Investment Banking: An Overview

With an impressive array of structures such as high-rise buildings and powerful decisions that shape global economy, investment banking has come to symbolize dominance and importance in the financial arena. And what exactly is behind it all? Now, let us explore the investment banking world. Investment Banking: An Overview.

Introduction to Investment Banking

What is Investment Banking?

Essentially, investment banking means helping companies, governments and others raise funds. They play important role in big and complex financial dealings, including underwriting, providing the linkage between companies that issue securities with investment public, involvement in deals of mergers and acquisitions and acting as brokers for Institutional Clients.

A Brief History

It may be noted that one aspect of the contemporary form of investment banking had its origins in the European financial capitals, but it was on Wall Street where It is a domain that has continued to evolve through wars, depressions, and financial meltdowns; this showing how the global economies have changed over time.

Core Functions of Investment Banks

Mergers & Acquisitions (M&A)

They play a role in guiding companies during buying and selling processes, in strategic planning and even in negotiations.

Underwriting

They help to connect companies that want to introduce new securities into the market and the buyers by ensuring an easier process of issuance and right pricing for the same.

Sales & Trading

Buyers and sellers for the trading of securities are joined by them in order to create a marketplace for the trading of securities.

Research

Such is an often-ignored function that comprises market analysis for various sectors involving companies or strategies, which gives out very crucial feedback to internal teams as well as clients.

Asset Management

Alternatively, these banks can also engage in an investment portfolio management of assets allocated by institutional entities or wealthy individual entreprs.

Careers in Investment Banking

Analysts

They are usually young blooded army of recent university leavers who delve headlong in Excel spreadsheets and financial modelings.

Associates

They have a direct reporting relationship to the VP’s and supervise analysts in a level up.

Vice Presidents (VPs)

They handle relationship with clients as well as new businesses.

Directors/Executive Directors

Responsibility for keeping existing clients satisfied and identifying new venture possibilities.

Managing Directors

Here is where strategies are implemented to increase productivity while others provide support services.

Risks and Rewards

The Allure

But a big attraction of being an investment banker includes the tremendous financial payoffs, prestige, and networking opportunities which are enormous.

The Downside

This may result in a poorly balanced work-life scenario when people devote long hours and exert immense pressure resulting of the work-first attitude.

Investment Banking vs. Commercial Banking

Although both are banking sectrs, the provide for different needs. In return, the commercial banks collect saving, which are later used as loans by the population. On the other hand, investment banks engage in capital creation through counseling.

Differences at a Glance:

1. Purpose: Commercial – Deposit and Loan management; Investment – Capital Creation Advisory.
2. Clients: Commercial – General Public; Investment – Corporations, Governments, High Net Worth Individuals.
3. Products: Commercial – Mortgage Loans/Underwriting, Personal Loans. Investments – Mergers and Acquisitions.

Conclusion

At the core of that is investment banking, which drives the world’s financial engine. It has opened the doors of opportunities for growths of corporations and governments construction of economic infrastructure and financial innovations, just to mention a few areas. Like any big authority, power bears a great responsibility to both the shareholders, and society in general. It’s important for aspiring finance professionals, investors, and everyday eavesdroppers to grasp this stuff, as globalization puts everything on the grid.

Disclaimer: In no event is this article a guide for making profits or purchasing decisions. Speak with a finance expert when you make an investment decision.