From 2019 to 2021, the industry CR4 increased from 38.5% to 42.1%. 2) CICC has piloted the launch of a cross-departmental cooperation "1+N" service team, giving full play to the professional forces of various lines to achieve innovative collaboration, and created platforms such a

(report producer/author: Huachuang Securities, Xu Kang, Hong Jinping)

. China's investment banking business under the comprehensive registration system has similarities with the United States in the 1970s and 1980s: 1) Relax regulation in regulatory policies. China is developing towards marketization, promoting the comprehensive registration system and promoting interest rate marketization. In the 1970s and 1980s, the United States liberalized the fixed commission system (1975) and implemented the shelf issuance system (1983). Storage shelf issuance means that after the issuer of securities submits registration or review documents to securities regulatory agency , it can continuously issue securities in the subsequent time. The difference from the original issuance rules is that the 20-day waiting period before the sale of securities is cancelled. 2) Investment banking business is facing new changes. China's comprehensive registration system will shorten the IPO project cycle and usher in market expansion. The shelf issuance system launched by the United States in 1983 under the "415 Rules" changed the waiting period for listing, and some of the application projects canceled the waiting period for issuance. The changes in the US registration system have led to an increase in issuance efficiency, which has intensified the competition among securities firms in investment banking business. 3) The concentration of investment banking business is in a continuous upward period. Since the pilot registration system of my country's 2019 pilot registration system, the total scale of underwriting has continued to rise, and its business has further concentrated in leading securities companies. From 2019 to 2021, the industry CR4 increased from 38.5% to 42.1% (in 2016, the pace of IPO, additional issuance and bond issuance accelerated, the business expanded rapidly, and the concentration decreased). In the 1970s and 1980s, competition in the US investment banking business intensified, and underwriting business concentrated in large securities companies with strong sales capabilities, and CR4 continued to rise (in the 1960s, due to the IPO boom driven by electronic stocks, IPO business grew rapidly and industry concentration decreased).

There is a gap in the development level of my country's investment banking business and developed markets, and it is more difficult to form coordination with other businesses. 1) In terms of business composition, my country's current investment banking business focuses on underwriting and sponsorship income, while consulting businesses with higher professionalism still have a lot of room for development. In 2021, my country's underwriting and sponsorship business revenue accounted for 87.3% of investment banking business revenue, and equity underwriting income accounted for more than half. The revenue data distribution of global investment industry, mainly top brokers, is more evenly distributed, with mergers and acquisition consulting accounting for the highest proportion. In 2021, equity underwriting, bond underwriting, and mergers and acquisition consulting accounting for 32%, 27.8%, and 40.2%, respectively. 2) In terms of business model, my country's investment banking business currently wins by scale, and lacks high-quality investment banks such as Moelis & Co, Houlihan Lokey, Lazard & Co that focus on mergers and acquisition consulting. Against the background of the relatively simple investment banking model, my country's demand for business collaboration will be relatively low.

After experiencing the turmoil of the 1970s and 1980s, the US investment banking business has entered a mature stage, and Goldman Sachs has gradually stabilized its position as a leading broker. my country's comprehensive registration system reform will also bring about new changes in investment banking business. In the time of the registration system reform, this article first analyzes the experience of top American securities companies in the investment bank's capital-intensive business collaboration through Goldman Sachs Investment Bank's capital-intensive collaboration case, and then reviews the current situation of my country's investment bank's capital-intensive business collaboration under the background of some market pilot registration system, and finally looks forward to the future coordinated development trend of my country's investment banking business.

2. The stone of the mountain: Guan International Investment Bank Goldman Sachs Collaborative Model

Goldman Sachs was established in 1869. After more than 150 years of development, the business collaboration model has taken shape. As a securities company that has both investment banking and trading business and has formed synergistic effects, the synergistic experience of Goldman Sachs investment banking business and capital-heavy business is worthy of our research and reference.

(I) Goldman Sachs business review

Among Goldman Sachs’ current four major business lines, global market business and investment banking business are the core businesses at present.

Goldman Sachs heavy asset business is mainly distributed in the global market sector and asset management sector. According to the 2021 Goldman Sachs annual report, (1) The global market (formerly institutional customer service) business line is mainly market making , credit, derivatives and other capital trading businesses. This business line is mainly market-making (71%), and also includes some light asset brokerage business.(2) Equity investment and debt investment in the Asset Management Department correspond to domestic proprietary investment business. These two parts of the business belonged to the Investment & Lending Department (Investment & Lending, now removed) before 2018. The proprietary investment business changed from a separate first-level department to coexisting with the Asset Management Department under the Asset Management Department, which shows that the investment attributes of the business have been weakening in recent years and their positioning is changing to the asset management attributes. Goldman Sachs has merged its proprietary investment and asset management business to raise more investment funds from its customers.

Goldman Sachs investment banking business distribution is relatively balanced, and its capital-intensive business focuses on non-directional transactions. In terms of investment banking business, Gaosheng Financial Advisor, Equity Underwriting and Bond Underwriting Income in 2021 accounted for 38%, 34%, and 24% respectively (Goldman Sachs has loan qualifications, and a small part of the investment bank's income comes from company loans). The three main businesses of the investment banking department are relatively balanced, and the financial advisor's income contributed the highest. In terms of capital-heavy business, according to the asset distribution of the Global Marketing Department and Asset Management Department, Goldman Sachs' capital-heavy business focuses on trading business, and trading assets are 4 times that of proprietary investment assets.

