Investment Banking Activities Research Articles

Investment Banking Activities in Nigeria: A Critical Discourse Analysis of Problems and Prospects

Investment Banking Activities in Nigeria: A Critical Discourse Analysis of Problems and Prospects

Investment Banking Activities In Nigeria: A Critical Discourse Analysis of Problems and Prospects

The investment bank's performance was researched and critically analysed, and how such performance might contribute to economic growth notably in Nigeria. Using the Nigerian financial industry, this study assessed the issues of investment banks in a growing nation. This study spanned the years 1960 through 2023. The period was marked by a credit boom, a financial recession, a rebound, and strong economic expansion. In this study piece, a systematic literature review (SLR) was performed, and the research revealed crucial challenges of Investment Banks in an emerging economy. Among the difficulties cited are: regulatory compliance, technology management, cyber risk, cost pressure as inferior ROE hits, the development of Fintech businesses, ring-fencing, and so on. The research identified the following important roles of investment banks: initial public offering activities, mergers and acquisitions, risk management, research, derivatives, merchant banking, and investment management. According to the research, in order for the performance of investment banks in Nigeria to significantly improve, the following should be pursued aggressively: a cost-cutting strategy, cultural transformation, a customer-centric approach to business, technological development, financial depth development, and the development of a sustainable investment bank framework. This study believes that if the recommendations are adopted, the profit of investment banks would improve, allowing them to execute their core functions and contribute to the growth of the economy, particularly in a rising economy like Nigeria.

Investment Bank, Financial Performance, Economic growth and Development: An Empirical Analysis of Investment Banking Activities and Financial Market in an emerging Economy: A case study of Nigeria

The investment bank's performance was researched and critically analysed, and how such performance might contribute to economic growth notably in Nigeria. This study is unique in the Nigerian financial market since it empirically studied connected characteristics that potentially impact investment bank performance in Nigeria. This study spanned the years 1996 through 2022. The period was marked by a credit boom, a financial recession, a rebound, and strong economic expansion. Because of the nature of the study topics, a quantitative approach was taken. The study discovered that bank-specific characteristics, industry-specific factors, macroeconomic drivers, and institutional factors are relevant in evaluating the performance of Nigerian investment banks. That is, a critical examination of the performance of Nigerian investment banks is centred on bank-specific characteristics. This suggests that the capacity of investment banks to fulfil their essential functions is determined by internal factors such as capital, credit risk, operating expenditures, and size. Additionally, the industry strength demonstrated that the financial market's depth had an influence on investment banks. The significance of competitiveness was underlined. Macroeconomic factors such as GDP growth, interest rates, inflation rates, and oil prices shown that a strong macroeconomic environment is required for vibrant investment banks. Lastly, institutional variables such as a developed insurance industry, political stability, the rule of law, and effective government policies can all have an impact on the success of Nigerian investment banks. The research recommended that, in order to significantly improve the performance of investment banks in Nigeria, the following strategies be pursued aggressively: cost reduction strategy, cultural transformation, adopting a customer-centric approach to business, technological development, financial depth development, and development of a sustainable investment bank framework. This study believes that if the recommendations are adopted, investment banks' profits would improve, allowing them to execute their core functions and contribute to the growth of the economy, particularly in a rising economy like Nigeria. &nbsp

Macroeconomic Aspects of Investment Activity of Banks

Bank investments have a special economic content. In the microeconomic aspect, the investment activity of the bank can be viewed from the point of view of the bank taken as an economic subject (as an activity in which the bank acts as an investor by putting its resources into the creation or acquisition of real assets, and the purchase of financial assets with the aim of generating direct and indirect income). However, there is another aspect of banks’ investment activities that is related to the implementation of their macroeconomic role. In this capacity, banks cause the realization of the investment demand of economic entities in the form of money and credit in the market economy, and the transformation of savings and savings into investment. Therefore, in the macroeconomic aspect, the investment activity of banks is understood as an activity aimed at meeting the investment needs of the economy.

