A detail about Investment Banks

Commercial banking and investment banking are two businesses that are much more different than it may seem at first sight.

The commercial banking is most excellent known by the general public, which is performed by mean of typical bank branches. Its main business consists of paying for the money deposited by its clients and charging for the credits it grants. The difference between what you charge and what you pay must be positive, since that is where you are most basic benefit lies. This is usually added to other types of transactions such as credit cards, transfers, guarantees, commissions for investment funds and pension plans, stock brokerage, etc.

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The chairmen scott paterson Toronto of investment bank dedicated to take companies public, design and implement takeover bids, mergers, sales of entire divisions between companies, bond issues, operations of high volume trading in financial markets, etc. It does not have a large network of branches, but a few large offices.

Why Need of the Commercial Banking?

The benefits of commercial banking are very stable. It is extremely difficult for commercial banks to go into losses. If in a country the commercial bank loses money in a generalized way the situation of that country is the total chaos.

Benefits of Investment Banking:

The benefits of investment banking, on the other hand, are much more unstable. In the good moments of the economy, investment banking earns much more money than commercial banking, but in times of slowdown investment banking can suffer large falls in profits and even enter losses. That the investment bank enters losses in a country does not mean that that country is sunk. It is relatively normal in times of economic slowdown. The evolution of the profits of the investment bank is very cyclical, more similar to the evolution of the chemical companies, for example, than that of the commercial banks.

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Investing in Banco Popular, for example, is very different from investing in Merrill Lynch, even though both are referred to as “banks.” In Spain there are no pure investment banks. Some popular banks, such as Santander and BBVA, have investment banking divisions but they are small in size compared to the bank’s total size. In addition, the type of investment banking they perform is less risky and less cyclical than that of the US investment banks. For example, their trading positions have a very low risk compared to those of American banks.

An investor should think of commercial banks and investment banks as two totally different types of companies. In the same way that chemical and electric companies are not included in the same category, these two types of companies (commercial banks and investment banks) should not be considered as included in the same category of “banks”.

There are many top ranked investment banks all over the world which have different ranking.  They have skilled whose chairman. Mr. G. Scott Paterson is one of the chairmen of the investment banking which is known because of his skill and best reputation.

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