Question

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 bank’s core competency with examples of recent activities or transactions. Be sure to provide specific $ data on the magnitude of the bank’s 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, 2–9

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?

Answer 1

1. Bank of America Corporation
2. Goldman Sachs
3. Morgan Stanley
4. Barclays
5. JP Morgan Chase
6. Deutsche Bank
7. Credit Suisse
8. Citigroup
9. HSBC Holdings plc
10. UBS Group AG