MIFID II and EMIR impact on Romanian banking system performance

Abstract MIFID II/MiFIR represents comprehensive financial market reforms in trading and settlement of financial instruments. The greatest impact of the new regulatory framework in the banking sector relates to pricing, trading, and reporting of banking products and classification of financial institutions. The new role of the financial market infrastructure provides more protection for bank customers and significantly increases market transparency. Banks are required to show their customers the best execution price on the relevant trading venues, transaction costs and market behavior. The regulation will be aligned with other financial market regulations of over-the-counter markets and market abuse protection to avoid regulatory overlap - European Market Infrastructure Regulation (EMIR). The new regulatory framework requires the banking sector to fully comply with the rules governing the banking system of the European Union. Banks must incur significant costs in order to restructure internal processes, acquire new technological support, and forego additional profits in competitive and transparent markets. This study analyses the impact of MiFID II/MiFIR and EMIR implementation on local banks’ performance (credit institutions, Romanian legal persons). Using a unique dataset from banks that have been operating in Romania over the period 2004-2020, it is shown that the implementation of the new regulatory framework did not affect the net trading income ratio of the selected banks. Moreover, the average trading asset ratio in the post-financial crisis period increased in comparison with the average trading asset ratio in the pre-financial crisis period. Local banks that took advantage of the large economies of scale obtained due to branch banking did not reduce their investment banking activities and product offerings to customers in the period following the introduction of the regulatory framework. Most of the costs of implementing the new regulatory framework were borne only by the ultimate parents of the controlled Romanian subsidiaries. All subsidiary banks benefited equally from these economies of scale.

Investment banking as a promising area of banking

Financial market participants are constantly trying to implement the adaptation of modern foreign products of banking institutions and innovative service tools as the formation of certain competitive advantages in this market.The Russian financial market is quite dynamic. It is no coincidence that many financial analysts note the fact that Russia is characterized by profound changes in the economic sphere, and especially in the banking services market.As banking institutions, it is customary to consider such organizations that collect funds from citizens of the country with special tools established by law, as well as transfer this capital to the process of use by various legal entities on the basis of the principle of repayment.Over the past few years, the banking institutions themselves have gradually changed their own status with the transformation from an additional financial instrument of the largest corporations into individual players in the market. A fairly rapidly developing area of such banking activity is investment banking (in other words, investment banking).For the first time, investment banking began to appear in the United States in the 30s of the last century, when, on a legislative basis, such banks were united into a separate conglomerate in order to manage the risks that arose as part of speculative operations in financial markets through deposits and customer deposits. This separation was further abolished, and commercial banks were again given the right to provide investment services.The subject of research in the article is the economic relations that arise in the process of intermediary activities of investment banks. The research results consist in identifying the actual features of the development of investment banking within the framework of the main types of investment activities of banks. The author substantiated the advantages of investment banks functioning as financial institutions, the main task of which is to attract investments for companies on a commercial basis or for state and municipal authorities.

COVID-19 and bank performance in dual-banking countries: an empirical analysis

We explore how banks’ income and stock prices respond to the COVID-19 policy measures in countries with the dual-banking system, and whether Islamic banks over- or underperform compared to conventional banks. Applying two-way fixed-effect regressions, we document that the changes in Islamic banks’ finance income as well as net income decline as much during the COVID-19 pandemic as the changes in interest and net income of conventional banks. Event-study tests show that the stock prices of Islamic banks respond as negatively as the ones of conventional banks to workplace closures. We do, however, document that the two types of banks respond differently to income support schemes. The change in Islamic banks’ finance income and net income increase significantly more compared to that of their conventional peers when governments install income support initiatives. Also, Islamic banks’ stock prices respond more positively to the income support programs than the ones of conventional banks. Because we control for investment banking activities and services to large clients, our findings on the stronger response of Islamic banks to income support programs seem to result from Islamic banks’ focus on private customers who are supported during the pandemic. Overall, we conclude that the Shariah compliance does not limit the adverse impact of the COVID-19 crisis on Islamic banking, but that Islamic banks’ performance responds more positively to income support initiatives than the one of conventional banks.

