Investment Banking by Ned Krastev
Commercial vs. Investment Banks
The two types of banking institutions
| Commercial Banking | VS | Investment Banking |
| Commercial banking is typically known as the practice of accepting deposits and providing loans. The core activity of commercial banks is to gather funds from individuals and businesses and then extend credit to borrowers. |
Description | Investment banks engage in a range of sophisticated activities, including initial public offerings (IPOs), merger and acquisition (M&A) advice, corporate restructuring, trading, and asset management. |
| Commercial banking services include accepting deposits, providing loans, issuing bank checks, managing cash and Treasury management. |
Services | Capital Markets (IPOs, SEOs, Private Placements), M&A, Restructurings, Trading and Brokerage, Asset Management |
| Retail Clients, Small Corporate Clients, Medium and Large Corporate Clients |
Clients | HNWI, Medium and Large Corporations, Institutional Investors, Hedge Funds, Private Equity Funds |
Universal vs. Pure Investment Banks
One-stop-shop or a specialized shop?
| Universal Banks | VS | Pure Investment Banks |
| Universal banks offer a combination of commercial and investment banking services. |
Description | A pure investment bank only provides investment banking services and does not offer commercial banking product such as deposittaking and lending. |
| Universal banks have the ability to offer a wide range of products to their clients, providing a onestop-shop for all banking needs. |
Competitive Advantage |
Specialization, focus, and historical relationships; Superb services offered to clients |
| J.P. Morgan Chase, HSBC, Credit Suisse, Societe Generale, BNP Paribas, Barclays, Bank of America Merrill Lynch |
Examples | Goldman Sachs, Morgan Stanley, Lazar |
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