Investment Banking

Investment banks specialize in large and complex financial transactions such as underwriting, acting as an intermediary between a securities issuer and the investing public, facilitating mergers and other corporate reorganizations, and acting as a broker and/or financial adviser for institutional clients. Some investment banks specialize in particular industry sectors. Many investment banks also have retail operations that serve small, individual customers.

The advisory divisions of investment banks are paid a fee for their services, while the trading divisions experience profit or loss based on their market performance. Professionals who work for investment banks may have careers as financial advisers, traders or salespeople. An investment banker career can be very lucrative, but it typically comes with long hours and significant stress. Because investment banks have external clients but also trade their own accounts, a conflict of interest can occur if the advisory and trading divisions don’t maintain their independence. Investment banks’ clients include corporations, pension funds, other financial institutions, governments and hedge funds.

Features

·    Raising Capital & Security Underwriting: Banks are middlemen between a company that wants to issue new securities and the buying public.

  Mergers & Acquisitions: Banks advise buyers and sellers on business valuation, negotiation, pricing and structuring of transactions, as well as procedure and implementation.

·     Sales & Trading and Equity Research:  Banks match up buyers and sellers as well as buy and sell securities out of their own account to facilitate the trading of securities

·    Retail and Commercial Banking: Investment banks now offer traditionally off-limits services like commercial banking.

·        Front office vs. back office:  While functions like M&A advisory are front office, other functions like risk management, financial control, corporate treasury, corporate strategy, compliance, operations and technology are critical back office functions.

·      After the 2008 financial crisis: The industry has not fully recovered from the financial crisis that gripped the world in 2008.

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