Queconomics – Large investment banks work as a financial institutions in high-class finance by helping other companies to access the capital market with the aim of expansion or different needs.
Investment banks are different from stockbrokers who carry out business activities to sell and purchase shares, bonds, and mutual funds. However, several companies carry out dual business activities by becoming brokers and investment banks.
Generally, investment banks are very much involved in providing additional financial services to their customers, such as trading in derivatives, bonds, foreign exchange, commodities, and stocks.
Large investment banks can act as intermediaries between investors (capital owners) and companies that need capital to grow their business. In general, investment banks are divided into two, namely for buying and selling.
The sell-side typically refers to selling a recently issued IPO (initial public offering) stock, placing a new bond issue, engaging in market-making services, or facilitating client transactions.
The buying side functions to regulate pension funds, hedge, and mutual funds to maximize profits on trading or investing in securities such as stocks or bonds.
Activities of Large Investment Banks
This kind of bank is best known to work as intermediaries in finance. They also help companies get debt financing by finding investors for corporate bonds.
As financial advisors, investment bank’s job is to act as trustworthy partners providing strategic and professional advice on various financial matters.
Its crucial element is to handle acquisitions and mergers of other companies. The investment bank’s main contribution to an asset or companies’ joining is to evaluate its value and help the parties reach a fair and suitable price.
Their research divisions review the companies and report on their prospects, usually buying, selling, or holding ratings.
While the research alone may not generate revenue, the knowledge they developed is used to help merchants and sales. Meanwhile, investment bankers get publicity for the clients.
Central large investment banks include JPMorgan Chase, Morgan Stanley, Goldman Sachs, Citigroup, Credit Suisse, Bank of America, and Deutsche Bank (Investopedia).
Specialized in Certain Industrial Sectors
Some investment banks specialize in specific industrial sectors. Many investment banks also have retail operations that cater to small customers and individuals.
The investment bank’s role starts with pre-guarantee counseling and also advising on the securities distributions.
They will also check the company’s accuracy of financial statements and publish the prospectus outlining to the investors the offering before the securities are available for them to purchase.
Investment banks are different from general banks. Those are the definition and functions of large investment banks that you need to know.