Investment Banking

What is Investment Banking

Investment banking is a part of banking industry that deals with high finance and helps companies, government, 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 offering on behalf of a client.

For instance, it may assist a company raise capital to meet its budget required for expansion. In order to do so, the bank will seek private investors and offer them bonds, allowing the company raise required 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 issue 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 it. 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 major clients.

Making a career in investment banking

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

Most investment banks require at least a bachelor’s degree in finance or technical background like mathematics. Though investment banks are open to hiring graduates who show strong 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 the knowledge of capital market helps a lot. The more you know capital market, the more chances you have of getting into investment banking. Investment banking Analysts is the entry-level role. They document transactions, crunch numbers, and do market research for possible deals. As you further progress, client-facing responsibilities are added, where your true skills as an investment banker is tested. Overall, to become an investment banker, you need strong communication skills as well as strong knowledge of finance, capital market, research, and interpersonal skills.
Notoriously, investment bankers put in long hours. So you need to be ready with good time management skills.

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