New face of I-banking

New face of I-banking
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First Published: Fri, Feb 23 2007. 01 02 AM IST
Updated: Wed, Jan 09 2008. 04 23 PM IST
The unravelling of the JM Morgan Stanley joint venture is the third such instance in recent months. These amicable divorces tell us a lot about the new world of investment banking. Its modern face is Goldman Sachs, which earns record-busting profits by trading on its own account, rather than by raising capital for others.
The latter has become easy in recent years, thanks to the flood of global liquidity. Hence fees have dropped. Of greater value is the ability to design and trade in new derivatives that slice and repackage risk. Remember the original rationale for joint ventures between Indian and global investment banks?
The global banks were to bring in their expertise while the Indian ones were to offer their local knowledge and contacts. Today, financial engineering is more important than contacts. Or: What the local partners had to offer is far less important. So the splits were perhaps inevitable.
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First Published: Fri, Feb 23 2007. 01 02 AM IST