Investment banking companies offer a range of services that help clients raise capital through either debt financing or equity financing. They also research opportunities to buy, sell and hold securities.
The work of these banks is important for the financial markets. They support the trading of publicly listed securities such as stocks, bonds, commodities and currencies.
Investment banking companies offer underwriting services to corporations, governments, and other organizations that need to raise money through equity or debt offerings. Typically, this involves helping them sell stocks or bonds to investors through an initial public offering (IPO) or follow-up listings.
Underwriting entails a series of research and risk assessments that determine the degree of risk an applicant brings to a financial agreement. This helps to set fair borrowing rates for loans, establish appropriate premiums, and create a market for securities by accurately pricing investment risk.
In some cases, an underwriting firm will agree to a commitment with the client to put its best efforts to sell the agreed-upon issue. In other cases, the firm may enter into an all-or-none commitment where it will not receive compensation unless the entire issue is sold at the agreed-upon price.
Research is a key service offered by investment banking companies. It allows them to provide their clients with information about investment opportunities and the markets in which they operate, and it also helps them to understand their clients’ businesses better.
There are a number of different types of research that an investment bank may carry out, depending on their area of expertise. These include financial modeling, comparative analysis and preparing presentations and pitchbooks.
Several investment banks also have merchant banking divisions that make investments in corporate private equity, real estate and infrastructure. These divisions usually market their capabilities and track record to potential investors such as pension funds, sovereign funds or high net worth individuals.
Some of the services that an investment bank provides may be subject to a specific policy or legal restriction, such as restrictions on the publication of research and inclusion of opinions in research relating to the issuer or its related parties at certain times when the Firm is involved in an investment banking transaction (see “Research Conflict Management Policy”). This policy will not prohibit a person from expressing views which are material to the Company’s business interests, if this is in the interest of the Firm, and the person affirms that the views expressed in any research report accurately reflect his or her personal views.
When most people think about investment banking companies, they envision a large, global network of traders and salespeople matching buyers and sellers. While this is part of the business, there is a lot more to the industry than that.
There are different types of clients who require different services from their investment banks. Some need a bank to invest their funds, while others want the bank to provide research and make investment decisions for them.
Traders and salespeople aim to create markets for buyers and sellers and advise clients on financial positions. Traders focus on stocks (also known as shares), fixed income securities, derivatives, currencies, and commodities, and sell and buy them to improve their portfolio positioning.
The largest investment banking firms have a significant advantage in trading, because they can leverage their global networks to match buyers and sellers. Moreover, they can invest in better electronic platforms and tools, which help them process and price more trades per full-time equivalent.
Investment banking companies offer client services such as equity research, asset management and debt issuance. In equity research, bankers analyze stock market trends and produce reports on potential investment opportunities for clients.
In asset management, they manage investment funds for private investors. This involves investing in stocks, bonds and other financial assets, such as real estate, to meet specific goals.
When advising corporations and governments on mergers and acquisitions, investment bankers provide advice on the best way to make the deal. They also perform what’s called due diligence, which is a thorough investigation into the target company’s financials.
Increasingly, clients expect a customized approach to client service. This means that investment banks must offer a range of solutions that can be tailored to their individual needs and to each capital raising or M&A transaction.