Introduction to Investment Banks — Part 1

It is a prevalent dream for most, if not all, business students to work in an investment bank upon graduation, either for their own interest or in pursuit of a high salary. But do you really know what an investment bank is?

Below will summarize the information about investment banks in a bid to familiarize you with this industry.

💡Investment banking appears as either a division of a bank, or a financial institution. Mainly offering underwriting and mergers and acquisitions (M&A) advisory services, investment banks serve as intermediaries between investors (who make monetary investment) and corporations (who need capital for businesses).

💡Though bearing a resemblance to each other, an investment bank and the investment banking division are different in some way. Services provided by full-service investment banks range from underwriting, to M&A, to sales and trading, to equity research, to asset management, to commercial banking, and to retail banking. The investment banking division merely provides underwriting and M&A advisory services.

The services provided full-service banks include:

Underwriting: Capital raising and underwriting groups act as middlemen between investors and companies that hope to raise money or go public through Initial Public Offerings (IPO), serving the primary market or “new capital”.

M&A: Advise both buyers and sellers of businesses, managing the IPO process.

Sales and Trading: Serve the secondary market to pair up buyers and sellers of securities, and act as agents for clients and conduct trading for the firm’s own capital. (We have an externship program to train students specifically for this role, partnered with a top tier Asian hedge fund, you can check it out here.)

Equity Research: Provide research that facilitates the decision making of investors, as well as support to trading of stocks.

Asset Management: Manage assets for a variety of investors, such as institutions and individuals, with corresponding investment styles.

💡Investment bankers serve countless clients located all around the globe, including:

1⃣Governments: Help raise money, trade securities and buy or sell crown companies.

2⃣Corporations: Help both public and private companies to go public via IPO, raise additional capital, augment their businesses, conduct acquisitions, make sales of business units, and offer research and general corporate finance advice.

3⃣Institutions: Help institutional investors who manage other people’s money trade securities and offer research, and help private equity firms to acquire portfolio companies and exit those positions by either selling to strategic buyers or through an IPO.

So there you go! This is the end of part 1 of the introduction to Investment Banks. We hope you have a clearer picture on IB now ;)

If you want to break into investment banks or finance roles but don’t know how to do it or do not have relevant experience, check out our Virtual Hedge Fund Analyst Program where you gain both hands-on work experience and training by our partner LBN Advisers, a long/short equity hedge fund. Past students have ended up at Morgan Stanley, Citi and Point72.

For any questions, please feel free to email us at info@careerhackers.io. Don’t forget to smash like to support us if you like this article ;)