities Attention to detail Accounting

Credit research Financial modeling

Corporate research
Maths

Asset allocation
Analytics Valuation
Economic research
Written and verbal communication
Rates research (including PowerPoint)

© 2024 Financial Edge Training 11

 Sales & Trading

Teams Skills

Equities Fixed income Attention to detail Accounting

Cash equities Rates Very strong maths in trading

Convertibles High yield

Financial maths

Credit CDS
Analytics Valuation
Commodities Currencies
Very strong verbal communication

Very strong interpersonal skills

© 2024 Financial Edge Training 12

 Front, Middle & Back Office

Front Office Middle Office Back Office

PROFIT GENERATION SUPPORTS FRONT OFFICE ADMIN AND OPS

M&A, markets Technology Technology

Research Risk management Risk management

Sales & trading Compliance Compliance

Hedging Legal Records

Asset management Accounting/finance

Private wealth Human resources

Transaction services Settlements

© 2024 Financial Edge Training 13

 Back Office

Back Office Skills

ADMIN AND OPS Team Working Communication IT Literacy Numeracy

Technology
Confidence and Attention
Analytics/problem solving
leadership to detail
Risk management

Compliance
Typical Jobs
Records
Developing/improving
Analyzing system info Ensuring data accuracy
Accounting/finance systems

Human resources
Ensuring limits not breached Systems testing

Settlements
Salary payments Hiring

© 2024 Financial Edge Training 14

 Middle Office

Middle Office Skills

SUPPORTS FRONT OFFICE Team Working Communication IT Literacy Numeracy

Technology
Confidence and Attention
Analytics/problem solving
leadership to detail
Risk management

Compliance
Typical Jobs
Legal
Checking daily
Transaction clearing Liaising with clients
transaction reports

Managing trading systems Designing software

© 2024 Financial Edge Training 15

 Working in Middle & Back Office

Highly valued professionals

E.g. convincing front office to keep within risk limits, E.g. calculating the risk position of the bank’s
while enabling lucrative deals to take place derivatives, and how to manage that position

© 2024 Financial Edge Training 16

 Other Parts of the Bank: Risk Management

Runs new programs

Risk Predicts where things
Estimates the impact to reduce risks, or
Managers can go wrong
benefits from risks

Risk Macro / system Credit Operational

Levels

Innovative and predictive Important role in high demand Stable job. Work with other depts

© 2024 Financial Edge Training 17

 Other Parts of the Bank: Compliance

Compliance means internal and external rules are followed.

This differs from risk management. Risk management looks to quantify
risks and determine risks worth taking / avoiding.

In-house service
Compliance Subscribe to Translate laws into
to support depts
Managers established laws operational rules
comply with rules

Stay on top of regulations, Increase in regulation Increasingly automated,

domestic and abroad and need for compliance meaning new opportunities
since 2008 to work with IT dept
© 2024 Financial Edge Training 18
 Bulge Budgets

Broker Dealer / Pure Play Investment Bank Broker Dealer / Pure Play Investment Bank Universal Bank

Top Three IPO Bookrunner Penetration by Industry

30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
et ar
e Ts h
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te tw R ei u t i v
In of Fr ib em eu l B er d
u
S ir tr h ac n
a S
ro
A is C d
ed D m io el P
g ar eg ilfi as
ka od h R O G
ac Fo P &
P il
O

Goldman Sachs & Co. JPMorgan Chase & Co Morgan Stanley

© 2024 Financial Edge Training 19
 FinTech – Technological Innovation in Finance

$
Inside financial Institutions to
institutions big clients

$
Between businesses $ Directly to
and consumers consumers

© 2024 Financial Edge Training 20

 Emerging Trends - FinTech

FinTech business Digital customer Cyber security

models for banks experience risks

Sharing Customer Public

Blockchain
economy $ intelligence cloud

Asia centre for Artificial Regulators

tech innovation intelligence using tech

© 2024 Financial Edge Training 21

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