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[Investment
Banking]
[Pakistan]
Salman Ahmed (09)
P a g e | 2
Investment Bankng In Pakstan
Presented to:
Prof Sheha Soha
Presented by:
Saman
Ahmed
Ro No. (09)
P a g e | 3
ACKNOWLEDGEMENT
The most mportant acknowedge s to our Lord Most Mercfu Most Wse
by Whose mercy we were abe to begn ths pro|ect, Hs Mercy s such that
unworthy saves ke ourseves are gven the abty to work hard and to be
gratefu towards a He has gven us.
Aah states n the Ouran:
"hen remember !e" I #ill remember yo$%
Be grate&$l to !e'
And do not re(e)t !e"
(*h+,: -+ ./,)
We woud ke to express our ove, grattude and sncere regards to the
foowng person to whom we are gratefu for her support and hep wthout
whch we woud not have been abe to make ths Pro|ect.
Prof. Sheha Soha. (IBA P.U.)
May Allah accept our humble!
P a g e | 4
1. Introducton:
Ths assgnment w anayze the nvestment bankng scenaro of Pakstan.
Assgnment dscusses the begnnng of nvestment bankng n Pakstan
and scope of t. Goba and Pakstans nvestment bankng reguatons are
dscussed and emergng mode of nvestment bankng n Pakstan and ts
crtca success factors are dscussed n ths.
The Begnnng:
Investment Bankng n Pakstan s a
nascent ndustry that takes ts roots
to 1987. On September17, 1987 the
Government of Pakstan ssued a
notcaton, SRO 585(1) 87 under
whch the prvate sector coud
estabsh Investment Banks and
Investment Fnance Companes.
Scope of Investment Banks:
The scope of the Investment Banks' actvtes as descrbed under SRO
585(1)87 s as foows:
Money Market actvtes, ncudng the ssuance of short term COIsor
own paper of not ess than 30 days maturty;
Capta Market actvtes, ncudng tradng n equty and non-equty
nstruments, underwrtng oatng and managng mutua funds,
provdng margn oans and oherng cash management accounts;
Pro|ect Fnancng through nvestments n pro|ects and the provson
of guarantees; and
Corporate Fnanca Servces, such as advsory, Pacement of Debt
and Equty, ocay and abroad.
P a g e | 5
2. Investment Bankng Reguatons:
Goba:
Hstorcay, n the deveoped countres,
Investment Banks were gven protecton by
restrctng the Commerca Banks from
gettng nto hgh-rsk actvtes pertanng to
Capta Markets and those actvtes were eft
for more specazed Investment Banks. By
the tme those restrctons were removed
(Sxty sx years ater 1933 -1999),
Investment Bankng Sector had aready
grown to the sze that coud defend for themseves and compete wth
arge Commerca Banks. In the US, the Gass-Steag-a Act of 1933
prevented conct of nterest between Commerca Banks and Investment
Banks. It restrcted the asset powers of Commerca Banks to underwrte,
buy and rese rsky busness securtes and Investment Banks were
prohbted from engagng n Commerca Banks' busnesses.
Pakstan:
Athough Investment Banks n
Pakstan have never favored
or demanded Industry Specc
Protecton Regmes, the fact
remans that n the pre SECP
era, Investment Banks were not
provded any protecton as was
avaabe n other
deveoped countres, at the
nfancy stage. Another reason why the Investment Banks n Pakstan coud
not oursh ntay was because t was perceved that Investment Bankng
P a g e | 6
was about mega Mergers and Hgh-Worth actvtes ony, whch were not
avaabe n the Country at that tme. The reatvey ower end actvtes
ke Intermedaton n Securtes (Brokerage) were not focused upon by
Investment Banks at that eary stage.
