What is investment banking – About investment banking

Investment banking services consists of underwriting equities and debts, merchant banking and advisory on mergers, acquisitions, divestitures and restructuring. We will look at each one of it in details below. Major difference between commercial bank and investment bank is focus on First three products of Investment bank.

Product
Investment
Bank
Commercial Bank
Securities Brokers
Underwriting
Yes
No
No
Advisory
Yes
No
No
Merchant Banking
Yes
No
No
Market Making & Trading
Yes
Yes
Yes
Brokerage Services
Yes
Yes
Yes
Securities Research
Yes
Yes
Yes
Investment Management
Yes
Yes
Yes
Demand Deposits
No
Yes
No
Revolving & Term Loans
No
Yes
No

Following are some of the biggest investment banks in the world.

Global Debt and Equity Issues
Jan 1 2008 – Dec 31 2008
Lead Managers Proceeds
($ Billion)
Mkt Share
(%)
# of Issues.
JP Morgan 455.1 9.7 1,210
Barclays Capital 401.3 8.5 1,041
Citi 309.0 6.6 986
Deutsche Bank 308.6 6.6 807
Merrill Lynch 241.2 5.1 852
Goldman Sachs 229.5 4.9 585
Morgan Stanley 220.4 4.7 662
Royal Bank of Scotland 214.0 4.6 712
Credit Suisse 205.3 4.4 682
UBS 204.4 4.4 867
TOP 10 TOTALS 2,788.8 59.5 8,404
Industry Total 4,697.2 100.0 13,554

In short following are main area of workings for investment bank

  • Underwriting security : Raising capitals for corporations and government companies by selling securities like IPO
    • Full commitment: Underwriter group buys all security at fixed price
    • Best effort: No commitment from underwriters to buy all security if response is less
  • Merchant banking: Putting bank’s own capital for long term investment
  • Advisory: Giving advisory services for corporation for mergers, acquisitions, divestitures and corporate restructuring.

Above mentioned three points separate investment banking from commercial banking or security broker.

One thought on “What is investment banking – About investment banking

  1. My spouse and i felt so excited that Raymond could carry out his investigation through your ideas he obtained from your very own weblog. It’s not at all simplistic just to choose to be giving for free guides that others might have been selling. And we realize we have got the website owner to thank because of that. All the illustrations you have made, the easy blog navigation, the friendships your site aid to instill – it is mostly remarkable, and it is letting our son and our family consider that that idea is cool, which is certainly rather serious. Many thanks for the whole lot!

Leave a Reply

Your email address will not be published. Required fields are marked *