What are Investment Banks?

Investment banks are banks which assist companies and corporations in raising corporate funds and improving their financial status. The clients of investment banks include both privately owned and publicly owned institutions.

Investment Banks vs Commercial Banks

Investment banks and commercial banks are two distinct types of financial institutions which share the same objective of assisting their clients with their financial needs. A commercial bank, which is the more popular between the two, is the type of financial subsidiary that performs banking services such as account deposits, cash withdrawals, fund transfers, mortgage loans, and check encashments. The commercial bank got its name just to distinguish it from the other type of bank, which are investment banks. Investment banks, on the other hand, is the type of bank that offers services such as risk management, assets handling, fund raising, and financial advice to companies and corporations.

Another difference in the two types of banks can be determined in terms of their clientele. While commercial banks are more concerned with providing the financial assistance needed by individual customers, investment banks are more focused on giving financial advice and generating additional funds for companies.

Importance of Investment Banks

Investment banks are a great help in the maintenance of a company's financial condition. By thoroughly researching and carefully analyzing the different factors that may affect an institution's financial state, investment banks are able to come up with a number of helpful strategies. The strategies are conceptualized with the objective of reducing the unfavorable risks and improving the finances of the company. After the conceptualization of the strategies, investment banks will then present the suggested strategies to their client companies and provide a clear picture of the probable effects that may be caused by such financial moves.

Investment banks, in a way, educate their clients about the different factors that circulate in the world of finance. By comprehensively explaining the importance of thorough analysis and careful decision-making in money-related matters, investment banks are able to assist its clients by leading them to the right path towards financial success. Without the advise from an investment bank, a company becomes vulnerable to some financial dilemma or worse, financial failures.

Aside from giving sound advice for the financial betterment of some companies, investment banks also assist their clients by helping them raise the much-needed company funds. In order to raise the funds, investment banks buy the entire shares of stock from a particular company and divide them into separate fractions that will be sold to the public. Other processes involved in the selling of the stocks, such as the setting of the price and the searching for potential investors, are also initiated and managed by investment banks. The transferring of financial matters into the hands of investment experts is highly recommended especially for those companies who are not that satisfied with the status of their finances.