What are the top 10 investment banks?
There are hundreds of investment banks around the world, but it’s quite easy to identify the top institutions. These giants include Goldman Sachs, JPMorgan Chase and Citigroup. Read on to learn about the top 10 investment banks.
What are investment banks?
Investment banks are major financial institutions that provide specialist services such as raising funds by issuing shares, and facilitating mergers and acquisitions (M&A). Every transaction that an investment bank handles is done on a large scale. For example, if drinks company Diageo wanted to sell £8 billion worth of bonds to expand its business into Russia, it would approach an investment bank to assist with finding buyers.
How do investment banks work?
Investment banks offer financial intermediary services to governments, pension funds, hedge funds and large corporations. These banks work differently from investment banking divisions of consumer (retail) banks, because they offer services such as underwriting, M&A, sales and trading, and asset management.
Investment banks are often involved in more than one activity when it comes to assisting companies with their needs. For example, in the case of an initial public offering (IPO), the bank will examine a business’s financials, assist with drafting a prospectus, and offer advice post-IPO.
How do investment banks make money?
Investment banks make money via the services they offer. How they make money ranges from charging a fixed rate or a percentage per transaction, or collecting interest on monies raised, to charging commission based on the value of a trade. An investment bank will typically make money from the following activities:
- Helping companies to launch an initial IPO
- Engaging in proprietary trading
- Issuing bonds to raise a company’s debt capital
- Insuring bonds
Investment banks vs commercial banks: what’s the difference?
There are quite significant differences between investment banks and commercial (retail) banks, as they provide distinctive services. Investment banks cater mainly to corporate clients, while commercial banks usually service corporate and individual clients. Further, investment banks offer services such as underwriting and asset management, while commercial banks provide more standard services – for everyday needs. Their services can include lending, accepting deposits, making payments, facilitating debit orders and more. Commercial banks make money from the fees they charge banking clients, as well as from interest off loans.
Top 10 investment banks
- JPMorgan Chase
- HSBC Holdings
- Bank of America
- Goldman Sachs
- Morgan Stanley
- Credit Suisse
- Deutsche Bank
- Wells Fargo
Note that these banks are not listed in any particular order, they are simply among the most famous investment banks in the world. This list was last updated on 28 November 2019.
Probably the biggest name in investment banking is JPMorgan Chase. Its history can be traced back to 1799, but the bank is completely different today from what it was more than 200 years ago. JPMorgan Chase was founded in 2000 after a merger between JPMorgan and Chase Manhattan Bank. It has a presence in more than 100 markets and manages more than $2.7 trillion in assets. Its main focus areas are investment banking, and M&A.
Its 2018 annual report states revenue of $111.5 billion and net income of $32.5 billion. As at November 2019, JPMorgan Chase has a market capitalisation of $414.2 billion.
UK-based HSBC Holdings was founded in 1865 and has more than 39 million clients in 65 countries. Not only is it one of the top investment banks in the world, it’s also the biggest company in the UK by market cap (£117.6 billion as at November 2019). It manages around $2.6 trillion in assets.
Services include M&A, investment banking and private banking. Unfortunately, Brexit and trade tensions have affected the company’s bottom line. At the end of 2018, HSBC reported revenue of $53.8 billion and profit of just over $15 billion, which was lower than expected.
Bank of America
While Bank of America is not an investment bank itself, it does have a very prominent investment banking arm that came about through the acquisition of Merrill Lynch in 2008. The company recently announced that it was rebranding the Merrill Lynch arm as BofA Securities. Some of the bank’s offerings include M&A, risk management, lending and trading.
The corporation manages nearly $2.4 trillion in assets, making it the second-largest investment bank in the US. Revenue for 2018 was recorded at $110.6 billion while profit amounted to $28.2 billion. Market cap in November 2019 was $300.6 billion.
American corporation Cititgroup is more than 200 years old, employs 219,000 people, serves more than 200 million customers and has a presence in 160 countries. It is ranked the third largest investment bank in the US. Citibank has a strong focus on investment banking, managing over $1.9 trillion in assets, but it also operates a private bank.
According to its 2018 annual report, it had revenues of $72.8 billion of which $18 billion was profit. As at November 2019, Citibank’s has a market cap of $164 billion.