(II) Goldman Sachs' trading business and investment banking business have industry status

Investment banking business has led the industry, and has ranked first in the equity underwriting and mergers and acquisitions business for many years. 1) Goldman Sachs has outstanding equity underwriting performance and has ranked first in the industry for many years. In 2021, Goldman Sachs' equity business scale was US$140.25 billion, with a global market share of 10.9%, and its business scale is US$22.9 billion higher than Morgan Stanley, which ranks second. 2) Goldman Sachs is the world's leading merger and acquisition business. Among the 30 malicious mergers and acquisitions of over 1 billion pounds from 1983 to 1993, Goldman Sachs served as a defense consultant for more than half. As of 2021, Gaoshen has ranked first in the global merger and acquisition business for five years, and its global market share in the M&A business in 2021 was 10.5%.

Goldman Sachs' trading business is leading in the industry and has a stable revenue contribution. In terms of industry ranking, Goldman Sachs' trading business revenue reached US$22.1 billion in 2021, ranking second, and Goldman Sachs' derivatives scale third in the industry in 2022Q1. Goldman Sachs' equity transaction revenue rose from US$3.49 billion in 2000 to US$11.5 billion in 2021, and the proportion of equity transaction revenue to total revenue remained at 20% (2000:21%, 2021:19.4%).

(III) Collaborative model: "Investment Bank + Trading" + "Investment Bank + Investment"

Goldman Sachs' investment banking business advantages and trading business advantages cannot be separated from the help of the "Investment Bank + Trading" collaborative model. In addition, the " Investment Bank + Investment" model is also helpful for the development of investment banking business.

1. Trading helps investment banks: Trading line products can meet more complex investment bank business needs, and the accumulation of trading line customers can improve investment bank sales efficiency. In the face of more complex investment banking business, 1) Financial Advisor: In addition to defensive acquisitions, restructuring and spin-offs, financial advisory services can help customers execute large and complex transactions and design cross-border transaction architectures for customers. Financial advisory services also include asset, liability risk management, and capital management services, and such businesses will be linked to the trading department. Derivative hedging is an important means of asset-liability risk management. When providing consulting services to financial institutions, the financial institution team of the investment banking department can obtain support from the Global Market Department for interest rate derivatives and currency derivatives. 2) Underwriting business: In addition to traditional equity and bond underwriting, some complex transaction entrustment during the underwriting process requires the support of trading business. For example, the Yankee bond issued for Japan Telecom in 1984 involves the use of currency swap .

In order to improve investment bank sales efficiency, Goldman Sachs' trading lines have accumulated a large number of institutional customers. Since the scale and quality of the buyer will affect the sales efficiency of the investment banking department, Goldman Sachs' sales strength can be improved in the process of accumulating institutional customers in the transaction business. At Goldman Sachs, the entire institutional client network is a potential buyer of private placement, public placement, and mergers and acquisitions. In the 2017 Japanese Toshiba Company private equity fundraising event, Toshiba may be delisted from Tokyo Stock Exchange in the short term due to negative net assets. In order to solve the problem, Goldman Sachs formed a consortium of 60 foreign buyers for it in less than two months and successfully allocated 2.28 billion shares to Toshiba, turning its net assets from negative to positive at the end of the fiscal year.

2. Investment banking helps trading: Investment banking business can first promote bulk transactions, and second, it can attract traffic to the trading department. 1) Promote bulk transactions: The strength of the trading business is reflected in the efficiency of reaching a transaction, that is, the time to help the buyer (seller) find the counterparty. Goldman Sachs will adopt a strategy of turning investment bank clients into counterpartys who are institutional clients: for example, if a private equity client generates the demand for investing in a specific type of bond (trading demand), the Goldman Sachs investment bank team will look for customers (investment bank clients) that have corresponding financing needs. If the investment transaction needs of private equity clients match the financing needs of investment bank clients successfully, Goldman Sachs can help investment bank clients issue bonds, and at the same time promote a transaction + one underwriting business. 2) Business drainage: The investment banking department can use trading department products to meet the needs of investment banking customers. For example, when airlines hedges fuel risks, the trading department helps trade commodity derivatives, which is equivalent to attracting traffic from customers in the investment banking department to the trading department.

3, Investment Bank Investment Collaboration: Investment Bank customers bring investment targets, and investment projects deepen customer relationships.

1) There is a synergy between stock underwriting and equity private equity. Goldman Sachs' private equity group (GS Capital Partners/PIA) and Goldman Sachs' investment banking departments have investment fund , both of which can use their own funds for equity investment. The investment scale of private equity group (now attributable to the Asset Management Department) is large, and the investment scale of the investment banking department is small. In 2021, the investment assets of the two will be US$32.3 billion and US$1 billion respectively. Special investment funds (IBD funds) within investment banks are directly recommended by departments, invest in specific industries (TMT, clean energy industry), and invest in late-stage, high-growth, and IPO foreseeable private enterprises, which can achieve the collaboration between investment banks and investment. The collaborative system is now: ① The exit path of investment projects is clear; ② Goldman Sachs can better dominate the IPO process as an investor. Similarly, investments in private equity groups will also have the above synergies. In the case of China Ping An , in 1994, Goldman Sachs purchased about 7.5% of the shares of China Ping An with approximately US$35 million of its own funds. After 11 years, the investment received a 20-fold (US$600 million) return. In 2004, Goldman Sachs, as one of the lead underwriters, helped China Ping An complete its IPO on the Hong Kong Stock Exchange.

