It's possible that when you think of a bank, the first thing that comes to mind is a place that accepts deposits, manages checking and savings accounts, and possibly even more. That is correct; nevertheless, a different kind of bank specializes in stocks, bonds, and other financial products. Although these financial institutions might be divisions of larger companies that also provide commercial banking services, they nonetheless hold a significant position within the financial system, which has an effect on the economy as a whole.
The most successful investment banks are typically large financial institutions with an essential part in ensuring the smooth circulation of money throughout the economy. For instance, initial public offerings (IPOs) provide investors with the opportunity to assist a company in the process of raising capital. At the same time, they have the opportunity to acquire a stake in the company.
Investment banks that provide full service to their clients provide a variety of business and investment services. A good number of them either operate or are affiliated with a retail banking institution. The vast majority of average consumers will not require the services of an investment bank. Still, expanding firms and high-net-worth people may find that this sort of bank can provide them with exceptional financial products and services to satisfy their requirements. Do you require some assistance in locating one that you can put to use? Have a peek at our choices for the top investment banks that are listed below.
The Top 8 Investment Banks of 2022
- HIGHLY RECOMMENDED OVERALL: Goldman Sachs
- HIGHLY RECOMMENDED LARGE INSTITUTION: JPMorgan Chase
- HIGHLY RECOMMENDED IN EUROPE: Barclays
- HIGHLY RECOMMENDED FOR TURNAROUND: Morgan Stanley
- HIGHLY RECOMMENDED FOR INNOVATION: Bank of America Merrill Lynch
- HIGHLY RECOMMENDED FOR RECESSION PROOFING: Credit Suisse
- HIGHLY RECOMMENDED IN GERMANY: Deutsche Bank
- HIGHLY RECOMMENDED IN CANADA: RBC Capital Markets
HIGHLY RECOMMENDED OVERALL: Goldman Sachs
One may argue that Goldman Sachs is the most prestigious investment bank in the world. It is a publicly-traded firm that has been in existence for more than 150 years; by the end of 2021, it was responsible for the supervision of assets worth about $2.5 trillion. Because of this, it has become an important power center on Wall Street. Goldman has hosted a significant number of high-ranking government leaders over the years. They include the Secretary of the United States Treasury, advisors to the White House, heads of state in countries, and central banks worldwide.
The bank has been involved in its fair share of scandals, including playing a part in the financial crisis that occurred in 2008, but in addition to that, it participates in a wide variety of social activities.
Among the most essential services and divisions are financial counseling and underwriting, the company's own investing and lending portfolios, services directed toward institutional investors, investment management, and private equity. The company also runs Marcus, an online consumer bank, in addition to its investment banking operations.
HIGHLY RECOMMENDED LARGE INSTITUTION: JPMorgan Chase
The banking and financial services company known as JPMorgan Chase is consistently ranked among the biggest in the world. One can break down this enormous corporation into two primary business units. The Chase division of the organization is responsible for handling commercial and business banking. The investment business, especially investment banking, is where the JPMorgan brand shines the brightest. At the end of the year 2021, the company's total assets were reported to be $3.7 trillion.
JPMorgan places a significant emphasis on mergers and acquisitions, one of the most lucrative services offered by investment banks. Advisory services, capital raising, and risk management are some of the other services that are provided.
Like most other significant financial institutions, they formed JPMorgan Chase through a series of internal mergers and acquisitions. The Chase Manhattan Bank, Bank One, Bear Stearns, and Washington Mutual were among the banks that came before it. The bank's oldest antecedent was the 31st-oldest bank in the world, and it was the third-oldest bank in the United States. Aaron Burr was the original founder of the company.
HIGHLY RECOMMENDED IN EUROPE: Barclays
Although Barclays may not be the most well-known brand name on this side of the water, in the United Kingdom, virtually everyone is familiar with the company. Barclays was established in 1690 and currently has assets worth over £1.4 trillion (approximately $1.9 trillion USD). The company's headquarters are located in London.
Consumers in the United States may already be aware of Barclays credit cards, and the company is also working on developing a consumer banking service for the American market. Both inside and outside of Europe, it has a significant presence in New York and other critical financial cities across the world.
By acquiring Lehman Brothers in 2008, Barclays was able to make a significant entrance into the investment banking industry in the United States. Barclays, another investment bank with a checkered past, was called out for failing to comply with regulations during the Lehman takeover and made headlines in 2012 for its part in the LIBOR affair. Despite this, it continues to be a huge investment bank that is highly regarded, and it continues to play a role as one of the largest investment banks in the world.
HIGHLY RECOMMENDED FOR TURNAROUND: Morgan Stanley
Morgan Stanley is another one of the most important investment banks in the United States, and it was founded in 1935. With a total of $6.5 trillion in assets under control, this financial institution is unequivocally classified as "too large to fail." The organization that is known today as Morgan Stanley was established in 1997 as a result of a merger that became Morgan Stanley Dean Witter Discover & Co. In 2001, the company's name was shortened to just "Morgan Stanley."
The primary operations of the international investment bank are carried out by its three departments: wealth management, investment management, and institutional securities. The wealth management department looks after individual shareholders. A significant portion of this division was acquired by the purchase of Smith Barney, which had previously taken over the operations of the well-known investment firm Salomon Brothers.
