What is Investment Banking - Investment Definition - Investment Banker Salary
What is investment banking - (IB)? Investment definition and Plans
An Investment bank 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 or financial adviser for institutional clients.
An investment bank is a finance company that specialists in helping companies raise funds - whether it is in the form of equity capital or debt (Loans and Bonds) from other investors.
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A Commercial Bank (also called as Retail Bank) works in the following way. They save money from depositors and give interest on it. they deploy the saved money in loans like home loan, car loan or personal loan and earn interest on it. The interest loan on deposit. In this way the earn money. It is generally a low risk business.
An INVESTMENT BANK, unlike Commercial Bank, perform the following functions -
Institutional Investors can be Mutual Fund, Insurance company or any company having a large pool of money. Investment Bank (IB) have a research department which does the company and stock research, create valuation model of companies and gives buy/sell recommendations to institutional investors. IB also helps them in executing the trade for which it takes a commission of 1-2%. IBs have a Sales & Trading department which buys stocks on behalf of investors. they keep a close watch on the market to minimize the execution charge.
An INVESTMENT BANK, unlike Commercial Bank, perform the following functions -
Help Institutional Investors Invest their Money
Institutional Investors can be Mutual Fund, Insurance company or any company having a large pool of money. Investment Bank (IB) have a research department which does the company and stock research, create valuation model of companies and gives buy/sell recommendations to institutional investors. IB also helps them in executing the trade for which it takes a commission of 1-2%. IBs have a Sales & Trading department which buys stocks on behalf of investors. they keep a close watch on the market to minimize the execution charge.
Merging & Acquisition
It is the heart and soul of IB. Suppose there are some people who want to sell their company so IB does the task of finding investors for that company. They buy the company from the sellers and sell it at a profit to the buyers. They analyze the financial information, historical & projected financial result of the target company. The generally have a pitch book which is a presentation, which contains the market size, competitiveness information of the company. The provide information to clients using this pitch book.
Help in Raising Capital
A company who wants to raise capital can go to Commercial Bank but due to being risky, the bank may refuse it. So another way to raise money is from the market buy launching IPO/IFO. If a company itself tries to launch an IPO/IFO their would be many things to consider like legality, their valuations & different processes involved, So, they find an IB to do it. IBs have expertise in valuation and deciding the share prices. They have a strong network of investors which helps them in raising capital for companies for which they charge a percentage of the amount raised.
Investment Banker Salary
- Money isn't as much as you'd expect and often huge portion are differed for years.
- Divorce is extremely common as you end up rarely seeing your family
- You'll have to cancel vacations or family events
- Bonuses are entirely discretionary and decided by your boss.
Investment Banks operate separately or they can also be in Banks in investment wings.
Their Salary range from 35000 Rs minimum to 1.5 Lac per month.
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