Difference Between Investment and Merchant Banking

Investment vs Merchant Banking

Bank is an organization that provides a range of financial and some non financial services to its customers. The main source of income, that makes the bank survive is the interest charged from those to whom the bank has given loan. A bank accepts deposits from its customers and pay interest to that deposited money, while it lends money to those who need finance and charge interest from them. The interest rate chargeable from the borrowers is higher than the interest rate payable to depositors. This is how a bank, which is traditionally known to normal people, earns revenue. Banks can be brodly categorized as retail banks and investment banks. The above mentioned revenue generating procedure is more applicable to a retail bank. The revenue models of investment and merchant banks are different, which we will discuss in this article.

Investment Banking

An investment bank is a financial institution that engages in the issuance of securities on behalf of its client. Investment banks are the banks, which facilitate both the investor, who is in search for good investment opportunity and the investee, who is searching for capital to invest in viable projects. Unlike other types of banks, investment banks are not accepting deposits from customers; that is, investment banks do not provide regular banking services to the general public. The main Investment banking activities are issuance of securities, underwriting of securities, providing financial related consultancy services to companies, assisting companies in the acquisition and mergers, and similar services.

JP Morgan, Bank of America, Merrill Lynch, Goldman Sachs, Morgan Stanley, and Credit Suisse are some of the world renown investment banks.

Merchant Banking

商户银行是一家主要处理国际金融活动（例如外国房地产投资和长期公司贷款）的银行。商户银行不为公众提供定期的银行服务。如今，商户银行为富裕机构以及个人提供承保服务和咨询服务。发行信用证，国际基金转移，外国公司投资和外国房地产投资是商家银行提供的服务的一些例子。商人银行提供资金以换取股份所有权。商户银行的主要收入来源是他们提供的咨询公司和所提供资本的利息的费用。上面提到的一些金融机构（例如：JP Morgan）已开始作为商户银行。

What is the difference between Investment and Merchant Banking? 尽管一线分离Merchant bank from an investment bank, there are some differences between them. – Traditional investment banks only engage in the underwriting of shares and issuance of shares, whereas merchant banks involve in international financial activities. – While traditional investment banks assist companies in the acquisition and merges, merchant banks are not. – Normally investment banks focus on share issuance of large private and public companies, whereas merchant banks look after small scale companies. – While merchant banks still offer trade financing to their clients, investment banks rarely offer this service. – Investment banks offer advisory services for acquisition and mergers, whereas a merchant bank provides little or no of such services.