What you need to know about an Investment Bank

What you need to know about an Investment Bank

An investment bank is not like the retail and commercial banks we are used to, they are most times a private company that offers a variety of financial services conventional banks do not render.

They undertake more complex financial transaction than a normal commercial bank. Just like a commercial bank has individuals, organization, pensioners, savers, etc. as clients, investment banks have their clients and they include corporations, pension funds, other financial institutions, governments and hedge funds.

The type of activities they undertake include; underwritings, They also act as intermediary between a securities issuer and the investing publics, they can also serve as an intermediary in any merger and acquisition and other corporate reorganizations, they also act as a broker or financial adviser for institutional clients, and FICC services (Fixed income Instruments, Currencies, and Commodities).

The advisory divisions of investment banks are paid a fee for their services, while the trading divisions experience profit or loss based on their market performance. Professionals who work for investment banks may have careers as financial advisers, traders or salespeople.

Investment banks help corporations issue new shares of stock in an initial public offering or follow-on offering. They also help corporations obtain debt financing by finding investors for corporate bonds.

However, some of these investment banks have external clients but also trade their own accounts, and as such, there tends to b a conflict of interest if the advisory and trading divisions don’t maintain their independence.