Investment Banking is related to the capital market. Investment Banks look after the unterwriting part when individuals, companies or even the Government wants to raise capital from the market. They also assist their client in issuing the securities. So, in short we can say that the primary role of an investment bank is underwriting of stocks and issuance of securities.
Scope of Investment Banking
They also faciliate implementing of large corporate policies like mergers, acquisitions, etc. They earn commission based income by way of acting as intermediary between the large corporates and the general public who invests in such stocks. They are financial advisors to large corporates and the Government. Investment Banks may also focus in a particular segment of the clientele, where they specialise in advisory services related to a particular sector only. Some investment Banks may also choose to expand their area of operation and serve retail customers also.
The advisory wing of investment banks work in lieu of a fee but the trading wing are exposed to the market as their income is based on the profit and loss they make out of their transactions.
Typically, an investment bank has 3 wings :
- Advisory services
- Trading services
- Sales wing
I understand that investment banking helps the investors and individuals as well. At the same time, I really wish this blog has been a little elaborated with more working examples and tabulated data. Each and every point quoted has been clearly defined if so it is really useful to save for reference.