Do large companies go to the same bank as people in a neighborhood? When talking about banking, you can make a distinction between investment banking and commercial banking. Since the businesses they perform are different, it is convenient to know the differences between one and the other. You can also take help from any financial expert like Mark Attanasio and Donato Sferra who are working as Financial Services Executive in Toronto and has helped many business owners.
Investment banking, the Ally of the stock market:
- An investment bank is a financial institution that raises capital, trades in financial markets, manages IPOs, deals and manages mergers and acquisitions of large companies. They do not have a large network of branches all over the geography, but a few huge offices in the big financial centers.
- The benefits of commercial banking tend to be more stable than those of investment banking; they depend on the economy of the country in which they are based and if they lose money, it means that the situation in that country is complicated. In contrast, the benefits of investment banking are more variable, depending on the economic cycle and the evolution of financial markets.
- When investing in one type of bank or another, we must take into account that their businesses are different and that they are two types of companies , although it may be that commercial banks have their investment banks or vice versa, both in Spain and abroad. other markets abroad.
- To carry out their activity, the investment banks have different departments, starting with the front office (the people, with whom the client directly contacts, and managing the pre-sale, sale and after-sales services). The front office is supported in turn in the middle office, in charge of assessing the risk of the client and the environment, deciding on the possibilities of carrying out the operation and other issues of great importance. Finally, there is also a back office for the accounting of operations and the link with other areas of the bank.
Commercial Banking & Investment Banking are two businesses that are much more different than it may seem at first sight:
- The commercial banking is best known by the general public, which is performed through typical bank branches. Its main business consists in paying for the money deposited by its clients and charging for the credits it grants. The difference between what you charge and what you pay must be positive, since that is where you’re most basic benefit lies. This is usually added to other types of operations such as credit cards, transfers, guarantees, commissions for investment funds and pension plans, stock brokerage, etc.
- The investment bank dedicated to take companies public, design and implement takeover bids, mergers, sales of entire divisions between companies, bond issues, operations of high volume trading in financial markets, etc. It does not have a large network of branches, but a few large offices.
- The benefits of commercial banking are very stable. It is extremely difficult for commercial banks to go into losses. If in a country the commercial bank loses money in a generalized way the situation of that country is the total chaos.