3. Investment Banks n Pakstan:
1. BMA Capta Management Lmted
2. Invest Capta Investment Bank Lmted
3. AMZ Securtes
4. Orx Leasng (Pakstan) Lmted
5. Trust Investment Bank Lmted
6. |S Investment Bank Lmted
7. Atas Investment Bank Lmted
4. Emergng Mode for Investment Banks n
Pakstan
In todays dynamc nanca sector, sustanabe success s most key to
be acheved by those nsttutons that take the broadest vew of ther
responsbtes. Most of the Investment Banks have made a conscentous
choce to reman Investment Banks wthn the new NBFC Structure,
desgned and reguated by the SECP.
heir emerging Prod$)t 0 Servi)es !atri1 #o$ld look as
here$nder:
P a g e | 7
Investment Banks contnue to provde a fu array of capta market
products and advsory servces. Speccay Investment Banks oher
research, tradng, structurng and dstrbuton capabtes of Equty and
Fxed Income Products. Most Investment Banks contnue to focus on
budng ts cent/customer Busness Mode. These customer ow actvtes
represent a ma|orty of the nvestment bankng revenues. In addton to ts
customer ow actvtes, the Investment Banks aso take Propretary
Postons, the success of whch s dependent on ther abty to antcpate
economc and market trends.
5. Typca Busness Segments of Investment
Banks n Pakstan
Corporate Fnance/Advsory
Servces:
Most nvestment Banks n Pakstan boast an
actve Corporate Fnance Servces Sute as part
P a g e | 8
of ther day operatons. Investment banks va ther Corporate Fnance
Operatons are responsbe for deveopng and mantanng reatonshps
wth ssung cents, ganng a thorough understandng of ther specc
borrowng needs.
Descrpton of Typca Corporate Fnance Actvtes:
Arrangement of Syndcated factes underwrtng of pubc
debt/equty ssues
Issuance of Corporate Bonds (known as Term Fnance Certcates n
Pakstan) for Corporate Enttes
Fnanca Advsory Servces wth regard to new Pro|ects, Mergers,
Acqustons and new Equty Issues
Trusteeshp -engaged n actng as Trustees for prvatey paced or
pubc ssues of TFCs.
Strategc Advsory to GOP on prvatzaton of SOE's.
Focus for the Future:
Contnued focus on pursung Corporate Debt Market through
Advsory and Underwrtng Arrangements n new TFC ssues
Aggressve marketng n Corporate Fnance by operatng avenues for
Syndcatons and roe of Advsor & Arranger
Advsory on M&A
Contnued aggressve focus on Trusteeshp
Leverage tsef through conventona as we as non conventona
sources ke Dscountng, Asset Securtzaton, etc
Advsory servces to pro|ect nancng and sck unt revva
Credt & Asset Sde Actvtes of Investment Banks:
Investment Banks' credt actvtes
engage n three prmary functons:
managng n matchng book actvtes,
suppyng secured nancng to
customers, (athough not ceary
P a g e | 9
stated n the rues of Busness of SECP) and provdng fundng for the
ongong actvtes. Matched book fundng nvoves borrowng and endng
cash on a short-term bass to nsttutona customers coaterazed by
marketabe securtes, typcay government or corporate debt securtes.
Smary Investment Banks enter nto Agreements to generate prots from
the dherence between nterest earned and nterest pad. It s typca for
Investment Banks to work wthn other departments namey Corporate
Fnance and Treasury to dentfy customer that have cash to nvest and/or
securtes to pedge to meet the nancng and nvestment ob|ectves.

Descrpton of Typca Credt Actvtes:
Margn Fnancng
Short / Long Term Fnance factes
Purchase of nvoce / B Dscountng factes
Bankers Acceptances
Some Investment Banks have entered nto Musharakah (prot & oss
sharng) transactons wth rms engaged n the busness of tradng
of commodtes
P a g e | 10
6. Road
Map
and
Crtca
Success Factor
The matrx beow sets out the Fve-Year Road Map for the Investment
Bankng Sector. These basc factors are ntegra for each nsttuton n
order to accompsh the overa Vson of the Sector. The Roadmap s
foowed by the key Crtca Success Factors, whch are vta for the
successfu mpementaton of the Roadmap.
