Investment Bank - IB

Loading the player...

What is an 'Investment Bank - IB'

An investment bank (IB) is a financial intermediary that performs a variety of services. Investment banks specialize in large and complex financial transactions such as underwriting, acting as an intermediary between a securities issuer and the investing public, facilitating mergers and other corporate reorganizations, and acting as a broker and/or financial adviser for institutional clients. Major investment banks include Barclays, BofA Merrill Lynch, Warburgs, Goldman Sachs, Deutsche Bank, JP Morgan, Morgan Stanley, Salomon Brothers, UBS, Credit Suisse, Citibank and Lazard. Some investment banks specialize in particular industry sectors. Many investment banks also have retail operations that serve small, individual customers.

BREAKING DOWN 'Investment Bank - IB'

The advisory divisions of investment banks are paid a fee for their services, while the trading divisions experience profit or loss based on their market performance. Professionals who work for investment banks may have careers as financial advisers, traders or salespeople. An investment banker career can be very lucrative, but it typically comes with long hours and significant stress.

Because investment banks have external clients but also trade their own accounts, a conflict of interest can occur if the advisory and trading divisions don’t maintain their independence (called the “Chinese Wall”). Investment banks’ clients include corporations, pension funds, other financial institutions, governments and hedge funds. Size is an asset for investment banks. The more connections the bank has within the market, the more likely it is to profit by matching buyers and sellers, especially for unique transactions. The largest investment banks have clients around the globe.

Investment banks help corporations issue new shares of stock in an initial public offering or follow-on offering. They also help corporations obtain debt financing by finding investors for corporate bonds. The investment bank's role begins with pre-underwriting counseling and continues after the distribution of securities in the form of advice. The investment bank will also examine the company’s financial statements for accuracy and publish a prospectus that explains the offering to investors before the securities are made available for purchase.

RELATED TERMS
  1. Investment Banking

    A specific division of banking related to the creation of capital ...
  2. Financial Intermediary

    An entity that acts as the middleman between two parties in a ...
  3. Investment Banker

    Someone working at an institution raising capital for companies, ...
  4. Business Banking

    A company's financial dealings with an institution that provides ...
  5. Asset Management

    1. The management of a client's investments by a financial services ...
  6. Universal Banking

    A banking system in which banks provide a wide variety of financial ...
Related Articles
  1. Personal Wealth & Private Banking

    What is an Investment Bank?

    An investment bank is a financial intermediary that performs a variety of services.
  2. Investing Basics

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  3. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  4. Professionals

    Career Advice: Investment Banking Vs. Corporate Finance

    Read an in-depth review and comparison of a career in investment banking and a career in corporate finance, with advice about which one to choose.
  5. Professionals

    Private Banking Vs. Wealth Management: Not Quite the Same

    Discover the various ways in which private banking and wealth management services coincide, as well as the significant differences between them.
  6. Investing

    Which Are the World's 10 Largest Private Banks?

    Most of the largest private banking providers in the world are headquartered in Europe or the United States.
  7. Professionals

    Career Advice: Investment Banking Vs. Commercial Banking

    Read an in-depth review of the differences between a career in investment banking and a career in commercial banking, including how to decide between them.
  8. Economics

    The World’s Top 8 Investment Banks

    The easiest way to rank investment banks is through figures such as revenue numbers and employee headcount.
  9. Personal Finance

    The Banking System: Commercial Banking - Operations

    ByStephen D. Simpson, CFA Retail BankingRetail banking is the banking that almost every reader will find most familiar. Retail banking is the business of making consumer loans, mortgages and ...
  10. Professionals

    Financial Careers: Investment Banking Jobs

    By Brian Perry This chapter will examine investment banking jobs. These jobs generally involve working with corporations, governments and other large institutions and either helping them to ...
RELATED FAQS
  1. What are the main reasons an investor should consider an allocation to the banking ...

    Learn about investment opportunities in the commercial and investment banking industry. Find out why many investors choose ... Read Answer >>
  2. What is the difference between a correspondent bank and intermediary bank?

    Read about the differences between intermediary banks and correspondent banks, why their role is necessary, and where the ... Read Answer >>
  3. What are examples of popular companies in the banking sector?

    Learn about some of the popular companies for bank stocks in the banking industry, a prime component of the financial services ... Read Answer >>
  4. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  5. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  6. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center