Current state and ways to improve the efficiency of investment activities of domestic banks

Subject of research is the current state of activity of domestic banks of Ukraine and ways of their effective investment activities. The purpose of the article is to study and characterize the ways of effective management of the bank's investment strategy. Methods used in the research process: method of system-structural analysis and synthesis, method of comparative analysis, generalization, general science, special methods of scientific knowledge and other research methods. Study results. Credit institutions in world practice are a significant segment of the investment market and play a significant role in this process. One of the components of effective management of a modern banking institution is the implementation of effective investment activities, which requires the selection of an effective investment strategy. The imbalance of domestic banking processes, as shown by domestic and international practice, is often the main prerequisite for the development of a crisis situation in an individual bank, is a threat to the stable development of the banking sector as a whole. One of the main problems in the functioning of domestic commercial banks is the instability of the economic situation in the country, namely declining GDP growth, inflation and devaluation of the national currency, which in turn led to the outflow of bank deposits, bankruptcy of many commercial banks in Ukraine. Covid-19. Over the past year, Ukrainian commercial banks have allocated about 17% of total bank assets to invest in securities. For many years, there has been a negative decline in the share of the banking sector in investing in securities, but there has been an increase in total assets of banks in Ukraine. In addition, the positive point is the increase in the share of investments in securities in the total assets of banks over the past two years, namely from 13.97% in 2020 to 16.88% in 2021. The strategy of the bank's investment activity is an integral interconnected structured complex (system) of consecutive actions (balanced management decisions) under resource constraints, which is aimed at forming long-term effective investment activities of the bank, strengthening the bank's competitive position in the investment market. Application of results. The results of the study can be used in the activities of the Ministry of Finance of Ukraine, the Verkhovna Rada of Ukraine, the National Commission on Securities and Stock Market, in the activities of banking institutions, as well as in higher education institutions in teaching economic disciplines. Conclusions. Thus, there is an extremely high degree of risk in the activities of commercial banks, and managerial errors can lead to the most serious consequences - so effective management for commercial banks becomes especially important. However, the key components of the theory of banking management are still poorly implemented in the practice of most domestic commercial banks. This also applies to the aspect of this theory, which is related to the management of the investment banking portfolio. Thus, the adaptation of the theory of investment portfolio management of commercial banks to the specifics of the Ukrainian economy is an unalterable necessity.

FORMATION AND MANAGEMENT OF THE BANK'S INVESTMENT PORTFOLIO

For effective investment activity of banks, it is necessary to optimize and manage the bank's securities portfolio.The modern portfolio management system has a sufficient arsenal of effective tools, including a number of principles and approaches.The volatility of the Kazakhstan stock market requires the accounting service to pay increased attention to the main function of professional financial agents (including commercial banks) - resource management. The multi-dimensionality of the modern investment portfolio of a commercial bank goes beyond the traditional "accounting" model, that is, the description of the results of portfolio management activities by drawing up the balance sheet. Accordingly, within the framework of the organization of the subject of financial activity, the problem of managing the investment portfolio, building a model and technological implementation arises.Given the huge potential of theoretical developments in the field of portfolio management, Kazakhstan's commercial banks are lagging behind in the practical implementation of management models. Decision-making within the standard organizational structure of commercial banks does not reflect the current capabilities and requirements for resource management. With the development of the Internet and information technologies in Kazakhstan, the time allocated to top managers for making managerial decisions has sharply decreased. Thus, it is necessary not only to develop a model of resource management in the financial markets, its practical implementation has also become a factor in the competitiveness of a commercial bank. The relevance of the study lies in the lack of a comprehensive approach to the practical implementation of the investment portfolio management process, starting with the creation of the organizational structure of a commercial bank and ending with the introduction of management models based on improved information.

