Investment Bank acts as an intermediary in the financial system which help the institutional investors to raise capital.
Mutual funds, Hedge funds, Pension funds, Insurance companies, HNIs, corporations, banks, government, etc are the clients of Investment Bank.
Investment Bank is different from Retail Bank
- The Retail Bank handles transactions with a lesser amount of money whereas the Investment Bank handles transactions with large amount of money.
- The clients in case of Retail Bank are general public while in case of Investment Bank are large institutions, government, corporates, HNIs.
- The services provided by Retail Bank are deposit and lending, ATM services, debit and credit cards, online banking. Whereas, services provided by Investment Bank include mergers and acquisitions, underwriting equities, debt security, trading services, asset management services, etc
- The Retail Bank charges fees for the services rendered whereas the Investment Bank charges fees (when acting as a broker) and makes profits ( when acting as a dealer).
Role of Investment Bank.
- Investment Bank helps the companies to raise capital through IPO/FPO.
- It also helps the companies in Mergers and Acquisitions by researching about the company and then valuating and negotiating about it.
- It provides trading services to its clients. Nearly 100,000+ trades happen in a single day in a big Investment Bank.
- It researches about the companies, industries and economies.
- It provides Asset management i.e. portfolio management services and fund management services to its clients.
- It also acts as a custodian of its clients’ assets.
- It also advises its clients on Restructuring of their businesses.
Investment Banking 