2) Financial advisory business and investment are synergistic. Goldman Sachs' financial advisory business provides financial advice for complex transactions such as leveraged acquisition of , asset restructuring, etc. Goldman Sachs will not only provide investment advice as an intermediary, but also invest its own funds to participate in the transactions. ①Bring equity investment opportunities: In 2003, Goldman Sachs invested US$1.27 billion in Sumitomo Financial Group (SMFG) and assisted SMFG in disposing of some non-performing assets. In the cooperation between Goldman Sachs and SMFG, on the one hand, Goldman Sachs received US$1.27 billion in its purchasing power and preferred shares of SMFG. On the other hand, it invested US$9.1 billion in SMFG's non-performing loans based on its rich experience in investing in Japanese non-performing assets, helping it to reorganize its debt, restore its balance sheet and helping it recover its profits. ② Bringing debt investment opportunities: In 2004, in the case of Lenovo's merger and acquisition of IBM, Goldman Sachs served as Lenovo's financial advisor and provided Lenovo with a bridge loan of US$500 million through Goldman Sachs Credit Partners L.P.

(IV) Model features: Customer connectivity + Customer need segmentation + Product connectivity

" One Goldman Sachs" strategy guides Goldman Sachs to make business layout with the customer center. From the perspective of customer perspective, Goldman Sachs' "investment bank + transaction" collaboration model has the characteristics of customer connectivity, customer need segmentation, and product connectivity.

At the customer level, there is no serious separation between various customer segments. The investment banking department covers both corporate and institutional customers, making it easier to achieve customer synergy. Unlike traditional investment banks that only serve the financing needs of enterprises and the financial consulting needs, Goldman Sachs investment banking team specially set up a "financial and strategic investor team" to provide them with investment full life cycle services (startup, acquisition consulting and financing, final sales/IPO).In the investment banking service team, such as the consumer retail team and the TMT team, they are contacted with investors and financing at the same time, which is conducive to efficient use of customer resources and helping investors (financers) to reach transactions faster. The investment banking department can reach two-way cooperation with financing enterprises and investment institutions within the department.

Customer demand level, Goldman Sachs segments the demand for different industries and types of customer groups to achieve accurate connection between transaction products and different investment bank customer groups. In addition to the "financial and strategic investor team" mainly connects with institutional customers with investment needs, the traditional IBD department is divided into eight teams by industry, covering the consumer retail department, finance, medical care, industry, public sector and infrastructure, natural resources, real estate, and TMT industries. Differentiated services are provided for differentiated customers in different industries: provide risk hedging services for financial institutions, commodity hedging services for customers in the natural resource industry, risk management services for customers in the medical, consumer retail, and industrial industries, and interest rate derivative services for municipal and non-profit customers. The segmentation of customer groups and customer needs makes derivatives targeted in investment banking business.

At the product level, product supply between different departments can be connected to each other to build more competitive and complex products. Goldman Sachs' traditional IBD, financing team, and global capital market team can form synergies through the "strategic team" in the financing team. The "strategy team" in the financing team is responsible for connecting with the traditional IBD team, the internal team of the financing team and the global capital market team to develop technical solutions for customers. This model opens up the product delivery channels. On the one hand, it can design a more complex financial product to meet the needs of higher difficulty customers. On the other hand, it can provide customers with full life cycle services to achieve more comprehensive services.

(V) Goldman Sachs' synergy success

1. Synergy element 1: Flexible adjustment mechanism

1960 Since the market environment has changed, the importance of institutional customers has increased. Since the 1960s, the proportion of institutional investors in the United States has maintained an upward trend, financial institutions have become the main traders in the capital market, and changes in the market investor component are driven by Goldman Sachs to promote sector adjustments.

Department flexibly adjusts, adapts to market changes, and increases the importance of trading (institutional) business. At the beginning of Goldman Sachs' listing in 1999, the first-level departments included the Global Capital Markets Department and the Asset Management and Securities Services Department, which included the Investment Bank Business Department and the Trading and Proprietary Business Department. In 2002, in line with business development, Goldman Sachs' emphasis on trading business increased, and the trading and proprietary business department was independent, maintaining the same level as the Investment Banking Department and Asset Management and Securities Service Department. Since then, in 2010, Goldman Sachs once again adjusted its departmental structure, from three business lines to four business lines: investment banking + institutional customer service + investment and lending + investment management. The institutional business department provides derivatives, market making, and financing, and its customers are mainly buyer institutions. According to the 2021 annual report, Goldman Sachs has adjusted between the investment and lending business lines and the investment management business lines, but investment banking and institutional customer services remain basically the same.

2. Synergy factor 2: Strong business strength

Goldman Sachs acquired a large number of high-quality companies in the early stage to improve its trading business service capabilities. In 1981, Goldman Sachs acquired J. Aron & Company, a trading company for commodities, and became a global leader in foreign exchange, crude oil, precious metals trading and hedging. Against the backdrop of the gradual rise of derivative business in the United States at the end of the 20th century, Goldman Sachs acquired Hull, a leading electronic trading company in 1999, and in 2000, the largest in-market member of the New York Stock Exchange, Spear Leeds & Kellogg (SLK), to expand the scale of its trading business. In 2001, Goldman Sachs acquired Benjamin Jacobson & Sons, a professional company under the NYSE, combining its business with the SLK business. Judging from the results, Goldman Sachs' trading business has developed rapidly, and after 1999, the equity trading income level rose to above US$1.5 billion (in January 2002, due to Goldman Sachs' adjustment of the fee pricing structure in the Nasdaq trading business, Nasdaq trading income was transferred to commission income statistics), and revenue increased the largest in 1999, an increase of 147% year-on-year.

investment banking business service capabilities are outstanding. In terms of equity underwriting, Goldman Sachs has participated in the world's top five IPO projects, with listed companies all over the world, and the largest participating projects raised US$25.6 billion. In terms of mergers and acquisitions, in the mid-1980s, malicious mergers and acquisitions began to be popular in the United States. Goldman Sachs reversed the trend and set up a sign of mergers and acquisitions through the "anti-malign acquisition" service. In 1983, Gaosheng served as the defense consultant for the BTR Group's malicious acquisition of Thomas Tilling for 600 million pounds, and fought for the highest offer of 655 million pounds for client Thomas Tilling. In 1986, Goldman Sachs helped Standard Chartered Bank resist the malicious acquisition of Lloyds' quotation of 1.167 billion pounds. Goldman Sachs maintained its advantages in the merger and acquisition business to this day. As of 2021, Goldman Sachs has ranked first in the global merger and acquisition business for five years.

