When you think of a bank, you probably think of a place that receives deposits, maintains cheques and savings accounts and offers loans such as mortgages. That is true, but there is a completely different kind of bank that focuses on shares, bonds and investment products. These financial companies can be part of a larger company that also offers commercial banking services, but they play a unique role in the financial system that affects the whole economy.
The best investment banks are large financial institutions that play an important role in facilitating money flows in the economy. Initial public offers, for example, are an opportunity for investors to help a company raise money and at the same time acquire an interest in the company.
Full-service investment banks offer a wide range of business and investment services. Many of them also own or belong to a consumer bank. Most regular consumers do not need investment banking services, but for growing businesses and high net worth individuals, an investment bank can offer unique financial products and services to meet your needs.
Goldman Sachs is the most prestigious investment bank. The nearly 150-year-old institution is a public company with $917 billion in assets from 2017. Several senior government officials spent time at Goldman, including U.S. treasury secretaries, White House advisors, and senior central bank and government executives around the world. This makes it incredibly influential and a major power hub on
Although the bank has endured many controversies, including a role in the 2008 financial crisis, it is also involved in a wide range of corporate social responsibility initiatives.
Key services and divisions include financial advice and underwriting, proprietary investment and loan portfolios, institutional investment services, investment management and private equity. Outside investment banking, the company is active with Marcus, an online consumer bank.
J.P. Morgan Chase
J.P. Morgan Chase is one of the largest financial institutions in the world. This huge company consists mainly of two divisions. The Chase side of the business is a corporate and commercial bank. The J.P. Morgan brand is more focused on investments, including investment banking. The company has an astounding $2.5 trillion in assets.
For its website, J.P. Morgan puts a great emphasis on mergers and acquisitions, the profitable service of the investment banking industry. Other offerings include advisory services, capital raising, and risk management.
Founded in 1896, London’s UK investment bank made headlines for allegations of manipulation of London’s interbank rates and news of the large number of job losses worldwide in 2013. Supported by a strong workforce of 139,600 employees worldwide, the 2016 annual report shows a total income of £21,451 million, of which the investment banking segment contributed £10,533 million. In total, earnings per share amounted to £0.12. Together with investment banking, the company has a strong presence in retail and commercial banking and card processing activities.
Bank of America Corporation (BAC)
Bank of America Corporation is a US multinational bank and financial services provider offering a wide range of banking services, including investment banking, mortgage, trading, brokerage and card services. The Investment Banking division operates in 40 countries around the world with a total net income of USD 18.23 billion in fiscal year 2017 and contributed USD 6,953 million. Total earnings per share for 2017 amounted to USD 1.56.
Morgan Stanley (MS)
Founded in 1935 and headquartered in New York, USA, the company employs 55,794 people in various countries. In 2017, it recorded net revenues of $37.9 billion, of which the Investment Banking segment contributed $1.4 billion, compared to $1.3 billion in the prior year. EPS was $3.09. In addition to the usual services such as capital raising, M&A, corporate restructuring, the firm also offers diversified services such as prime brokerage, custodian, settlement and clearing, etc. The firm’s core business is the provision of financial services to its clients.
Deutsche Bank (DB)
Deutsche Bank, which is headquartered in Germany and listed on the New York Stock Exchange, generated net revenues of EUR 26.4 billion, 12% less than in the previous year. As one of the largest financial services providers in Europe, DB specializes in cross-border payments, international trade finance, cash management, card services, mortgages, insurance and investment banking. Deutsche has a global presence and operates in 71 countries.
Citi, whose roots go back to the origins of Citibank in 1812, employs 219,000 people with operations in 160 countries by 2016. Of the total revenues of $71.4 billion reported for 2017, Investment Banking contributions increased 20% to $5.17 billion from the prior year. EPS was -$2.76. The Bank has a strong presence in investment banking, investment management, private banking and card processing.
Credit Suisse (DHY)
With net income of CHF 20.9 billion and EPS of -0.41 in 2017 (report), Credit Suisse Group, founded in 1856 and headquartered in Zurich Switzerland, today employs over 48,000 members worldwide in over 50 countries. In addition to its ongoing investment banking business, it is also active in the areas of tax and advisory services, structural loans, real estate leasing and investment research.
PJT Partners is a New York-based company focused on three key areas: Restructuring and special situations, strategic consulting and Park Hill. Park Hill offers fundraising worldwide.
PJT was founded in 2013 by the well-known consultant Paul J. Taubman.
Some of its famous transactions include the sale of Yahoo to Verizon and the sale of Dreamworks to Comcast as well as the sale of Starz to Lionsgate.
Qatalyst is one of the best-known investment boutiques in the technology sector. The company, led by Frank Quattrone, has advised on major transactions, including the sale of National Semiconductor to HP for more than $6 billion.
In the first quarter of 2011, Qatalyst was even among the top 3 (including Goldman Sachs and Morgan Stanley) in terms of total M&A transaction size.
Houlihan Lokey enjoys a high reputation in restructuring and bankruptcy proceedings. In fact, they worked on the bankruptcy proceedings of Lehman Brothers, Enron and WorldCom.
Houlihan is also active in capital markets, corporate finance, financial advisory and illiquid financial investments.
Federal Reserve interest rate hikes are negative for companies that need to borrow to grow, but can be positive for lenders.
Banks are benefiting from rising credit card and commercial loan interest rates, while interest expense growth is significantly lower. The best investment banks to serve customers and gain access to capital markets may also be those that make the most sense now and in the coming higher interest rate environment.