P a g e | 11
Tasks 2006 2007 2008 2009 2010
Revitalizing IBAP as a vehicle for self regulation
!evelo"#ent "ro#otion facilitation of Invest#ent
Banking $ector %ith s"ecific e#"hasis on A!visor&
$ervices an! $ervices relate! to 'one& ( )a"ital
'arkets
'aintain an ongoing interaction %ith the $*)P in
or!er to "ro#ote higher stan!ar!s of +overnance
an! Best Business Practices
,evelo" a )o!e of )on!uct for #e#-ers of IBAP an!
-uil! a consensus on setting out #ini#al acce"ta-le
"ara#eters
Buil! on our success. -oth in ter#s of /inancial
In!icators as %ell as 0ualitative as"ects
/urther %i!en the s"ectru# of Pro!ucts ( $ervices.
-ase! on conte#"orar& International /inancial
$tructures
Pro!uct Innovations an! ,iversifications
+eogra"hical ,iversification
)on!uct Roa! $ho%s $e#inars )onferences in
$#aller )ities to create Investor a%areness an!
i#"rove the -rea!th of )a"ital 'arkets
)on!uct Invest#ent )onferences a-roa! at #a1or
financial centers of the %orl! to "ro#ote invest#ent
in Pakistan in ke& $ectors e2g2 3il ( +as. Po%er.
Teleco#. Te4tiles
A!vise +3P an! "otential foreign an! or local
investors on Privatization an! 5oint 6enture
3""ortunities
To -uil! a "artnershi" %ith 7ocal an! International
8niversities Business $chools. Institute of Bankers in
Pakistan. 9ational Institute of Banking an! /inance
for aligning /inancial an! Business curricula to the
s"ecific "ractical re:uire#ents of the Invest#ent
P a g e | 12
Banking In!ustr& inclu!ing )ertification of
"rofessionals %orking in the )a"ital 'arket
3"erations etc2
,evelo" a %orking relationshi" %ith si#ilar
Associations like 7IBA. $IBA. etc
;ork to%ar!s !evelo"#ent of :ualit& hu#an
resource
Auto#ation an! ;ork Process Re2engineering
)o#"ete effectivel& through even greater cost
efficienc&
,evelo" e4ecution a-ilit&. "ricing. a!vertising an!
sales efforts an! the skills of its "ersonnel
7. Crtca Success Factors
In order to mpement the essence of Investment Bankng n Pakstan, t s
mperatve that not ony shoud the Sector's Vson be shared by a the
Stakehoders but compete support wth respect o the foowng crtca
ssues shoud be provded:
Enabng Reguatory Envronment n genera
Consstency of Poces by the Reguators, n partcuar and Government
of Pakstan (GOP) n genera
Remova of the rrtant reatng to renewa of cense on yeary bass
(especay n the presence of negatve causes n the Rues)
Resouton of Issues arsng out of Accountng Treatment of New
Investment Bankng Products e.g. nterpretaton / cacuaton of
Exposures Lmts and nettng oh of Future Saes / Purchases
Ouaty of Governance at the Stock Exchanges
Ratonazaton of newy mposed taxes on Stock Market transactons
Immedate resouton of Long outstandng ssues of Rate of Taxaton
(Company Vs. Bankng Company Rate)
Conducve, consstent & stabe macro economc condtons
P a g e | 13
Enabng envronment for Foregn Investment e.g. Law and Order,
Issues reated to Country mage
The mperatve of "Leve Payng Fed" and unform "Appcaton of
Specazed Reguaton" shoud be provded. The Investment Bankng
actvtes of Commerca Banks shoud be brought nto the Specazed
Reguatory |ursdcton of SECP by drectng the Commerca Banks to
ncorporate separate Investment Bankng Subsdares
The w of the Reguators and GOP to see through the Impementaton
of the current set of Reforms and nducton of the next Generaton of
Reforms
8. Concuson:
Assgnment dscusses the begnnng of nvestment bankng n Pakstan
and scope of t. Goba and Pakstans nvestment bankng reguatons are
dscussed and emergng mode of nvestment bankng n Pakstan and ts
crtca success factors are dscussed n ths.