3. Synergy element 3: Complete product system

Goldman Sachs product coverage is very wide. 1) The investment banking business segment mainly faces corporate customers. Although it is only divided into four business lines: financial advisory, stock underwriting, bond underwriting, and corporate loans, the products and services provided also include derivatives, risk management, loans, credit consulting, etc. 2) The global market sectors mainly face institutional customers. Goldman Sachs provides four major services: FICC intermediary, FICC financing, equity intermediary, and equity financing. Each sector is composed of a rich product. Taking the share equity intermediary service as an example, Goldman Sachs provides transactions for the entire stock products from physical stocks, ETFs, options , other derivatives, etc. In addition to the main business line, Goldman Sachs can also provide commission management services to financial institutions, providing services such as reconciliation, payment processing, and cross-platform transaction allocation plan customization.

The complete product system comes from innovation based on customer needs. Goldman Sachs’ corporate culture attaches great importance to innovation. One of the company’s 14 business principles is “all our work emphasizes creativity and imagination.” 1) For institutional customers, Goldman Sachs improves its ability to serve institutional customers through technological innovation to meet the investment needs of institutional customers. In 1990, Gaosheng designed the Black-Litterman global asset allocation model to help institutional customers achieve global asset allocation. In order to meet the investment analysis needs of institutional customers, Goldman Sachs built an GS financial analysis platform for institutional customers in 1995, adapting to technological development. In 2014, Goldman Sachs further launched Marquee to enable customers to connect more conveniently with the platforms provided by Goldman Sachs. In addition to technology, Goldman Sachs has also maintained innovation in financial products. The increase in asset types has brought new derivative demand to institutions. In May 2021, Goldman Sachs began to launch forward transactions without principal delivery pegged to the Bitcoin price to investors. Executives of Gaosheng Digital Assets said that the launch of Bitcoin-related derivatives symbolizes the development of Goldman Sachs in a wider asset class. 2) For corporate customers, Goldman Sachs helped customers realize their financing needs through innovative design of financial products. In 1974, Gaoshang conducted financing innovations, issued the first foreign government commercial paper in the history of the United States, and in 1984, it innovatively designed bond issuance + currency swap model for customers to help customers successfully raise funds.

4. Synergistic elements four: Huge customer relationship network

"Customer first" is one of Goldman Sachs' four core values. The accumulation and maintenance of corporate customers and institutional customers is the key to the synergistic effect of Goldman Sachs' investment banking business and other businesses.

1) In terms of corporate customers, customers of all sizes, regions and industries pay equal attention to the development of customers. Goldman Sachs targeted large customers before the 1970s. In the mid-1970s, we began to focus on small and medium-sized enterprise customers, and the target customers expanded from 500 other than the Fortune 500 to 4,000 in 1971. In terms of customer development, the investment bank’s customer service department has improved the development quality through personnel expansion. The number of customers covered by a single account manager in the department has dropped from 200 to 100, and the depth of mining of a single customer has increased. In addition, Goldman Sachs' expert group and model of "customer relationship experts + product experts" helps to tap customer needs. Customer relationship experts continue to be responsible for following up customer feedback and discovering new business opportunities, and product experts are responsible for focusing on serving customers. This efficient and high-quality service model allows Goldman Sachs to rapidly expand the number of corporate customers, and the number of Goldman Sachs customers increased by 500 in the five years from 1979 to 1984.With the advancement of globalization, Goldman Sachs has begun to deploy overseas small and medium-sized enterprise markets. In 2019, Goldman Sachs has covered 95% of listed companies with a market value of US$10 billion in the Americas, Europe, , Middle East, and Africa, and 44% of listed companies with a market value of US$500 million to US$2 billion.

2) In terms of institutional customers, high-quality and comprehensive institutional customer service increases institutional customer stickiness. Investors in the United States are mainly institutions, and Goldman Sachs attaches importance to institutional customers. Through the adjustment of organizational structure and the improvement of product services, Goldman Sachs has obtained a large number of institutional customer resources. In the early days, Goldman Sachs built an institutional customer relationship network through bulk transactions. Goldman Sachs had strong bulk transaction service capabilities and executed the largest order ever (US$26.5 million) in 1967. At the same time, the management formulated a strategy based on expanding the strength of bulk trading and stabilizing institutional clients. In the 1960s and 1970s, Goldman Sachs president Gus Levi asked sales personnel and traders to establish close relationships by helping senior institutional traders deal with difficult stocks, and initially establish an institutional client relationship network. In the 1990s, Goldman Sachs acquired electronic trading companies and developed GS Financial WorkbenchSM institutional service platform to consolidate its trading advantage, enrich the scope of institutional service, and enhance the institutional customer service capabilities. By 2021, Goldman Sachs has covered 72 of the world's top 100 institutions, ranking third in the world.