New York-based firm Goldman Sachs was founded in 1869. It specialises in investing and lending, private equity, investment management, and institutional client services. By the end of 2018, the bank managed more than $1.5 trillion in assets and reported $36.62 billion in revenue. Most of its revenue is generated by the investment banking division. As at November 2019, Goldman Sachs’s market cap is more than $81 billion.
The bank is infamous for its role in the 2008 financial crisis but remains a powerhouse in the investment bank industry. Goldman Sachs operates a standalone online consumer bank and also engages in several social responsibility initiatives.
British giant Barclays is the second largest British investment bank by total assets (managing £1.1 trillion). Barclays listed on the London Stock Exchange (LSE) in 1953 and it is also a constituent of the FTSE 100. Its offering ranges from corporate banking to wealth and investment management.
Barclays’s short-term plans include reducing operational costs to improve profitability and returning more cash to shareholders. Revenue for 2018 amounted to £21.1 billion, while profit was £3.5 billion following a loss the previous year. Its market cap at the end of November 2019 was £38.2 billion.
Morgan Stanley does not have the same amount of assets under management as its competitors, but it has been a major player in investment banking for nearly 90 years. The bank specialises in investment management, wealth management and corporate restructuring. It manages more than $850 billion in assets. The 2008 financial crisis had a severe effect on Morgan Stanley, and it was one of the financial institutions that received the most aid from the US government.
Revenue in 2018 amounted to $40.1 billion, while profit rose 3% to $2.2 billion. As at November 2019, Morgan Stanley’s market capitalisation was $80.5 billion.
Credit Suisse is a leading Swedish investment bank, which dates back to 1856. It operates in major financial centres across the world, managing more than ₣1.35 trillion in assets. The bank is known for its strict confidentiality and banking secrecy. It has operations in 50 countries around the world, with a major presence in the United States. One of its most significant deals was the underwriting of the Amazon IPO.
It reported ₣21.8 billion in revenue for the year 2018 and ₣2.1 billion in profit. Credit Suisse’s market cap at the end of November 2019 was over ₣33.6 billion.
The largest investment bank in the Eurozone is Deutsche Bank, founded in 1870. As with Credit Suisse, Deutsche Bank has a big bearing on investment banking in the US. It holds around €213 billion in assets under management. Services include M&A, advisory services, risk management, and more
In November 2019, the bank announced that it was selling billions of euros worth of assets to Goldman Sachs. Deutsche Bank reported around €23.8 billion in revenue for 2018 and a profit of €341 million – its first profit since 2014. As of November 2019, its market cap is €13.6 billion.
Wells Fargo is a US investment bank, with offices in more than 40 countries. Its focus is on wholesale banking, as well as wealth and investment management, but the it also runs a consumer bank. Wells Fargo investment bank manages around $503 billion in assets.
Revenue increased by 3.4% from 2017 to 2018, to $101 billion. Profit for 2018 was $20.7 billion, which was only 0.66% more than the previous year. As at November 2019, Wells Fargos’ market capitalisation was $230.3 bilion.
How to trade investment banks
If you want to trade investment bank shares, you can use spread bets or CFDs. Both are derivative products, which means you only have to put up a small deposit (called margin) to get exposure to the full value of the trade. Plus, you don’t own any physical assets, so you can buy if you think the share price will go up or sell if you think the share price will go down.
If you want to own the shares, you may want to consider share dealing. You’ll buy the shares outright and profit if the share price goes up.
Derivatives trading is a popular choice because it offers tax benefits, as well as the ability to hedge your positions. Spread betting is completely tax free and there is no capital gains tax (CGT).* CFDs are free from stamp duty, but not exempt from CGT*.
To trade an investment bank, follow these easy steps:
- Create your IG trading account or log in to your existing account
- Type the name of the investment bank into the search bar and click on it
- Choose your position size
- Select ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
Investment banks summed up
- Investment banks are financial institutions that provide specialist services such as underwriting, asset management, advisory services, and M&A
- These banks make money by charging interest and commission
- You can trade multi-billion-dollar investment banks with IG, via CFDs and spread bets
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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