What is the difference Between an Investment Bank and a Retail Bank?

October 18, 2017
What is the difference Between an Investment Bank and a Retail Bank?

This could easily be asked as an interview question and one that seemingly causes a lot of confusion for aspirants in the Finance domain. To help you understand investment banking, it’s best to differentiate it from the type of banking that you have experience with: commercial or retail banking – the banks that you see on the street.

The banking sector is split into two fundamental divisions: Investment banking and retail banking.

Let’s understand what Investment banking is. Investment banks are huge financial institutions that assist their clients – mostly corporates and government agencies – in raising capital by underwriting and acting as the agent or an underwriter in the issuance of securities.

An investment bank assists these organizations with complex financial solutions such as Mergers and Acquisitions, Equity Underwriting, Private Placement, Valuation and Fairness Opinion, Corporate Restructuring,  Structured Refinance, Management Buyouts, among others.

In a way, Investment Banks serve as a bridge between large corporations and investors.

Investment banking is split into the front office, middle office, and back office activities. Think you want to be an investment banker?  Chances are the role you are imagining is a front office role.Investment Banking Banner

On the other hand, The bank where you maintain your current (UK), checking (USA) or savings account is a commercial or retail bank. You cannot go into an investment bank and deposit your money, get your ATM card, or ask for a student loan. This is what commercial or retail banks do. – The value of transactions that happen in a retail bank is very low in nature but the number of transactions is significantly higher than those of investment banks Some retail banks have an investment banking unit, others do not.  For example, SBI Bank is primarily a Retail Bank and has established a subsidiary company SBI Cap Securities, which carries on investment banking operations. Retail Banking encompasses a wide variety of products and services like Savings Accounts, Bank Guarantees, Certificate of Deposits, Mortgages, Personal Loans, Letter of credits, Foreign Exchange services for retails clients, Insurance business, Wealth Management Services, Personal Banking, Stock Brokerage Services, Locker Facilities etc. which are not provided by Investment Banks.

Some of the well-known Investment Banks include:

  • JP Morgan and Chase
  • Bank of America
  • Wells Fargo
  • Morgan Stanley

Some of the well-known Retail Banks include:

  • HDFC Bank
  • ICICI Bank
  • Bank of Baroda
  • SBI Bank

To sum up, here are the key differences between investment and retail banks:

Think investment banking is a career option for you? Interested in learning more? Join our CIBOP (Certified Investment Banking Operations Professional) program to learn about Investment Banking in more detail…


  • kush kumar yadav says:

    ya, really i am interested for investment banking as a career opportunity and also i eager to know something more about it. i think this would be the best way for me which i was looking for and where i can enhance my skill in every aspect.

  • rita rai says:

    Yea I really want to join in investment banking and eager to learn more about this in bank as a front office .if I get this opportunity I will enhance my skill in every aspect .

  • rita rai says:

    Yea I want to join in investment banking as it will best for my career and eager to know more about this ,if I get an opportunity I will enhance my skill in this field as a banking sector in front office

  • Pratham says:

    I’m looking for job in investment banking. What are the steps that I should take?

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