Banking – Part 1: Investment or Retail?

Banks

 

Think you might like a career in banking but not sure what it’s all about?

First thing’s first: ‘banking’ is a very broad term.

Generally speaking there are two areas – retail and investment. Corporate finance and wealth management are where these areas overlap. Some banks focus on retail or investment only, whereas others such as Barclays or HSBC, cover both areas and are known as ‘universal’ banks.

If you want to work in banking you must understand the differences between these areas, as they are two distinctive career paths. This will help you make the right choice when choosing which job you want to pursue, and help you articulate this to employers at application and at interview.

Retail

  • Also known as ‘high street banking’ (although increasingly these banks also have an online presence). These are the companies which have branches in your local town centre where individuals can open a current account or obtain a mortgage etc.
  • These banks also help small, medium and even large companies with their banking needs.
  • This area of banking is customer-led – products and services offered are generally determined by customer demand. For example, if a retail bank notices an increase in people making home improvements rather than moving house, they might look at ways to encourage people to take out small loans with them.

Investment

  • The clients of investment banks are large corporations and organisations, and governments. These banks use a variety of methods to ultimately make the most of their clients’ money and assets through investment.
  • The main areas of activities that investment bankers are involved in include:

Mergers and Acquisitions (M&A): advising client companies on mergers (where two companies join up as equals) and acquisitions (where one firm takes over part or all of another).

Sales, Trading and Research: the buying and selling of shares, bonds and other financial products.

Capital Markets: creating the financial products to be bought and sold.

  • This area of banking is driven by the global financial market and has a reputation for being high-pressured and fast-paced.

Corporate Finance

  • The terms ‘corporate banking/finance’ and ‘investment banking’ are sometimes used interchangeably. Yet both investment and retail banks may have corporate divisions. In basic terms, corporate finance is about managing the money of businesses and companies.
  • Depending on what help the company would like, depends on where it goes for its banking. And some businesses might use both retail and investment banks. For example, a company might use a retail bank to handle its day-to-day monetary affairs, such as paying its staff or securing a small loan. If, however, the company needed to raise a large amount of capital, or wanted to take over another business, it would go to an investment bank.

Wealth Management

  • Sometimes known as ‘private banking’, wealth management includes aspects from both retail and investment banking.
  • Just like retail banking, this involves managing the money of individual people rather than large corporations. However, these people are of considerable personal worth, and so they also might utilise services often offered by investment banks to help grow their money.
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