Investment banks are financial institutions that provide a wide range of services to both corporations and governments. In addition to acting as advisers, investment banks also provide capital to help companies grow.
In this article, we explain the basics of investment banking, so you can better understand this global industry.
What is Canadian Investment Banking?
An investment bank in Canada provides a variety of financial services to large businesses and government bodies. These clients typically have complex banking needs, so they require a knowledgeable and experienced institution for guidance.
In Canada, BMO, CIBC, Desjardins, National Bank, RBC, Scotiabank, TD Canada Trust, and others, offer investment banking services. Additionally, boutique banks, such as Blair Franklin Capital Partners, Capital Canada Limited, and Evans & Evans, offer the same services.
What Services do Investment Banks Offer?
Investment banks are active in the underwriting of equities and corporate bonds, and they may also provide advice on mergers and acquisitions (M&A), restructurings, and other corporate finance transactions.
They may advise on the issuance of stocks or bonds by governments as well as on international debt issues. Investment banks can also be involved in raising funds through private placements and initial public offerings (IPOs).
The following is a list of some of the major services investment banks provide:
Underwriting
Underwriting involves purchasing securities from issuers at a discount to resell them at their market price after their issuance. This provides the issuer with capital at a lower cost than if it borrowed directly from investors or raised capital via an initial public offering (IPO). Underwriters typically pay for this service by taking commissions from investors who buy the securities or by earning fees from issuers for helping them raise capital through an IPO.
Mergers & Acquisitions
Mergers & acquisitions (M&A) refers to the process of combining two companies into one. When a business is acquired by another, the former owners are paid with cash, stock, or both. The purpose of an M&A transaction can be to create a larger, more profitable company, consolidate operations and reduce costs, or simply to gain access to new markets.
M&A is one of the most common ways for companies to grow their revenue and increase market share. It’s also one of the fastest-growing sectors of the financial services industry.
Equity Research
Equity research focuses on helping investors make informed decisions about stocks. Equity research analysts produce reports with their analysis of companies and the industry they operate in, as well as their recommendations on whether or not an investor should buy, sell or hold a particular stock based on its potential return and risk factors.
Debt Management
Debt management is the practice of managing the amount and terms of the debt owed by a company or government. An investment bank can help governments and other institutions analyze and restructure debts, create repayment plans, locate borrowing sources, and provide support for better financial management.