5. Collaborative element 5: Smooth business delivery channels

1950s In the past, an investment banking service department was established to realize the coordination between investment banking and other departments. In 1956, Goldman Sachs senior partner Whitehead Innovation proposed to separate the investment banking department from the contract, and set up a separate "Investment Banking Business Customer Service Department" (IBS). The department is only responsible for covering customers and soliciting business. Those responsible for selling investment banking services and providing services will be separated. Based on the establishment of this department, Goldman Sachs launched an expert group and model of "Customer Relations Expert + Product Expert" to serve corporate customers. Customer relations experts from the service department are specifically responsible for following up customers and exploring the needs of not limited to traditional investment banking business. Product experts come from various business lines and are responsible for providing services specifically. At this stage, the investment banking department is more refined and the financing team (Financing group) achieves product collaboration. In 2022, Goldman Sachs' investment banking department is composed of traditional investment banking team + merger and acquisition team + financing team + transaction banking team + operation team + engineering team. The dual structure of "traditional investment banking team + financing team" can provide customers with a wide range of products and services. Among them, the traditional investment banking team is mainly organized by industry and provides consulting services to customers in 9 investment banking sub-sectors. The financing team is composed of all Goldman Sachs' capital market departments, connecting customers, including corporate customers, institutional customers, and government departments, and working closely with various internal departments of the company to build and implement difficult financing and risk management solutions, providing full products including stocks, bonds, derivatives and FICC products.

6. Factor empowerment and collaboration: product advantages + smooth channels + network effect

Flexible mechanisms, strong service capabilities, high-quality and complete products, huge customer network and other factors are the cornerstones for the construction of a collaboration model between investment banking business and other businesses. The "investment banking service department"/"financing team" is the finishing touch of the collaboration model.

1) Flexible organizational structure adjustments enable the company's resources to be fully allocated to the trading department. Goldman Sachs made departmental adjustments based on market changes. In 2002, after acquiring a series of transaction companies, it increased the level of the trading department and consolidated the basic trading advantages of Goldman Sachs. In 2010, Goldman Sachs restructured its first-level department structure and classified its institutional business departments separately to adapt to the rising demand for derivatives by institutional customers.

2) Structural optimization + innovation capabilities have improved the investment banking and trading product systems. Based on flexible organizational structure adjustment, Goldman Sachs can quickly innovate products according to customer needs, and the product system of various departments has been relatively complete so far. Goldman Sachs' institutional business department has created a product system based on the needs of institutions' customers at this stage, including credit products, emerging market asset trading, portfolio transition management services, etc., which covers credit products, emerging market asset trading, portfolio transition management services, etc., so that the investment banking department has the ability to use derivatives to meet customer risk management needs in addition to financing solutions.

3) A complete product system consolidates service strength, and the two types of customer resources are naturally accumulated.Products from multiple types and markets support investment banking departments to have the ability to solve difficult customer needs, and high-quality services + products enhance customer stickiness. As business accumulates, institutional and corporate customer resources gradually increase.

4) The organizational structure ultimately opens up resources from all parties and forms a cross-network effect. The "service team" connecting various business lines is the key to joint implementation. There are two key elements for successful non-channel investment banking business: ①Design a financial contract that is compliant and meets customer financing needs; ② Find buyers of financial contracts. For elements ①, the support of the investment banking department by the trading line products will help the design of difficult contracts. For factors ②, the accumulation of transaction lines can form a network effect, that is, the value of securities companies to corporate financing customers increases with the scale of institutional investment customers. The principle is that securities companies with more institutional customers are more likely to sell financial contracts. The key to achieving the above factors is to maintain smooth business lines through the "investment banking service department"/"financing team", realizing the link between the institutional customer network and corporate customers, the "1+12" of the investment banking and trading department products, and the delivery of high-quality customers to the company's private equity investment projects.

. Domestic review: The relationship between investment bank's capital-intensive business has entered the adjustment period

2019 Science and Technology Innovation Board registration system, 2021 New Third Board "sponsorship + direct investment" regulations change the relationship between investment banking business and investment business. The rapid development of capital intermediary business has brought new opportunities to the development of the "capital intermediary + investment banking" model.

(I) Investment banking business + investment business

Domestic "follow-investment + investment banking" is half- passive investment under the requirements of the follow-up investment system of the registration system, "issuance and underwriting" is passive investment under the registration system and abandonment of purchases, and "direct investment + investment banking" is the active investment of securities companies in high-quality projects. The Science and Technology Innovation Board requires the lead underwriting agency to follow up on all projects. The following is mainly used to analyze the Science and Technology Innovation Board as an example.

1. "Follow-up investment + underwriting" changes IPO business composition

Under the background of the pilot registration system, stock underwriting business needs to pay attention to revenue composition and initial capital investment. The underwriting and underwriting project income of the Science and Technology Innovation Board consists of two parts: underwriting and underwriting income and investment profit and loss. The source of investment profit and loss is: 1) The follow-up investment mechanism requires the lead underwriter to follow up. When selecting the project, the underwriter also chooses a securities investment target with a lock-in period of 24 months, resulting in investment profit and loss; 2) The Science and Technology Innovation Board has a 23-fold price-earnings ratio requirement, and some high-priced new stocks on the Science and Technology Innovation Board are abandoned, and the probability of underwriters having passive investment in new stocks without lock-in periods increases. The initial capital investment of the Science and Technology Innovation Board consists of two parts: follow-up investment expenditure and underwriting expenditure.

