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Investment Banking Industry Profile Excerpt
| SIC Codes: 6211 NAICS Codes: 52311 Page Length: 10-12 Last Quarterly Update: 9/29/2008 View Sample Industry Profile |
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The investment banking industry in the US is comprised of fewer than 2,000 companies, with combined annual revenue of about $110 billion. Major companies include Morgan Stanley, Goldman Sachs, Lehman Brothers, and Bear Stearns. Investment banking is heavily concentrated: the largest 50 firms hold 90 percent of the market.
COMPETITIVE LANDSCAPE
Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries. Although labor-intensive, the industry produces very high value: average annual revenue per employee at large firms is close to $1 million.
PRODUCTS, OPERATIONS & TECHNOLOGY
The primary revenue sources of the investment banking industry are from placing new debt and equity issues with public and private investors, and the fees associated with M&As. Investment banks also buy new debt and equity issues for their own accounts, acting as the market "maker," and actively trade other financial instruments. Most investment banks are active securities and currency traders and provide asset management services for wealthy clients and retirement and investment funds. Of industry revenue, 30 percent comes from M&A fees ...
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