THE IMPACT OF THE COVID-19 PANDEMIC ON THE BANK'S LENDING AND INVESTMENT ACTIVITY IN UKRAINE

The paper deals with the theoretical, regulatory framework for the implementation of lending and investment activities of banks in Ukraine, in particular in the economic downturn caused by the COVID-19 pandemic. The purpose of the article is to reveal the features of bank lending and investing in 2019-2021 and to identify the impact of the COVID-19 pandemic on the implementation of lending and investment activities of banks in Ukraine. The authors' approach to determining the essence of lending and investment activities of banks is substantiated. An assessment of banks' lending and investment activities in 2019-2021 has shown, that 60% of banks' loan and investment portfolios are formed from loans and 40% from investments. The main share of banks credit agreements volume is occupied by loans granted to economic entities; the bank portfolios of securities are formed mainly of profitable and low-risk government bonds. Unprecedented restrictive measures imposed to overcome the pandemic have had an impact on the activities of banking institutions, including reduced income of potential borrowers and their ability to service debt, as well as the problems for banks that have not introduced remote customer service. Analysis of the dynamics and structure of the credit and investment portfolio of Ukrainian banks, investments in investment securities, and long-term investments made it possible to identify the main trends in lending and investment activities of banks in Ukraine. Potential directions of regulatory policy implementation on the banking sector in the context of overcoming the negative consequences of the pandemic should be aimed at creating equal and transparent rules of the game between traditional and new financial service providers. The authors focus the attention on opportunities for the development of lending and investment activities of banks that emerged in the financial market of Ukraine during 2020-2021. Most of these capabilities involve providing simple, intuitive, personalized services across digital platforms with an appropriate level of cybersecurity.

Marketing pricing for products of the citrus store chain in the ukrainian high-tech electronics market

Methods. The theoretical and methodological basis of the study includes the following methods: analysis and synthesis, theoretical generalization to study the process of managing the loan and investment portfolio of the bank; comparative analysis – to establish more efficient uses of the bank's financial resources; formalization (for setting the task of mathematical modeling); generalization and synthesis to substantiate the scientific approach in determining the optimal structure of the creditinvestment portfolio of the bank. Results. It was found that with the significant increase in bank deposits, lending to the economy continues to decline. This is facilitated by the current economic situation, which is characterized by further decline. Recovery of positive dynamics is impossible without structural changes. In the banking sector, changes are related to the development of global stock markets and investment activities of banks. A significant potential of commercial banks in intensifying investment activities is the ability to act simultaneously in two important areas – in the securities market and in the credit market, which are responsible for converting savings into investments. Novelty. A strategy for managing the bank's loan and investment portfolio is proposed in order to maximize profits under different conditions of supply and demand of free banking resources ratio. An economic and mathematical model for optimizing the structure of the bank's loan and investment portfolio has been developed. Practical value. The usage of economic-mathematical model to optimize the structure of the bank's loan and investment portfolio in order to maximize profits under different conditions of free banking resources supply and demand allows the bank to choose what to focus on –the securities market or credit market.

PROBLEMS AND PROSPECTS FOR DEVELOPING OPERATIONS OF BANKS WITH SECURITIES IN UKRAINE

The article reveals modern trends, the main problems of development of operations of Ukrainian banks with securities are allocated, as well as the ways to solve them are proposed. The authors analyze the current state of banks' securities operations in Ukraine and determine that the issuing activity of banks tends to decrease, while the investment activity of banks in the securities market is growing. It is established that most of the investment operations of banks in the stock market belong to operations with government bonds and NBU certificates of deposit, which reduces the level of diversification of securities portfolios, inhibits economic growth in Ukraine and reduces potential profits of banks. The main problems that hinder the development of banks' operations with securities in Ukraine are presented and characterized. It is established that the low level of development of the securities market not only slows down the intensification of banks in the stock market, but also reduces the quality of rating agencies, and hence the reliability of financial instruments of Ukrainian issuers, including banks, in the international and domestic markets. In order to reduce the existing problems, a list of measures is proposed that will positively affect the volume and quality of banks' operations with financial instruments and will contribute to their further development and improvement. In order to substantiate the most attractive areas of financial investment for Ukrainian banks, a fundamental analysis of the macroeconomic analysis of the economies of Ukraine and the United States, which simulates two types of investment portfolios and evaluates their effectiveness, mainly in terms of profitability but also risk. The simulation results showed that the portfolio of securities with financial instruments of American issuers provides a higher level of yield compared to the portfolio containing securities of only domestic issuers. It is proposed to include in the securities portfolio of Ukrainian banks new financial instruments, in particular "green" bonds and derivatives that will hedge currency and interest rate risk.

