What Is Investment Banking? What Are Its Benefits?

 Investment banking is about managing investments for a bank’s client towards whom these facilities are directed. The individuals who can avail of the investment banking services are HNIs, corporates, and the Government for planning and managing large projects, saving time, and money by identifying the risks associated with the project before moving forward.

They are highly specialised segments within the banking operations which help raise the capital and offer financial consultancy facilities concerning large, complicated financial transactions. Such facilities include thorough investigation, analysis, and informed recommendations about how much the company is worth. Based on the results, the trained investment bankers determine whether to create the deal. 

Investment bankers further structure an optimal deal to check if the client is considering acquisition or merger or sale. Most of the investment banking services involve prime brokerage and asset management, which is in conjunction with their investment research businesses.

The services are broken down to bulge bracket, middle market, and boutique market. The benefits of investment banking services are –

• The services involve investing the client’s funds in other companies for creating more value.
• It helps investors raise funds by underwriting or by acting as an agent in the issuance of securities for conducting the acquisition, merger, or sale.
• A thorough investigation gets conducted to make sure every compliance is met for the client’s deal, thereby minimising the risk of failure or loss of invested capital.

Now, investment banking services are aplenty. They are as follows –

• Mergers and acquisitions
• Corporate finance
• Equity research
• Sales & trading
• Asset management

What other services do investment banking offers?

The investment banking services may include the issuance of securities, underwriting, sales and trading of derivatives, equity securities, and fixed instruments, currencies, and commodities, facilities.

• Issuance of securities: It means raising capital for the client or business and creating documentation for the Securities and Exchange Commission. It is a prerequisite if the company plans to go public.
  
  
• Underwriting: It is practically the investment bank standing guarantee for the loan which is given to a business or corporate individual purely for business purpose. Investment banking also includes IPO underwriting, which assures that they have investigated the company’s credibility and is good to invest.
  
  
• Sales and Trading: This aspect of derivatives is a highly specialised skillset that offers accurate data, and its analysis comes handy for gauging the market stock price and its potential to grow or fall. These skills allow traders to either buy or sell stocks for their clients.
  
  
• FICC facilities: It involves handling fixed income instruments such as currencies and commodities, which, unlike the stocks carry lesser risk levels daily. Also, the percentage of growth is steadier.