Investment banking is emerging as an important tool for the expansion of industries and aiding the economic growth of many sectors around the world in this expanding era of globalization. To gain a better understanding of future of investment banking, it is necessary first to comprehend the idea of investment banking and then delve deeper to see what the future holds for it. So, let us begin with defining investment banking and then examine the current state and prospects of the industry.
WHAT IS INVESTMENT BANKING?
Investment banking is the practice of conducting unique financial transactions such as raising funds for various businesses and providing financial consulting services to them. Investment banking, on the other hand, should not be mistaken for general banking because it is a subset of banking that is separate from regular banking services and does not include the general public at large. Even if the general public can invest, the numbers and scope of such an endeavor are limited.
Investment banking can be considered in two ways: as a concept and as a career. Investment banking as a career is made up of highly trained and flawless individuals who have a thorough understanding of financial institutions, investment banking, and other related ideas. Most investment bankers have degrees in financial fields; however, as the world has progressed, the emphasis on the qualifications for becoming an investment banker has switched from fancy commerce-related degrees to having a passion for the industry and the necessary skills and knowledge. Yes, you heard it right, even if you are an engineer with a deep interest in the field and you wish to switch from your dull job to one that excites you, you may choose a few relevant courses from EduBridge’s wide range of financial and banking courses that provide you the right direction and put you on the right path.
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STATUS QUO OF INVESTMENT BANKING
The banking sector has suffered major setbacks in the recent past with the COVID-19 pandemic and its devastating setbacks to the economy.
However, the investment banking sector has emerged as a fighter, striving to reach new heights as liquidity and money enter the markets. The pandemic-related issues caused the sector to suffer, resulting in issues such as dropping share prices, market democratization, liquidity stress, dynamic financial rules, and client deterrent. Because the pandemic is taking so long to finish, the industry has now accepted it as something that will last forever and has opted to thrive despite it.
With the fall of equity prices, empires of industries fell during the pandemic, putting both investors and owners into vicious cycles of debt, due to which the investors now shirk before investing, given the unstable and unpredictable behavior of the markets. However, over time, the trend in the same is changing as the market is now flooding with capital, and investment banking is achieving pinnacles of growth.
Investment banking, throughout the pandemic, was the blood running in the veins of the economy that somehow stabilized the economy by minimizing the damage. Even though most sectors lost their charm, this one profession was trying its best to relocate funds into industries that can function despite the closure of the economy. This is one major reason why we saw the surge of new industries such as the cosmetic industry, during the tough times of the pandemic.
FUTURE OF INVESTMENT BANKING
Because of recently emerging stock market trends, existing pandemics, and newly erupting outbreaks, the future of investment banking is uncertain. However, it is assumed that competition from other industries and digitization won’t pose a threat to this future. The investment banking sector recently put on a solid performance and has recovered, and it is anticipated that this will continue in the near future.
Some predictions or new trends that the sector is going to see in the coming future are:
- Seamless flow of capital
- The emergence of unstressed liquidity
- Emerging technologies
- Newer consumer expectations
- Changing business models
- Higher returns (subject to changes in business models)
The future of the investment banking sector looks bright, and it is growing in the right way. The system has made sure that the market is operating normally and that all other affairs are properly handled, despite the rupee’s recent significant slide against the dollar. In the near future, higher customer returns are projected in the sector; nonetheless, business model modifications are probable.
As per the The “Investment Banking Global Market Report 2022” published by ResearchAndMarkets.com, The global investment banking market is expected to grow from $138.95 billion in 2021 to $155.49 billion in 2022 at a compound annual growth rate (CAGR) of 11.9%. The market is expected to grow to $231.12 billion in 2026 at a compound annual growth rate (CAGR) of 10.4%.
To broaden its product offerings and increase its market share, investment banking is focusing on mergers and acquisitions. Boutique firms (small firms that specialise in a variety of fields) that serve specific industries such as technology, health care, finance, media, and entertainment are being acquired by large investment banks.
Because of the presence of a large number of niche-focused small firms, larger investment banking firms have significant opportunities. This is causing a surge in merger and acquisition activity in the investment banking industry.
CONCLUSION
Banking is an unpredictable function, however, with the right foresight into the same, one can easily predict what is next in the house, and manage the actions accordingly. From the above analysis of investment banking, it is safe to conclude that the sector knows how to stabilize itself in times of hardships and can ace the test of time.
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