Industry Risk For Investment Banking Is Generally Higher Than For Other Financial Institutions Jan 11
Standard & Poors, January 2011
Abstract
In Standard & Poor's Ratings Services' view, investment banking has different industry risk characteristics than traditional lending. Investment banking is generally riskier and more volatile. The industry's typical funding profile renders the sector more vulnerable to confidence erosion and liquidity constraints during times of financial stress than are retail deposit-funded institutions. Investment banks therefore have a higher fatality rate than commercial banks do. In fact, investment banks' financial performance is highly subject to capital-market conditions, which are inherently cyclical in terms of pricing and volume. An uncertain economic outlook that tempers corporate activity, and investors' varying tolerances to risk contribute to volatility for investment banks. In addition, the large investment banks are often highly leveraged with considerable principal credit- and...
Companies mentioned in this report are:
- Bank of America Corp.
- BNP Paribas
- Portigon AG (Unsolicited Ratings)
- Morgan Stanley
- JPMorgan Chase & Co.
- Citigroup Inc.
- Credit Suisse Group AG
- The Goldman Sachs Group Inc.
- UBS AG
- Nomura Holdings Inc.
- Barclays PLC
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
- Bank of America Corp.
- BNP Paribas
- Portigon AG (Unsolicited Ratings)
- Morgan Stanley
- JPMorgan Chase & Co.
- Citigroup Inc.
- Credit Suisse Group AG
- The Goldman Sachs Group Inc.
- UBS AG
- Nomura Holdings Inc.
- Barclays PLC
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