Investment Banking
Commercial banks and investment banks perform primarily different functions. Investment banking is not one specific function or service but rather an umbrella term for a range of activities. Investment banks, or I-banks, issue securities, manage portfolios of financial assets, trade securities (stocks and bonds), help investors purchase securities and provide financial advice and support services. I-banks offer these services to governments, companies, non-profit institutions and individuals. They also engage in numerous proprietary activities in the financial markets – activities where they are their own clients.
The functions of investment banking often overlap that of a private brokerage. The line between investment banking and various other forms of banking has vague in recent years. Deregulation banking has helped banks take on more financial issues related to their clients than ever before. With the advent of mega-banks, which operate at different levels, the function of investment banking has expanded to covering virtually every area of an individual or company’s wealth management process.
There are various other functions that an investment bank performs, sales being an important part of its offerings. Sales people representing investment banks actually take the role of the classic institutional salesperson. Brokers develop relationships with investors for selling stock and offer stock advice. Traders facilitate buying and selling of stock and help clients carry out any other business transactions. Research analysts follow the performance of stocks or fixed income securities and suggest clients on the right time to buy and sell stocks.
A key role of investment banks is to advise companies in raising money or funds. There are two ways of raising funds that investment bankers typically engage in: raising funds through the capital markets and raising funds through private placements. Investment bankers can raise funds in capital markets in two ways. They can sell the company’s equities in the stock market in an initial public offering (IPO) or secondary offering, or they can give advices on debt issues to the companies. Investment bankers also advise companies on private placements, which mean purchase or sale of corporate securities by private companies or individuals. Types of private placement transactions include venture capital investments, strategic investments by companies, private equity investments, private debt placements, acquisitions, divestitures, and merchant banking.
Some of the sectors in investment banking are as follows:
Corporate Finance: Corporate finance includes a range of areas such as debt and equity capital, appropriate capital structures and mergers and acquisitions. Advisory services include sector specialists, who are supported by several general service teams.
Sales And Trading: Sales and trading is considered to be one of the most popular areas of work in the field of investment banking. A number of employees are required to work within the sales and trading departments. The work calls for hard working people with the ability to think fast and make key decisions in just seconds. The basic role of a sales and trading employee is to inform clients about the opinion of the bank on certain assets and markets.