A discussion of the how investment banks differ from commercial banks, their role in capital markets and the structure of investment bank divisions.

1. Overview of the
Investment Banking Industry
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2. Commercial Banks
• Provide deposit and loan services through
branch networks and ATMs
• Accept deposits and lend the fund to other
• Earn income from the margin of higher
creditors rate than depositors
• Lend through credit cards
• Offer safe deposit
• Notary services
• Merchant banking services
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3. Investment Banks
• Work with:
– Bigger organizations
– Institutional investors
– High net worth individuals
• Advise clients on investment issues
• Help clients raise funds through the
debt or equity routes
• Sometimes act as principals; represent
clients in other transactions
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4. Investment Banks
• Provide a wide range of services:
– Underwriting
– Trading in securities
– Financial advisory services related to restructuring,
mergers, acquisitions or divestitures
– Trading of derivatives, fixed income, foreign
exchange, commodities, and equity securities
• Mostly located in or around Wall Street
• Revenue sources: fees or commission
earned through the placement of equity and
debt
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5. Investment vs. Commercial Bank
• The line between the two
is slowly disappearing
• Citibank, Deutsche Bank
and BNP Paribas,
operate both commercial
and investment banking
services
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6. Intermediaries Role
• Investment Bankers act as Intermediaries in
Financial and Capital Markets
– Raise and supply capital to corporation
– Provides advisory
– Provides asset management services
– Act as intermediaries between the firms raising funds
and investors
– Help in the issuance of equity and bonds
– Arrange debt for clients
– Often purchase debt and equities their own
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7. Underwriters Role
• Provide advisory services
– Asset management
– Market research and analysis
– Facilitating mergers and acquisition (M&A) deals
• Investment banker’s revenues
– Fees related to M&A deals and related transactions
– Sale and purchase of securities and other financial
instruments
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8. Top Investment Banks
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9. Structure of an Investment Bank
• Categories or divisions depend on:
– The services being offered
– The clients being catered to
• Corporate finance department
– Caters to the funding requirements of a
company
– Study what the client needs
– Arrange funds through equity or debt routes
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10. Structure of an Investment Bank
• Capital markets trading and investment
department
– Responsible for all investments into the securities
markets
– Through underwriting or direct trading in the stock
markets
• Research departments
– Analyze the latest economic and industry situations
– Provide research for enabling informed decisions
– Carry out risk, financial and economic analysis
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11. Structure of an Investment Bank
• Institutional sales and trading division
– Maintains relationships with institutional
investors:
• Mutual funds
• Investment advisory firms
• Banks
• Pension funds
• Insurance companies
• Other money management firms
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