1st Week Question 'Investment banking' 기사를 해석하면서 애로사항이 많았던 부분입니다.

[호랑이8104]

1. EVEN by its own notoriously cyclical standards, investment banking has been on a stomach-churning ride in the past five years

"악명높게도 순환적인 기준에 의해서 투자은행은 지난 5년간 욕망이 뒤끊은 질주를 해오고 있다.

- EVEN by의 정확한 뜻이 궁금합니다. even이 있고 전치사가 더해지면 해석하는게 어려울 때가 많습니다.

*혹시 해석하는데 도움이 되는 틀 같은게 있을까요? 아니면 참고할 수 있는 숙어집이 있는지?

2. After an apparently golden age, with quarter after quarter of record profits, came the bursting of the debt bubble, a deluge of red ink and bail-outs; then, last year, firms bounced back obscenely quickly thanks to record trading profits.

"기록적인 이익의 분기이후 분기와 함께 뚜렷한 황금시대이후 손실과 구제금융의 홍수인 채무거품의 폭발이 왔다. 그리고 지난내 회사들은 구역질나게도 기록적인 매매이익때문에 다시 반등했다."

- with quarter after quarter 의 정확한 뜻은요?

- came the bursting of the debt bubble은 도치문장인가요? 주어를 수식하는 문구가 길어서 뒤로 뺀건가요?

3. With nervy investors sitting on their hands, client activity was “painfully slow across the board”, according to Jefferies, a middle-sized bank.

" 그들의 손위에 앉아있는 신경질적인 투자자와 함깨 고객행동은 보드를 횡단하여 고통스럽게 느려졌다."

- 'with'가 포함될 경우 해석하는 tip이 있나요?(with quarter after quarter 도  마찬가지임)

4.  When output picks up, so will investment banking, argue optimists.

"산출물이 나올때 또한 투자은행도 산출물이 나올것이다."

- 뒷 문장의 주어와 동사는 무엇인가요? 그리고 왜 문장이 숨겨져 있을까요?

5. Morgan Stanley is looking at a possible spin-off of PDT, its quantitative-trading arm, one hope being that the bank can still make some money from the independent entity if it borrows.

" 모건 스탠리는 그것의 양적인 거래부분인 PDT 의 가능한 파생상품을 찾고 있다. 그 은행이 차용한다면 독립적인 실체로부터 돈을 여전히 벌수 있을것이라는 희망을 갖고,

- one hope being that ---- 이하의 전체문장에서의 문장구조 및 정확한 해석은?

6. With regulatory change looming, these must now be faced.

" 어렴풋이 다가오는 규제적인 변화와 함게 이것들은 지금 직면되어져야 한다.

- 앞 부분과 마찬가지로 with의 용법 및 해석은?

시간되실때 답변부탁드립니다.

Investment banking

The big squeeze

Why the industry’s best days may be behind it

Oct 7th 2010 | NEW YORK

EVEN by its own notoriously cyclical standards, investment banking has been on a stomach-churning ride in the past five years. After an apparently golden age, with quarter after quarter of record profits, came the bursting of the debt bubble, a deluge of red ink and bail-outs; then, last year, firms bounced back obscenely quickly thanks to record trading profits. Now they are being squeezed once more, and this time the slump may last.

American banking giants’ third-quarter results, starting with JPMorgan Chase on October 13th, will show that trading revenues fell by perhaps 20-30% from the previous quarter. With nervy investors sitting on their hands, client activity was “painfully slow across the board”, according to Jefferies, a middle-sized bank.

Things are not much better in origination businesses. Several trends that buoyed underwriting last year, such as banks’ rush to raise capital and the boom in bond issuance as companies refinanced at low rates, have fizzled. Merger-advisory business has picked up but not by enough to compensate. As one Wall Streeter puts it: “If we extrapolated our third-quarter returns, we’d shoot ourselves.” Overall, 2010 will be a year to forget (see chart).

The ugly results will make for difficult decisions on bonuses as the year draws to a close. Firms won’t want to lose their “talent”: witness Goldman Sachs’s unusual mid year payout of restricted shares for partners affected by Britain’s bonus tax. But they face growing pressure to cut costs, and 40-50% of their revenues still flow to employees. Chopping people often comes more easily to banks than cutting pay. Bank of America is sacking up to 5% of its capital-markets unit. Others will follow—in a reversal of a hiring spree earlier this year—unless markets improve markedly in the fourth quarter. Meredith Whitney, an analyst with a reputation for prescience, thinks up to 80,000 jobs could go on Wall Street in the next two years.

