Explaining the term ‘investment banking’
Investment banking can be explained as a form of banking which provides funds to meet the capital requirements of companies. Moreover, investment banking supports as it carries out IPOs, bond offerings, and private placement in addition to acting as a broker and helping out in accomplishment of mergers and possessions. Putting it other way, investment banking is a field of banking that helps businesses in acquiring funds. Also, besides acquiring fresh working capital, investment banking also proffers advice for wide ranging transactions a business might engage in.
Basic activities of investment banking
The core activities of investment banking include:
- Investment banking is the conventional aspect of investment banks which help customers in raising funds in the capital market in addition to guiding them about mergers and possessions. Moreover, investment banking can also include subscribing investors to a security issuance, coordinating with bidders, and negotiating with a merger target.
- Sales and trading: Depending on the requirements of the bank and its clients, the primary function of an investment bank is sale and purchase of products. in market making, the traders purchase and sell securities as well as financial products with the aim of earning an extra amount of money on each trade.
- Research: this is the segment of investment banks which assesses companies and prepares reports about their prospects, generally with “buy” or “sell” ratings.
Functions of investment banking
Investment banking carries out multilateral functions. Some of the most vital functions of investment banking include:
- Investment banking is helpful to the public and private corporations in issuance of securities in the prime market. Moreover, they also act as mediators in trading for clients.
- Investment banking gives financial advice to investors and is helpful by guiding in purchasing and trading securities and managing financial assets.
- Investment banking is different from commercial banking for investment banks do not accept deposits nor do they provide retail loans.
- Small companies which provide investment banking services are referred as boutiques. They primarily specialize in bond trading, proffering technical analysis or program trading and guiding for mergers and possessions.