How Investment Banking Operate

Before delving into investment banking, let’s get acquainted with its definition. Therefore, investment banking is a banking division or financial institution that serves specific clients such as corporations, institutions, and even governments. Jobs offers them a range of services, including mergers and acquisitions (M&A), consulting, sales and trading, underwriting, inventory research and asset management.

At this point, the investment banks have a responsibility to act as an intermediary. She is the intermediary between the company and the investor. Companies are the ones that receive the capital for their activities (government, corporations and institutions). Investors, on the other hand, are people who invest their money in banks.

 

Now that we know the definition and the basic concepts, let’s move on to what the investment bank actually does. If you are also curious about this, let’s take a look at the explanation below.

 

What do Investment Banks do?

Well, before knowing what investment banks do or what they are responsible for, you must first know that investment banking and the investment banking department (IBD) of a particular bank are different. They differ in service.

 

Investment banks have many services, which is why they are sometimes referred to as full-service investment banks. They offer services such as sales and trading, asset management, inventory research, mergers and acquisitions, underwriting, retail banking and commercial banking. It really is such a comprehensive service.

On the other hand, IBDs only offer two services. These are mergers and acquisitions (M&A) advisory and underwriting services. Therefore, investment banks and IBDs differ in terms of services.

 

Kind of Services

Let’s take a look at the explanation below to understand these services in more detail.

 

1. Underwriting

The definition of underwriting is the process of taking financial risks by individuals or institutions for a fee. These financial risks typically include investments, loans and insurance.

 

2. Mergers and Acquisitions (M&A)

This service only provides advisory functions to corporate buyers and sellers and manages the M&A process from start to finish.

 

3. Sales and Trade

The third service is sales and trade. This service is an agent for clients to match sellers and buyers of securities in the secondary market.

 

4. Equity Research

As the name suggests, this type of service aims to help investors make investment decisions. In addition, it helps investors support the trading of their stocks. This service really helps investors make the best decisions about their investments and stocks.

 

5. Asset Management

This service is responsible for managing investments for a wide range of investors. It includes investors such as individuals, institutions and different investment styles.

The most common service, which is acceptance, also has a number of types that offer different services to customers. Let’s look at the explanation below to make it easier to understand.

 

Underwriting Services

As explained above, underwriting is a process of financial risk taking by paid individuals or institutions. These financial risks typically include investments, loans and insurance. A business, of course, needs money to grow, so the bank helps businesses raise capital by promoting the businesses or selling them to investors. The insurance service has three types. Which are they? These are the types of insurance.

 

Firm Commitment : In this type, the insurer commits to purchase the entire issue and takes full financial responsibility for any unsold shares.

 

Best Effort – This kind of service sells as many problems as possible for an agreed price. The bank may also return unsold shares to investors without financial liability.

 

All or nothing – Simply put, this guy offers a service to sell the whole issue, but if not all numbers are sold at the agreed price, the deal is canceled and the company that owns the issue gets nothing.

 

Clients

Investment banking has a number of clients who need its services. These clients are companies, governments and institutions from all over the world.

 

Governments – The Government is one of the Investment Bank’s clients. Governments work with investment banks to trade stocks, raise money or capital, and buy or sell Crown companies.

Corporations – If the bank has corporate clients, the bank must help them go public (IPO), grow their business, sell corporate products, make acquisitions and, of course, raise additional capital. In addition, the bank is also responsible for research and advice on corporate finance in general. Companies that work with investment banks include public and private banks.

 

Settings – The last client is settings. The bank assists institutional investors with equity trading and research.

 

Investment Banking Skills

Of course, working in such a bank requires a lot of skills, especially in the financial sector. Internet banking in particular requires a lot of estimates and financial models, so this is a very important skill if you want to work in the Internet banking industry.

 

Internet banking also requires many skills, so which ones? These are company valuations, financial models, transaction documents, presentation books and presentations. Relationship management, negotiation and sales and business development. Therefore, in Internet banking, it is necessary to have a good command of Excel, PowerPoint, financial knowledge and various methods of customer service and transactions.

 

Career In Investment Banking

If you are looking for career information in this field, here are six of the most common investment banking jobs. Six positions: Analyst, Vice President, Assistant, Director, Chief or Vice President, and General Manager. Of course, starting this career is quite difficult, so you need to prepare yourself.

 

Major Investment Banks

There are several large investment banks in the world known as swashbuckler banks. So what are they? These are Citi, UBS, Morgan Stanley, Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, Barclays Capital, J.P. Morgan and Deutsche Bank. These are the largest investment banks in the world.