Investment banking is a relatively new concept in the finance market. As opposed to commercial banks which receive deposits and give out loans investment banks are used by both the public and private companies to raise funds in the extensive capital market. It is important to note that this is the core goal of investment banking. However, as the banking sector evolved and diversified its activities investment banks started offering new services which include: providing professional advices on acquisition and merging of firms, underwriting. Offered stock brokerage services, advising corporate clients especially on private placements and also provided financial research to investors. In addition, investment banking also invested in foreign exchange currency and private banking.
Investment banker’s role is to assist his/her client to raise funds in the capital market. There are two main ways that a company may raise funds in capital market; sell companies equities in an initial Public Offering (IPO) or through the use of debentures. Investment bankers are supposed to offer advice to their client on the most cost effective way to raise funds. If the prudent method is through floating companies equities in the stock market, investment banker should act as an underwriter to ensure 100% subscription.
Investment bankers can also offer candid advice on private placement. This is mostly with private investors whose firms are not public. They are not required to provide a prospectus detailing their financial information. Some of private placements offered include; divestitures, venture capital investments, private equity investments, private debts placement and also merchant banking.
They also ensure there is full compliance with the law. In this regard, they prepare comprehensive financial statements, have them audited and file the necessary returns form to tax authority for taxation purposes. They also ensure there are adequate financial disclosures as stipulated in capital markets regulations. This, among other careers in the financial markets, requires up-to-date knowledge and skill level to better assist clients.
Investment bankers are also expected to do a trade analysis for their client to identify the best investment opportunity for their clients. As such, they are required to do both technical and fundamental analysis. Technical analysis involves the use of charts to determine the trend in the market while fundamental analysis is more detailed as it seeks to examine a number of factors in relation to an investment option. This includes the economic and financial implications thus there is need to engage professional investment bankers who will properly analyze all investments and advise on the one with profitable financial projections.
Investment banking has been endeared at by many investors as it allows them to raise funds very fast. However, its success is anchored on the expertise of the bankers.
A few good websites to check out if interested working in the financial markets include: