Investment banking is concerned with raising capital for businesses, and consulting prospective clients regarding funding and merger options. Capital always has to do with money. Businesses require money to develop their industry and investment banks raise the money by selling securities to investors which is in the form of bonds, stocks or loans.
Usually, an investment bank covers the following disciplines:
Corporate finance:
Corporate finance is an important aspect of investment banking. Corporate finance is responsible for activities such as mergers and acquisitions, consultation as well as underwriting.
On the mergers and acquisitions (M&A) advising side of corporate finance, the investment bank also helps in discussing and forming a merger between two firms. They assist in deciding the acquired price, finalizing the deal and ensuring a smooth transaction. The underwriting function deals with raising capital for a business.
Sales:
Sales is an important aspect of an investment bank. A salesperson may be the institutional salesperson, retail broker or a private client service representative. Brokers are responsible for building up relationships with individual investors. While institutional salespersons build up good business relationships with big institutional investors. They handle big groups of possessions including mutual funds and pension funds. Private client service representatives serve as private wealth managers.
Trading:
Traders are also a key part of an investment bank. Traders are responsible for buying and selling of bonds, stocks or other securities. Traders engage in various transactions and offer liquidity. Usually, traders earn money by buying various securities and selling them at a higher rate. This difference in price is also known as "bid-ask spread".
Research:
In the research department of investment banking, research analysts assess securities including stocks and bonds. On the basis of their assessment, they recommend whether to buy securities or not. Stock analysts also called as equity analysts concentrate on the stocks of 20 firms at a given time. Some of the research analysts tend to focus on a particular segment of bonds.