In terms of the number of underwriting projects, the leading brokers have advantages in the Science and Technology Innovation Board. Taking the third anniversary of the semi-pilot project of science and technology innovation (2022.7.22) as the statistical node, there are 439 listed companies on the Science and Technology Innovation Board (including Guandian Defense , which is the transfer of Beijing Stock Exchange to the , and there are actually 438 securities companies to follow-up investment), and the number of listed companies in 2019, 2020, 2021 and 2022 is 70, 145, 162, and 62 respectively, of which two securities companies have followed up investment at the same time. In terms of performance of sponsor institutions, there are more than 30 securities companies in the top five, all of which are leading securities companies in IPO business. Among them, CITIC Securities ranked first, with a total of 56 projects underpinning (except Guandian Defense). In terms of follow-up investment returns, the leading brokers have obvious advantages, and small and medium-sized brokers have opportunities. CICC , CICC , Haitong , CICC is far ahead in following investment returns, with a total floating profit of nearly 2 billion yuan. Among the top ten securities firms in total floating profits, CITIC Jiantou and CICC have advantages in terms of project quantity and single project investment income. CITIC Securities, Haitong Securities , Huatai Securities, Guotai Junan , Minsheng Securities , and China Merchants Bank performed well in following investment income due to its advantage in number of projects. However, medium-sized securities companies also have opportunities to catch up under the follow-up investment system of the Science and Technology Innovation Board. Due to the high follow-up investment returns of a single project, they also ranked among the top ten in total follow-up investment returns.Although small brokerage Xinda Securities , Wugang Securities , and Zhongshan Securities have only completed one IPO project on the Science and Technology Innovation Board in the past three years, the follow-up investment returns of a single project are relatively rich. However, it should be noted that institutions with fewer underwriting projects are not enough to prove their investment capabilities through the returns of a single project, and the winning rate of small and medium-sized securities companies in following investment remains to be further observed.

Compare follow-up investment returns and underwriting expenses, and follow-up investment system increases the underwriting risks of small and medium-sized securities companies. Assuming that securities companies hold follow-up investment companies on the Science and Technology Innovation Board until July 22, there are 12 securities companies whose follow-up investment floating profits exceed underwriting expenses, and there are many small and medium-sized securities companies whose follow-up investment returns far exceed underwriting income. Although Cinda Securities only sponsored "Otway" company to go public in the past three years, its follow-up investment returns far exceed the underwriting income, close to 8 times. Small and medium-sized securities companies such as Wugang Securities, Hongta Securities, and Huaxing Securities also received multiple follow-up returns. However, high returns are linked to high risks. If small and medium-sized securities companies step on the mine, they may not be able to diversify investment risks due to few projects.

brokerage underwriting pressure has increased. Under the registration system, new stocks break and investors abandon purchases significantly increase the capital-intensive attributes of investment banking business, testing the pricing ability of brokers. Since 2021, the proportion of underwriting securities companies has increased sharply. Taking the Science and Technology Innovation Board as an example, since the opening of the market, 30 projects with underwriting accounts for more than 1% of the number of shares issued, and 9 projects with underwriting amounts of over 100 million yuan in securities companies have appeared. These projects with a high proportion of underwriting are concentrated in 2022, which shows that due to the combined influence of multiple factors such as market prosperity and the pricing of new stock issuance under the registration system, securities companies may invest more capital in the underwriting and underwriting process. The five securities with the highest abandonment and underwriting rate are all high-priced projects, and the initial PE of the five projects exceeds 100 times. The project with the highest underwriting amount mentioned above is "Naxinwei", which was sponsored and listed by Everbright Securities in 2022. The underwriting amount is as high as 780 million yuan, and the underwriting accounted for 13.38% of the number of shares issued. The initial price-to-earnings ratio of the project is as high as 574 times. At the same time, Everbright Securities is the main underwriter with a strategic follow-up investment of about 120 million yuan. The overall project cost is close to 900 million yuan, far higher than the underwriting revenue of the project of 203 million yuan.

comprehensively looks at underwriting capital expenditures, investment banking business under the registration system has increased capital requirements for securities firms. Among the 438 Jiake companies listed on the Chuangban Board, the total amount of follow-up investment + underwriting exceeds the underwriting expenses. Among them, the total amount of "Jingwei Hengrun-W" underwriting and following investment expenses recommended by CITIC Securities is as high as 4.77 times its underwriting and underwriting income. Among the 44 projects with over-insurance expenses, 10 are joint sponsors. Since the follow-up investment system requires the joint sponsor to follow up at the same time, the follow-up investment expenditure of the joint sponsor projects is more likely to exceed the underwriting expenses. In addition, improper pricing projects are more likely to be abandoned, allowing underwriting agencies to bear the risk of high underwriting expenses.

2. The "direct investment + investment banking" model is exploring the new regulations on direct investment in

break the original "sponsorship + direct investment" interest transfer model. The "sponsorship + direct investment" model refers to the direct investment of securities companies to suddenly invest in a listed company sponsored by themselves, thereby forming a transfer of interests. Before the announcement of the "Regulations on the Management of Private Equity Fund Subsidiaries of Securities Companies" and the "Regulations on the Management of Alternative Investment Subsidiaries of Securities Companies" (hereinafter referred to as the new direct investment regulations), although "direct investment + sponsorship" was banned, because the recognition rules emphasize the "first intermediary coordination meeting", they will be evaded by securities companies in actual supervision. The new direct investment regulations in 2016 emphasize "substantive underwriting business", focusing on the essence of business development, and the direct investment surprise investment model is unsustainable.