Bank risk profile and horizons in financing investment projects: a case study of selected banks in Uzbekistan

The article presents the results of risk analysis in financing investment projects. In the example of three commercial banks, the relationship between the factors causing risks and the dynamics of the volume of financing of investment projects was modelled using the two-step generalised method of moments - 2SGMM. According to the results of econometric analysis, among the factors, risk assets, risk profile, interest income and investment activity of banks have a significant positive impact on the dynamics of investment loans.

Credit-Investment Activity of Banks of the Ukraine: Financial Globalization, Risks, Stabilization

Today the problem of managing credit and investment risk in the bank in the context of financial globalization remains one of the most relevant problems. At the same time, science may not yet explain the answers to some questions and the banker needs to solve them in practice. Therefore, the construction of a comprehensive system of credit and investment risk management in banks is one of the main components of security effective lending activities of banks. The article considers the features of credit and investment activities of banks in the interbank market in the context of financial globalization. The article reveals that the main economic function of Ukrainian banks in the period of accession to the EU is the credit and investment activity of their clients. State of the loan and investment portfolio and dynamics of loans were analyzed. The model and methods of the integrated stabilizer of credit and investment activity of the bank on the interbank market are developed. The authors proposed a list of methods and actions that unify threats, identify risks and improve the credit and innovation activities of the bank in the period of globalization for countries that are in the process of forming the banking infrastructure.

METHODOLOGICAL FOUNDATIONS FOR THE DEVELOPMENT OF THE FINANCIAL STABILITY RISK MANAGEMENT SYSTEM IN THE INVESTMENT ACTIVITIES OF BANKS

The risk of loss of financial stability in the investment activities of banks is the probability of a negative impact of the negative financial result of the bank's investment activities on the capital structure and bringing it to an imbalance of funds. This type of risk is complex and includes several types of banking risks that have a direct impact on the financial stability of the bank. A system for managing such a risk implies a combination of three systems: the control system, the managed system and the result of the management. Each of the elements of the system is subject to the principles of managing the risk of loss of financial stability and thus contributes to achieving the result - minimizing the studied risk. Effective risk management is a crucial task of the bank to ensure profitability, as well as to maximize the value of shareholders. The business environment and the development of technologies had a significant impact on changes in risk management practices. The management of the considered risk is an iterative process. All links are constantly changing, and each change affects the other links. Managing this risk is a part of the bank's portfolio management process. For each bank, the management system is built based on the needs and specifics. Control elements can manifest themselves in a large number, so they need to be evaluated, grouped and determine the degree of influence on the financial stability of the bank's investment activities.

Can the Plight of the European Banking Structural Reforms be a Blessing in Disguise?

One of the problems perceived to be at the heart of the global financial crisis was an amalgamation of various commercial and investment banking activities under one entity, as well as the interconnectedness of the banking entities with other financial institutions, investment funds, and the shadow banking system. This paper focuses on various measures that aim to structurally separate the banking entities and their core functions from riskier financial activities such as (proprietary) trading or investments in alternative investment funds. Although banking structural reforms in the EU, the UK, and the US have taken different forms, their common denominator is the separation of core banking functions from certain trading or securities market activities. Having reviewed the arguments for and against banking structural reforms and their varieties in major jurisdictions, including the EU, UK, US, France, and Germany, the paper argues that a more nuanced approach to introducing such measures at the EU level is warranted. Given the different market structures across the Atlantic and the lack of conclusive evidence of the beneficial impact of banking structural reforms, the paper concludes that the withdrawal of the banking structural reforms proposal by the European Commission has been a prudent move. It seems that in the absence of concrete evidence, experimenting with structural reforms at the Member-State level would be less costly and would provide for opportunities for learning from smaller experiments that could pave the way for a more optimal approach to banking structural reforms at the European level in the future.

