Investment Banking

What is Investment Banking

Investment banking is a part of the banking industry that deals with high finance and helps companies, governments, and high-net-worth individuals raise capital. Investment banks do so by underwriting debts and equity securities, assisting in mergers and acquisitions, and offering initial public offerings on behalf of a client.

For instance, it may assist a company in raising capital to meet its budget required for expansion. To do so, the bank will seek private investors and offer them bonds, allowing the company to raise needed capital. Similarly, it can raise capital by facilitating IPOs.

How do Investment banks work?

Investment banks render several services; major ones include –
  1. Raise capital by investing in securities or issuing new stocks during an IPO.
  2. Raise debt capital for companies by seeking investors
  3. Facilitate mergers and acquisitions and corporate restructuring
  4. Proprietary trading to make own money

Morgan Stanley, Goldman Sachs, JP Morgan Chase, Bank of America, Merrill Lynch, Wells Fargo Securities, etc. are some popular investment banks.

How do investment banks make money?

Investment banks offer the above services and get paid for them. Services mostly revolve around advisory, financing, trading, and research. Most investment banks operate this way and drive their revenue. Government, conglomerates, investment funds, etc., are significant clients.

Making a career in investment banking

For finance graduates, investment banking is one of the best rewarding career options.
Apart from paying a handsome salary, it also offers unparalleled perks. However, making a career in investment banking is challenging. When hiring investment bankers, banks are highly stringent, for instance, for the Goldman Sachs summer internship program. The chances of making it through is 2 percent. That’s how competitive it is.

Most investment banks require at least a bachelor’s degree in finance or a technical background like mathematics. Investment banks are open to hiring graduates with solid analytical, logical, and numeracy skills. Looking at the prospects of a career in investment banking, many graduates are turning to investment banking certifications to enhance their skills.

Further, staying updated on capital market knowledge helps a lot. The more you know the capital market, the more chances you have of getting into investment banking. Investment banking Analysts are the entry-level role. They document transactions, crunch numbers, and do market research for possible deals. As you progress, client-facing responsibilities are added, where your actual skills as an investment banker are tested. To become an investment banker, you need strong communication skills and solid knowledge of finance, capital markets, research, and interpersonal skills.
Notoriously, investment bankers put in long hours. So you need to be ready with good time management skills.

So, to start an investment banking career, start equipping yourself with the skills. The stronger your skills, the closer you are to becoming a certified investment banker.