Difference Between Investment and Corporate Banking

It is very important to know the professions you want to pursue thoroughly. Knowing both the pros and cons can help better compare the occupations. Furthermore, one should choose the job carefully as it depends on it. For example, investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more helps create capital rather than handle it, while corporate banking involves banking services, including loans, especially to companies. Therefore, a career in investment banking would include being in the limelight and earning more than a career in corporate banking.

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What is Investment Banking?

Investment banking involves: –

  • Providing a range of banking services like underwritingUnderwritingThe underwriters take the financial risk of their client in return of a financial fee. Market Makers like financial institution and large banks ensure that there is enough amount of liquidity in the market by ensuring that enough trading volume is there.read moreRaising capital for companiesIssuing securitiesFacilitating mergers

Investment banks act as an intermediate while raising capital funding. Investment banking involves two main sides vis-à-vis the selling and buying sides. The selling side includes trading securitiesTrading SecuritiesTrading securities are investments in the form of debt or equity that the company’s management wants to actively purchase and sell to make a profit in the short term with securities they believe will increase in price. These securities can be found on the balance sheet at the fair value on the balance sheet date.read more or monetary gain or portfolio gain, and it also involves promoting securities or research and underwriting. In contrast, buying involves giving clients sound advice on investment services.

Investment Banking firms are of three types – Bulge Bracket Investment BanksBulge Bracket Investment BanksTop 10 bulge bracket investment banks are - Blackstone, Goldman Sach & co, Morgan Stanley, J.P Morgan Chase & co, Bank of America Merrill Lynch, Credit Suisse, Citi, Deutsche Bank, HSBC, UBS.read more, Middle Market Investment BanksMiddle Market Investment BanksThe deals of a mid-tier investment bank range from USD 50 million to USD 500 million. They offer the same services as the bigwigs, i.e. bulge bracket banks, but are not as geographically present internationally as they are.read more, and Boutique Investment Banking FirmsBoutique Investment Banking FirmsThe top boutique investment banks are - Perella Weinberg Partners (Global M&A Advisory – Boutique), Lazard (Global M&A Advisory), Rothschild (Global M&A Advisory – Boutique), Evercore Partners (Global M&A Advisory – Boutique), Greenhill & Co. (Global M&A Advisory – Boutique, Blackstone (Global M&A Advisory).read more.

What is Corporate Banking?

Corporate banking is also known as corporate financing. Corporate banking caters to large-scale companies and businesses. They focus on various banking services like issuing loans, setting up portfolios, and helping MNCs by giving them options for lowering their taxes.

We can say that a corporate banker closely studies his clients’ portfolios and ensures that financial risks Financial Risks Financial risk refers to the risk of losing funds and assets with the possibility of not being able to pay off the debt taken from creditors, banks and financial institutions. A firm may face this due to incompetent business decisions and practices, eventually leading to bankruptcy.read more minimize. There are numerous opportunities for commercial banksCommercial BanksA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.read more. You can work in many positions: Credit Analyst, Loan Officer, Branch Manager, Trust Officer, and Mortgage Banker.

Investment vs Corporate Banking – Prerequisites

If you are an undergrad, you should pursue an MBA from a business school and enter the investment banking sector as an associate. The skills you would want to teach yourselves include an in-depth understanding of corporate finance, quick calculation skills, and organizational analysis. In addition, excellent communication skills are a must for a candidate looking forward to a career in investment banking.

A qualification in a subject such as law, business studies, management, accountancy, finance, mathematics, or economics can be advantageous, as can an MBA or similar professional qualification for having opportunities in corporate banking. Additional skills required for a career in corporate banking include numeracy skills, solving problems, negotiation skills, and working under pressure.

Employment Outlook

There are many positions to acquire in the investment banking sector, including: –

  • Analyst: The analyst is the basic profile in investment banking. An analyst’s main roles involve creating financial models, performing a company analysis, doing due diligence, and creating pitch books Pitch BooksPitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm’s main attributes and valuation analysis, which helps them decide whether or not to invest in the client’s business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm’s sales department to help them sell products and services to a client.read more, and punching data. You must have at least 1-year experience as an analyst before applying for the associate post.Associate: The main job roles of an investment banking associate are similar to that of an analyst except for the additional responsibility of acting as an intermediate between junior and senior bankers. You are required to be an associate for 3 or 4 years before being promoted to the post of Vice President.Vice President: The main job roles of an investment banking associate are almost similar to that of an analyst except for the additional responsibility of acting as an intermediate between junior and senior bankers. You are required to be an associate for 3 or 4 years before being promoted to the post of Vice President.Managing Director: Managing Directors are usually highly experienced candidates representing the firm in foreign countries and important meetings. He has the power to make all the strategic decisions of the company.

Unlike investment banking, there are no levels in corporate banking. Still, one can work in the following positions: –

  • Loan Officer: A loan officer decides whether a client is eligible for a loan or not. He monitors the customer’s financial conditions and gives him the best suitable loan.Branch Manager: Major job roles of a branch manager are supervising employees, taking care of the smooth selling and delivery of financial services, and maintaining business relationships.Trust Officer: The main focus of a trust officer is areas like trust services, estate planning, taxes, investment, etc.

Compensation

Recent research shows that investment bankers earn more money than corporate bankers. For example, an analyst in investment banking can earn as much as $70,000 as their base salary. As an associate, your basic compensation would be $100,000. A Vice President would accumulate $250,000.

Entry-level jobs in the corporate banking sector will pay you $30,000 to $40,000 per year. However, having three years of experience can increase the compensation from $54,000 to $86,000.

Investment and Corporate Banking – Pros & Cons

Investment Banking vs Corporate Banking Video

Conclusion

There are intense competition in investment banking jobs Investment Banking JobsThe entry-level investment banking jobs for graduates mainly belong to categories such as markets, specialist markets, investment management, corporate banking, risk management, structured finance, technology, operations, private wealth management.read more. Still, a decent salary can compensate for this, while in corporate banking jobs, one can enjoy flexible working hours, and there is not much competition, but compensation has to be earned and does not come with the degree. Therefore, it is not easy to choose between both professions.

Those who want to enjoy their weekends over handsome pay can opt for a career in the corporate banking sector, and those who value money and can spend their day and night getting rich must opt for a career in the investment banking sector. Also, you may be in the limelight and appreciated in investment banking jobs, while corporate banking jobs are dull, and you will not get much recognition. The choice is entirely yours to make.

This article is a guide to Investment Banking vs Corporate Banking. We compare the difference between investment banking and corporate banking, etc. We also discuss employment outlook and investment and corporate banking compensation. You may also have a look at the following articles: –

  • Who is an Investment Banking Analyst?Top 4 Corporate Development CareersTop 4 Careers in Investment BankingWhat is Retail Banking?Investment Banking vs Investment Management