New regulations on the New Third Board have triggered new explorations of "sponsorship + direct investment". "Guidelines for the Application of Regulatory Rules - Institutional Category No. 1" points out that sponsors can invest in the issuer before and after providing sponsor services to the issuer. In order to achieve the listing and exit of direct investment companies, an existing synergistic model is "direct investment + investment bank + bet". This model has several elements: 1) The broker is the enterprise sponsor; 2) After the broker is sponsored, hedging the risk of the company's non-listing investment; 3) When participating in the private placement, the sponsoring broker signs a bet agreement with the company to be listed to hedge the risk of the company's non-listing success.According to the public disclosure information, the "Trees" project participated in by CITIC Construction Investment adopts this model. CITIC Construction Investment's alternative investment subsidiary invested 17.7386 million yuan to participate in the "Trees" private placement at a low price. At the same time, CITIC Construction Investment signed a betting agreement with Teres. The content of the agreement includes that Teres needs to submit an IPO application to the Beijing Stock Exchange before the end of 2022 and formally accept it. If the above content is not reached, CITIC Construction Investment can require Teres to repurchase the shares held during the targeted share issuance, and have the right to require the calculation of capital investment income at an average annual rate of return of 8%. For securities firms, this collaborative model at this stage can ensure compliance on the one hand, and on the other hand, it can ensure stable investment returns with relatively low risks.

The "direct investment + investment bank + betting" model of the New Third Board is limited in applicability, and "direct investment + guidance + investment bank" is more universal. On the one hand, the market is currently applicable to sponsor first and then direct investment. On the other hand, the cooperation model based on the betting agreement is not applicable to all customers. For example, high-quality projects may attract multiple investment banks. At this time, high-quality customers have more bargaining rights when choosing sponsors, and "direct investment + investment bank + betting" is difficult to achieve. The more universal "direct investment + investment banking" model should focus on helping investing companies grow: establish relationships with customers in the early stage, help companies grow through guidance and product support in the medium stage, and exit through customer listing in the later stage.

(II) Investment banking business + capital intermediary business

"Investment banking business + capital intermediary business" is part of the big investment banking strategy. Since 2012, many securities companies in my country (CICC, CITIC, Guojun, etc.) have proposed to develop "big investment banks", that is, to provide all-round capital market services to enterprises. This model is carried out under the concept of "serving customers", running through the life cycle of the enterprise, and based on the diversified needs of customers, it provides customers with full business chain (credit, derivatives, investment banking...) services. On the one hand, this model can reduce the cost of developing new customers, and on the other hand, it can increase customer stickiness through one-stop service. At this stage, domestic derivative business is developing rapidly. The following is an analysis of the development opportunities of "derivative + investment banking" as an example. Domestic derivatives business are developing rapidly. Since 2019, the scale of over-the-counter derivatives in my country has expanded rapidly. In January 2019, the new nominal principal of over-the-counter derivatives was 106 billion yuan, and in January 2022 it reached 612.4 billion yuan. There are 44 securities companies that have passed the registration of foreign options business associations, 8 securities companies with first-level dealers qualifications, 36 secondary dealers, and all of them are leading securities companies with relatively outstanding comprehensive strength.

derivatives can provide customers with risk management tools to meet the risk management demands of financial institutions and enterprises. At this stage, on-site derivative products include futures and options. The over-the-counter derivative products provided by securities companies are mainly over-the-counter options, income swaps and floating income certificates. There are cases at home and abroad that help corporate customers manage risks based on derivatives business. 1) Domestic: Shenwan Hongyuan once carried out derivatives business linked to pig futures to ensure revenue guarantees for corporate customers about 7,000 pigs, and carried out derivatives trading linked to Brent crude oil to help industrial customers hedge against the risks of large fluctuations in commodity prices and achieve investment hedging. 2) Foreign: Goldman Sachs provides Geely with collar options to help Geely avoid the huge fluctuations in Daimler's stock price and bring potential huge losses when Geely acquiring Daimler through the secondary market.

In order to meet customer derivative needs, the organizational structure and product innovation planning of securities companies are being adjusted. Everbright Securities, Tianfeng Securities, Guotai Junan, Shenwan Hongyuan and others have further increased their attention to innovative businesses, and have taken measures such as creating a financial innovation department and improving the level of derivatives department. Shenwan Hongyuan established the Financial Innovation Headquarters and the Products and Innovation Business Committee to coordinate the development of innovative business across lines in 2020. In July 2022, the board of directors of Haitong Securities reviewed and approved the proposal to adjust the organizational structure, and established a new derivatives and trading department, an institutional sales department, and the financial product department, and at the same time, the counter marketing department, the organization and international business department were abolished. Under the layout of the entire life cycle, the rapid development of derivatives brings new opportunities to "investment bank + derivatives". At this stage, domestic securities companies, large and small, have proposed to "provide comprehensive financial services for enterprises throughout their life cycle", that is, to provide services to the financial needs arising from the entire process of customer growth.The registration system relaxes the listing requirements for enterprises, and more high-quality customers who do not meet the profit indicators are expected to go public. Before going public, securities companies can lock in high-quality customers as soon as possible and provide risk management services at the front end of the enterprise life cycle to help customers develop smoothly and go public smoothly. After listing, securities companies can continue to provide a series of services such as risk management and equity pledge to help the company develop in the long term, consolidate customer relationships, and obtain more refinancing business opportunities.

. Outlook: Investment banking business has broad development potential, and business collaboration is the long-term development direction

Under the comprehensive registration system, look at the coordination between investment banking business and capital-heavy business. First, look at the future direction of the follow-up investment system, second, look at the development of transaction business, and third, look at the progress of organizational structure adjustment. There may be differences between domestic "investment bank + investment" coordination and overseas in the short term. Before Goldman Sachs adjusted its business structure in 2010, its own funds were mainly invested in the primary market (not considering the SMFG and ICBC invested in 2006). During the period 2002-2009, the highest proportion of public assets was only 13.7% in 2009, and public assets were mainly generated by IPOs and trading businesses. After 2010, Goldman Sachs' organizational structure adjustment brought about statistical caliber adjustments. In the past five years, private equity assets are still the main ones.

