Financial Institutions Group
Financial Institutions Group or FIG is an industry group that focuses on providing advisory services to financial institutions.
Firms are usually divided up into:
- Specialty Finance
- Financial Technology
Since FIG companies do not actually make or sell any real, physical products, their income is quite different to a 'normal' company. They are in the business of moving money around through loans, deposits and money markets and all their income (and the majority of their expenses) are in the form of interest. The income statement of a deposit bank will have very little in the form of Cost of Goods Sold, Depreciation, Research & Development etc. but will have huge values for Interest Income and Interest Expense.
The key metric of a FIG company is book value and book value per share and these are both influenced by what value the market puts on the assets of a firm. For example, if a financial institution is trading below book value, this suggests that markets believe the assets (loans) are worth less than the company says they are. At the time of writing, Citigroup is trading at around 0.5x book value which implies that Citi are overvaluing their assets by a factor of 2.
Some examples of services that banks will provide to FIG firms are:
- Mergers & Acquisitions
- Debt Financing
- Balance Sheet (BS)
- Book Value (BV)
- Investment Banking Division (IBD)
- P / BV