Much like other major investment banks, Morgan Stanley provides various services to large firms. These services include mergers and acquisitions, advising, initial public offerings (IPOs), restructurings, and loans. During the challenging time period for financial companies, the firm was one of the largest recipients of TARP (Troubled Asset Relief Program) monies from the government. This was due to the fact that the company struggled during the financial crisis that occurred in 2008. After 2008, it made the necessary changes to return to its position of historical preeminence as a market leader in business buyouts.
HIGHLY RECOMMENDED FOR INNOVATION: Bank of America Merrill Lynch
This investment bank is the investment banking division of Bank of America and was formed as a result of a lengthy series of mergers, the most recent of which was Bank of America's acquisition of the prominent investment bank Merrill Lynch in the midst of the financial crisis in 2008. With assets of $3.1 trillion, Bank of America is the second-largest financial institution in the United States. Its primary operations are based in Hong Kong, London, and New York, although it has offices all over the world.
Investment banking services provided by Bank of America Merrill Lynch may include things like mergers and acquisitions, public and private offers of debt and stock, lending, trading, and risk management, amongst other things. The former wealth advisory division of Merrill Lynch continues to exist as Merrill Lynch, which is also owned by Bank of America but conducts its business independently.
The consulting services offered by Bank of America Merrill Lynch, much like those offered by other investment banks, are essential for businesses that want to acquire capital through the public markets. Investment bankers contribute to the process of determining the first share price when a company is going public by attempting to strike a balance between liquidity and demand. They also assist businesses in selling bonds, which is another powerful method of raising finance.
HIGHLY RECOMMENDED FOR RECESSION PROOFING: Credit Suisse
When the value of the US dollar is uncertain, investors from all over the world frequently seek the Swiss franc as a safe haven investment option. When it comes to the management of significant financial dealings, Swiss banks have a well-deserved reputation for being both professional and discreet. Credit Suisse, one of the most successful Swiss banks, can trace its beginnings all the way back to 1856.
Assets of 1.62 trillion Swiss francs (or approximately 1.75 trillion US dollars) are held by Credit Suisse. The company operates in major financial cities all over the world and has a significant presence in the United States. Credit Suisse came under fire from the government regulators in the United States for allowing others to take advantage of its well-known client confidentiality to avoid paying taxes.
HIGHLY RECOMMENDED IN GERMANY: Deutsche Bank
Deutsche Bank, which has its headquarters in Frankfurt, is one of the 10 largest investment banks in Europe. Its total assets amount to approximately 1.3 trillion euros. Deutsche Bank is a comprehensive financial institution that was established in the year 1870. It possesses an investment banking division that is both powerful and prominent.
Deutsche Bank is a significant player both in the United States and all around the world. Through its activities in the mortgage securities market, the company made a significant contribution to the financial crisis that occurred in 2008, which resulted in a penalty of $7.2 billion being levied on it in 2017. The bank has been embroiled in several scandals over the past few years, some of which include engaging in business with countries under economic sanctions, engaging in money laundering, and the LIBOR incident that occurred in 2015. Because of its extensive lending relationship with Trump's enterprises, it also became entangled in the investigation of former President Donald Trump that Robert Mueller was conducting.
However, the majority of its operations involve little to no contentiousness. Its Corporate & Investment Bank comprises divisions that focus on mergers and acquisitions (M&A) as well as advisory services, trading and sales of securities, risk management and the issuance of securities, international commercial banking and trade, and research and analysis.
HIGHLY RECOMMENDED IN CANADA: RBC Capital Markets
RBC Capital Markets is the division of investment banking at RBC and has its headquarters in Toronto, in the country of Canada. RBC, which is the acronym for Royal Bank of Canada, has a history that dates back to 1869 and currently manages assets worth a total of CAD $1.7 trillion. This significant bank is one of the largest in North America and the world, and its offices are located in a number of nations, including the United States.
RBC has customers in 36 different countries. A non-American company's concentration in the municipal finance market in the United States is an intriguing feature to consider (muni bonds). Traditional investment banking services, such as mergers and acquisitions as well as equity and debt market issues, are also provided by the bank.
RBC is in a great position because it has both easy access to the United States and an emphasis on international business. When everything is considered, the Royal Bank of Canada is a highly competitive international bank. RBC was added to the list of globally essential banks, also known as the "too large to fail" list, in the year 2017.
Frequently Asked Questions (FAQs)
What sets investment banks apart from commercial banks?
What sets investment banks apart from commercial banks is their focus on making investments. Commercial banks, on the other hand, are more concerned with fundamental banking tasks than investment banks, which are more concerned with high-finance activities such as guaranteeing bonds or helping businesses raise equity capital. Retail banks primarily cater to individuals, whereas commercial banks focus on businesses as their primary clientele; however, both sorts of banks offer the same kinds of goods and services to their customers (e.g., loans and deposit accounts).
How do investment banks generate revenue for themselves?
Investment banks' commissions and fees for their services are the primary sources of revenue for the firms' profitability. For instance, if you wish to take your firm public by means of an initial public offering of stock, you would require the assistance of an investment bank. The investment bank will assess a fee in exchange for its assistance in marketing your company's stock to a broader audience.