- Posted July 6, 2014 by
What is Investment Bank and World's Top Investment Banks
What does an Investment bank actually do? Several things, actually. Below we break down each of the major functions of the investment bank, and provide a brief review of the changes that have shaped the investment banking industry through the aftermath of the 2008 financial crisis. For better understanding i will show you full list of what they are doing:
1) Raising Capital & Security Underwriting - Banks are middlemen between a company that wants to issue new securities and the buying public. So when a company wants to issue, say, new bonds to get funds to retire an older bond or to pay for an acquisition or new project, the company hires an investment bank. The investment bank then determines the value and riskiness of the business in order to price, underwrite, and then sell the new bonds. Banks also underwrite other securities (like stocks) through an initial public offering (IPO) or any subsequent secondary (vs. initial) public offering. So when a company wants to issue, say, new bonds to get funds to retire an older bond or to pay for an acquisition or new project, the company hires an investment bank. The investment bank then determines the value and riskiness of the business in order to price, underwrite, and then sell the new bonds. Banks also underwrite other securities (like stocks) through an initial public offering (IPO) or any subsequent secondary (vs. initial) public offering.
2) M&A Advisory and Other Corporate Reorganizations -
You’ve probably heard of the term “Mergers and acquisitions” or M&A. It’s an important source of fee income for investment banks as the fee margin structure is substantially higher than most underwriting fees). This is why M&A bankers are some of the highest paid and highest profile bankers in the industry. The scope of the M&A advisory services offered by investment banks usually relates to various aspects of the acquisition and sale of companies and assets such as business valuation, negotiation, pricing and structuring of transactions, as well as procedure and implementation. One of the most common analyses performed is the accretion/dilution analysis, while an understanding of M&A accounting, for which the rules have changed significantly over the last decade is critical. Investment banks also provide “fairness opinions” – documents attesting to the fairness of a transaction.
3) Sales & Trading and Equity Research - Institutional investors such as pension funds, mutual funds, university endowments, as well as hedge funds use investment banks in order to trade securities.
4) Retail and Commercial Banking - s such, many investment banks now offer retail brokerage (retail meaning the customers are individual investors rather than institutional investors) as well as commercial lending. For example, today you can open a checking account with JP Morgan via its Chase brand, while JP Morgan offers investment banking services and asset management.
This is top things doing by Investment Banks worldwide. Today there are 10 000 investment banks worldwide, but most of them are only companies and nothing more. In last years to trust investment bank is too hard if you don't know their business environment, past and future plans. I analyzed the following investment banks that are Top from my view and they are:
1) J.P. Morgan Chase & Co
2) Bank of America Merrill Lynch
3) Morgan Stanley
4) Deutsche Bank
5) Barclays Capital
6) RBC Capital Markets
7) Wells Fargo
10) Credit Suisse
Today Goldman Sachs is the largest investment bank by volume of M&A deals.
CEO of I.B. Capital Management