Capital-markets activity tends to be closely linked with overall economic growth. When output picks up, so will investment banking, argue optimists. But this time could be different because market and regulatory pressures have “substantially weakened” the economics of the business, says Shubh Saumya of the Boston Consulting Group. There is less leverage to supercharge returns. Some previously money-spinning activities are shadows of their former selves. Revenues from selling and trading structured products are almost two-thirds lower than in 2006. New regulations and accounting rules have made securitisation less appealing.

The biggest impact will come from the Basel 3 capital requirements, which could be finalised at next month’s G20 summit in Seoul. Higher charges, especially for trading, could cause global wholesale banks’ risk-weighted assets to balloon by one-fifth on average, reckons Huw van Steenis of Morgan Stanley.

This will force some to reassess their exposure to racy stuff. Even JPMorgan Chase, which boasts of its “fortress” balance-sheet, has said it will cut some investment-banking exposures to counter the effects of Basel 3. In future, numerous trading businesses will no longer be able to beat their cost of capital, says Brad Hintz of Alliance Bernstein, though some of these may still be run as loss-leaders. Firms are seeking out less capital-intensive opportunities in areas like equities and advisory work.

Adding to the pressure on the industry’s trading culture is America’s Volcker rule, which restricts banks’ “proprietary” trading, or punting with their own capital in markets. JPMorgan Chase is shifting 45 prop traders into its asset-management arm, where they can continue to place bets, but only for clients. Morgan Stanley is looking at a possible spin-off of PDT, its quantitative-trading arm, one hope being that the bank can still make some money from the independent entity if it borrows. Senior folk at Goldman’s mighty Principal Strategies group are reportedly in talks with Avenue Capital and other non-banks.

The big firms will still be able to do some gambling. Volcker allows banks to invest up to 3% of their Tier-1 capital in prop trading, hedge funds and private equity. And they can take directional bets by not hedging all of the marketmaking trades they do for clients. Goldman, for instance, went “short volatility” in equities in the second quarter—a decision it came to rue. Overall, however, investment banks will have fewer opportunities to roll the dice.

Banks have not made it easy for themselves. They missed an opportunity to overhaul their operations and pay policies last year, instead preferring to ride the rebound and postpone difficult choices. With regulatory change looming, these must now be faced. Tushar Morzaria, chief financial officer of JPMorgan Chase’s investment bank, says all banks have to wrestle with “very fundamental change”.

As you would expect from an industry with a history of innovation, good and bad, firms are scurrying around for new opportunities. Bank of America, for instance, wants to expand in the middle market; only 2,000 of its 40,000 middle-sized corporate clients use both its commercial and investment banks. It and many others are throwing money and people at emerging markets. The hottest area of expansion is also, tellingly, the dullest: transaction services. This covers a host of businesses that provide steady income and are not too capital-intensive, such as corporate cash management, foreign exchange, trade finance, global custody and hedge-fund administration. Some banks have moved investment bankers into these less glamorous but more promising areas.

Working out the relative attractiveness of different businesses is not easy because the final shape of regulatory reform is unclear. In derivatives, for instance, the common wisdom is that big dealers will be hurt as trades migrate to central clearing and exchanges. But that will depend on future capital charges for cleared and uncleared assets and the precise structure of trading venues, which are still not known. Dealers could benefit from an increase in trading volume, offsetting tighter margins.

There could be other positive effects. The boss of one European bank thinks the Basel rules will cause borrowers to move away from banks and into bond markets, boosting debt-origination business for some investment banks. Others point to the $1.6 trillion cash pile on which American companies sit. If they start to deploy that in mergers and securities markets, the industry will benefit.

And even if market growth is low, there will be winners, such as the “flow monsters” that have the scale and the systems to handle vast flows of client trades in shares, bonds, foreign exchange, rates, commodities and more. Perversely, this points to increased concentration. Among those likely to be in the top tier are Goldman, Deutsche, JPMorgan, Barclays and Credit Suisse. The risk is that acute competition in those areas drives down margins. Flow business is “the side of the boat all banks are running towards,” says Ted Moynihan of Oliver Wyman, a consultancy.

The best firms, such as Goldman, used to make returns on equity above 30%. Even the laggards could clock 20% without breaking a sweat. Now the best that most can hope for is the teens, and even that will require chopping and changing. With such a foggy outlook, it is only natural that markets value many investment banks at or below book value. If another golden age is coming, investors can’t see it.

Finance and Economics