About Investment Banking League TablesCategory: Finance
Article added by: cesar magnaye
If you have ever scanned a newspaper's sports pages, chances are you have seen, at least once, a list or a chart comparing sports teams in the order of their ability or achievement. In investment banking, we also have such rankings based on ability or achievement presented in list or chart form and we call these "league tables". Among the companies which compile data used in generating investment banking league tables are Dealogic, Thomson Financial and Bloomberg.
There are standard league tables for Bonds, Loans, Equities, Project Finance and Mergers & Acquisitions (M&A). The basic data presented are the dollar volume and number of deals the investment banks work on, not profitability. These are used by investment banks in their promotional materials or client pitches and this is where criticisms about the credibility, or lack of it, of bank-produced materials come in.
I cannot forget what my professor in statistics told our class once: Statistics don't lie, but liars do statistics. That comment captures the main criticism against some bank-produced league tables. Let's face it, the investment bank has control over how to tabulate each table. Truth to tell, there is no "industry standard" in calculating league tables. As such, it can theoretically choose which ones and how to show to these to their clients and even prospective hires.
I've been there so I know that no bank would like to show unflattering league tables. I'm willing to bet that you can rarely find, if any at all, bank-produced league tables where the firm is not in the top 3 tier. It's because the tabulations can be tweaked. Analysts know that.
What are the more common tweaks? Counting or excluding announced but uncompleted deals. Counting or excluding deals smaller than a certain size. Counting or excluding deals in a given geographic area, date range, etc. In fairness to investment banks, these tweaks are usually disclosed at the bottom of each table. Thus, if you are not keen about scrutinizing tiny footnotes, you wouldn't understand how much these tables have been tweaked.
Notwithstanding what I just said, there is no doubt that league tables are still important for classifying investment banks by their area of expertise. Make no mistake about it. The competition for the top league table places is always intense among the global investment banks. Before the final bragging rights are won, league tables could change hands several times during the year. Investment bankers work closely with compilers of league tables like Dealogic and Thomson Financial to make sure they get league table credit for their deals. Investment bankers are a competitive breed. Some live for the league tables. But all, bar none, love the bragging rights.
(This was earlier published on http://investmentbankeronlife.blogspot.com)
Posted By: cesar magnaye
Web: http://investmentbankeronlife.blogspot.com
Contact: e-mail
| About the Author: |
| Cesar Magnaye is a Filipino economist, corporate planner, and investment banker. He is presently a consultant to the Philippine National Bank and the Department of Finance. You can find his blog, "An Investment Banker's Take On Life", at http://investmentbankeronlife.blogspot.com. He also writes for the LendingClub.com blog. |
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