The financial conglomerate discount: Insights from stock return skewness

Diversified banks (i.e. financial conglomerates) trade often at a discount compared to matched portfolios of specialized stand-alone banks. The existing research explains this evidence primarily with inefficiencies in the cash flow management of banks. This article analyzes the financial conglomerate discount by focusing on the role of expected returns approximated by measures of stock return skewness. Our empirical findings support the hypothesis that diversified banks have less skewed stock returns, i.e. they are more likely to perform badly than non-diversified banks. Due to the lower skewness exposure investors demand higher future returns, thereby lowering corporate value. Although the conglomerate puzzle is observed across industries, the previous literature examines banks separately, as the financial industry is hardly comparable to other sectors. We follow this field of research and show that huge banks quote at a discount as diversification into investment banking activities affects negatively the corporate performance.

УПРАВЛІННЯ ІНВЕСТИЦІЙНИМ ПОРТФЕЛЕМ БАНКУ

The article considers the investment activity of banks as an alternative to lending, which will help to further restore the banking system. The reasons that motivate banks to carry out investment activities are identified, namely: expansion of income and customer base; high risk of credit operations and the desire to optimize the taxation of bank income. The analysis of efficiency of the formed portfolio of securities in bank, on an example of JSC ProCredit Bank is carried out. As a result of the analysis, it was found that the assessment of the quality of the bank's investment portfolio has certain features related to determining the amount of problem investments, as the bank's balance sheet lacks information on the riskiness of certain securities, and it is proposed to apply fixed risk ratios securities. Despite the impact of COVID-19 on the country's economy, the banking sector gradually continued to stabilize. Banks' investment activities are an alternative to lending, which will help the banking system to recover further. Investments create conditions for expanded reproduction, structural transformations in the country, increasing the competitiveness of domestic products, solving socio-economic problems. Ways to improve the efficiency and quality of investment management of the bank through the optimal combination of centralization and decentralization for investment management; efforts to create new goals and objectives to improve the organization of analytical support of the investment management process; support for constant information support of the investment management process; advanced training of managers related to the management of investment activities. Therefore, the worst quality of the portfolio was in 2019 and 2020, due to the fact that the securities portfolio included only investments in securities for sale. Ways to improve the efficiency and quality of investment management of the bank through the optimal combination of centralization and decentralization for investment management; efforts to create new goals and objectives to improve the organization of analytical support of the investment management process; support of constant information support of investment management process; advanced training of managers related to the management of investment activities.

Фінансова безпека банківської системи України: сутність та оцінка

The article is aimed at defining the essence of financial security of the banking system (FSBS) and carrying out a comprehensive evaluation of its current status. The article examines and systematizes the publications of scholars on the definition of «financial security of the bank». To examine the status of the FSBS, the indicators of resource-forming, credit, investment activities of banks and the dynamics of their income and expenses are analyzed. In the course of analysis, it was found out that the indicators of the resource-forming and investment components of the banking sector of Ukraine have positive dynamics and do not pose threats to its financial security. The analysis of credit security indicators identified a significant threat to the financial security of the banking system – a significant proportion of non-performing loans. The dynamics of incomes and expenses of the banking sector has demonstrated that the banking system is gradually coming out of the crisis and has a positive financial result since 2018. To summarize the analysis, both the indices and the integral indicator of the FSBS were computed in accordance with the methodological recommendations of the Ministry of Economic Development and Trade of Ukraine, the results of computing led to conclusion that the financial security of the banking system of Ukraine is at a dangerous level. Prospects for further research are condition due to the low level of financial security of the banking system of Ukraine and the need to develop a set of measures aimed at improving the overall level of financial security of the banking system.

Peculiarities of accounting for investment activities of banks in the Republic of Belarus

Peculiarities of accounting for investment activities of banks in the Republic of Belarus