Due to the follow-up investment system in China, securities investment banking business has forced linkage with their own capital investment, and the stocks of sponsored companies become investment assets held by securities companies: 1) Investment period: limited to more than 24 months; 2) Investment amount: determined by the stock issuance scale of listed companies. According to the requirements of the follow-up investment system, the larger the issuance scale, the larger the investment amount; 3) Investment cost: determined by the pricing of the underwriting agency; 4) Investment income: (sale price-issuance price) × Follow-up investment scale, the sale price is determined by the secondary market conditions. Therefore, among the follow-up investment gains and losses generated by an IPO underwriting project, the securities firms are more controllable in both scale and cost. In order to achieve gains in the investment income part of an IPO project, the importance of the pricing strength and sales strength of the brokerage firm gradually increases. However, with the introduction of the market-making system of the Science and Technology Innovation Board, the coordination of the domestic follow-up investment system and the market-making system may prompt securities firms to transform directional equity assets into non-directional assets.

Goldman Sachs collaborative model is the potential development direction in the future, but how long my country can develop the Goldman Sachs model depends on the development of the trading business. According to the Goldman Sachs case, Goldman Sachs has developed trading business, complete trading products, and strong trading strength. Under the collaborative organizational structure design, trading business products are exported to investment banking business, enhancing the service capabilities of investment banking departments. The domestic securities trading business is still in its infancy, and its "investment + trading" assets are not as good as those of top investment banks Goldman Sachs and Morgan Stanley. The largest domestic scale, CITIC Securities, is only one-fifth of Goldman Sachs' assets, and its leverage ratio is significantly lower than that of overseas securities companies. In 2021, the financial leverage ratios of domestic CITIC, CICC, Huatai and CICC were 6%, 5.7%, 5.3% and 7.7%, respectively, while overseas investment banks Goldman Sachs and Morgan Stanley were 12.8% and 11.12% respectively. Due to capital restrictions, it is difficult to quickly increase trading business and achieve overseas collaboration model.

does not consider leverage constraints. Looking at Goldman Sachs, the rapid development of trading business is due to the external factors of competitive pressure, market environment, and technical environment, and the internal factors are strategy, investment, and innovation. External causes: (1) Intensified industry competition forces securities companies to develop trading business to supplement profits. The 1970 "Amendment to the Bank Holding Company Law" relaxes the supervision of the business scope of bank holding companies, allowing commercial banks to enter the securities industry, carry out closely related businesses such as securities brokerage and investment consultants, and intensify competition in traditional securities industry. 1975 The fixed commission system canceled the squeeze of brokerage business profits, and the industry increased its investment in trading business as a whole. From 1973 to 1986, the proportion of industry transaction and investment income increased from 8% to 27%. (2) Investors are clearly institution, and trading demand and risk management demand have increased. The data shows that the proportion of bulk transactions from institutional investors has increased significantly. (3) The basic theories of derivatives design in the 1980s (such as B-S option pricing model and asset pricing theory) have taken shape.Internal reasons: As mentioned above, Goldman Sachs has shown its importance to institutional customers and trading business in its organizational structure adjustment, investing a large amount of funds to acquire upstream and downstream companies in high-quality trading industry chain, and innovating trading technologies and trading products.

view in China, the external driving force for promoting the development of trading business is relatively insufficient compared to the United States, but the strategic layout and capital investment have begun. (1) Since 2015, the decline in the commission rate of brokerage business has increased the pressure on securities companies' performance, but with the rise of financial product agency sales in China, the proportion of industry brokerage business revenue has risen to 31% in 2021. Against the background of the expansion space of the brokerage business market, domestic brokerage firms may not be as enthusiastic as those in the United States in the 1980s. (2) The transaction business is mainly for institutional investors. Although the proportion of institutional investors in my country has increased in recent years (2015:14.5%, 2020:17.8%), there is still a big gap compared with the United States. The proportion of A-share bulk transaction volume in 2021 was only 0.31%, indicating that institutional trading demand is not strong enough, and the insufficient customer size and trading demand will limit the market space of trading business. (3) In 2022, large and small securities companies will further raise funds to develop trading businesses. CITIC Securities plans to consolidate the advantages of capital intermediary business with 19 billion yuan, and Caitong Securities plans to catch up with leading securities companies in investment trading business with 4.5 billion yuan. Judging from the capital investment plans of multiple securities firms, we believe that the scale of the trading business will expand in the short term, but it will take time to break through quality.

The core of Goldman Sachs collaboration lies in the cooperation of internal business lines, and domestic securities companies have already made arrangements in this direction. 1) Huatai Securities actively promotes the platform and ecological strategy centered on investment banking customers, continuously strengthens the linkage and coordination between investment banking business and other businesses, and creates a three-in-one institutional customer service ecosystem of "buyer + seller + research". 2) CICC has piloted the launch of a cross-departmental cooperation "1+N" service team, giving full play to the professional forces of various lines to achieve innovative collaboration, and created platforms such as "cloud investment banking", "phoenix nest system", "nebula system", and "CICC Fixed Income APP". Through the platform's customer acquisition, externalization of capabilities and ecological connection, it has achieved the upgrade of its customer service model. 3) Haitong Securities' investment banking business continues to strengthen cooperation with wealth management, institutional business, asset management, equity investment and other businesses, import high-quality customer resources and business opportunities to the company, and strengthen the comprehensive service value chain. The custodial market value introduced by the IPO project in 2021 exceeds 150 billion yuan.

(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)

selected report source: [Future Think Tank].