Investment banking is a specialised area of finance that focuses on helping companies, governments, and institutions raise capital, manage mergers, and execute large-scale financial transactions. Unlike commercial banking, which deals with deposits and loans, investment banking handles high-value, strategic deals that shape markets and economies. The functions of investment banking go beyond simple financial advice — they involve deep analysis, risk management, and innovative deal structuring. In India and globally, investment banks have enabled billion-dollar IPOs, historic mergers, and cross-border acquisitions. These banks act as both advisors and executors, ensuring clients achieve their funding and growth goals efficiently. From Tata Motors acquiring Jaguar Land Rover to Reliance Jio raising funds from global investors, real examples prove how investment bank functions influence industries. This article explains the key functions of investment banks, their global leaders, and the services they provide, with factual insights and practical relevance.
What is Investment Banking?
Investment banking is a branch of banking that deals with capital raising, corporate finance advisory, and complex financial transactions for large corporations, governments, and institutional investors. It differs from traditional commercial banking, which focuses on accepting deposits and lending money. Instead, investment banks connect capital seekers (companies needing funds) with capital providers (investors looking for returns).
The functions of investment banking revolve around two core activities:
- Advisory Services – guiding clients on mergers, acquisitions, restructuring, and strategic investments.
- Capital Market Operations – issuing stocks, bonds, and other securities to raise funds.
Investment banks are typically divided into:
- Bulge Bracket Banks – Large, global players like Goldman Sachs, Morgan Stanley, and JP Morgan that handle billion-dollar deals.
- Mid-Market Banks – Smaller firms focusing on mid-sized companies.
- Boutique Investment Banks – Specialised firms offering niche advisory services.
Real-World Example in India
In 2020, Reliance Jio Platforms raised over $20 billion from global investors like Facebook, Google, and Silver Lake. Multiple investment banks, including Morgan Stanley and Kotak Investment Banking, facilitated the deal by structuring the investment, advising on valuation, and managing regulatory approvals.
Top 10 Investment Banks in the World
The global investment banking industry is dominated by bulge bracket banks — large multinational financial institutions with significant market share, massive balance sheets, and a wide network across continents. These banks handle billion-dollar deals, advise the biggest corporations and governments, and set industry benchmarks for functions of investment banking. Below is the updated Top 10 investment banks in the world, ranked by reputation, deal volume, and capital strength, along with key facts about their headquarters and financial power.
1. Goldman Sachs
- Headquarters: New York City, United States
- Founded: 1869
- Total Assets (2024): Approx. $1.6 trillion
Goldman Sachs is recognised worldwide for its expertise in mergers and acquisitions (M&A) advisory, equity underwriting, and securities trading. It advised Facebook on its $16 billion IPO in 2012 and played a major role in expanding the company’s investor base. In India, it assisted Reliance Industries in raising $6 billion through a well-structured fundraising strategy.
2. JPMorgan Chase & Co.
- Headquarters: New York City, United States
- Founded: 1799
- Total Assets (2024): Approx. $3.9 trillion
JPMorgan Chase is the largest U.S. bank by assets and a global leader in investment banking services, including debt financing, equity capital markets, and asset management. It managed Disney’s $71 billion acquisition of 21st Century Fox, one of the largest media deals in history.
3. Morgan Stanley
- Headquarters: New York City, United States
- Founded: 1935
- Total Assets (2024): Approx. $1.2 trillion
Morgan Stanley is known for its strength in capital raising, institutional securities, and wealth management. It supported Tesla in multiple public offerings and fundraising rounds, helping the company scale production. In India, it was a key advisor in the ₹10,355 crore SBI Cards IPO.
4. Citigroup Inc.
- Headquarters: New York City, United States
- Founded: 1812
- Total Assets (2024): Approx. $2.4 trillion
Citigroup has a vast global presence and deep expertise in emerging markets. It has advised on several sovereign debt issuances in Asia and Latin America, enabling governments to secure vital funding for infrastructure projects.
5. Bank of America Merrill Lynch
- Headquarters: Charlotte, North Carolina, United States
- Founded: 1904 (Merrill Lynch in 1914)
- Total Assets (2024): Approx. $3.2 trillion
Bank of America Merrill Lynch offers comprehensive corporate and investment banking services. It played a crucial role in Amazon’s $13.7 billion acquisition of Whole Foods, structuring the financing and advising on deal strategy.
6. Barclays Investment Bank
- Headquarters: London, United Kingdom
- Founded: 1690
- Total Assets (2024): Approx. $1.9 trillion
Barclays is a major player in European capital markets and cross-border M&A deals. It oversaw the UK government’s partial privatisation of Royal Mail, ensuring smooth execution and investor participation.
7. Credit Suisse
- Headquarters: Zurich, Switzerland
- Founded: 1856
- Total Assets (2024): Approx. $575 billion (post-UBS merger adjustments)
Credit Suisse gained prominence for its role in the $25 billion Alibaba IPO, the largest in history. It continues to focus on advisory services and mid-market client financing solutions.
8. Deutsche Bank
- Headquarters: Frankfurt, Germany
- Founded: 1870
- Total Assets (2024): Approx. $1.4 trillion
Deutsche Bank is strong in fixed income and foreign exchange markets. It has advised European governments on large-scale bond issuances, supporting economic stability and public sector funding.
9. UBS Group AG
- Headquarters: Zurich, Switzerland
- Founded: 1862
- Total Assets (2024): Approx. $1.6 trillion
UBS is a leader in wealth management and investment advisory. It works with high-net-worth individuals and global institutions on complex investment strategies and capital market transactions.
10. Evercore Inc.
- Headquarters: New York City, United States
- Founded: 1995
- Revenue (2024): Approx. $3.2 billion
Evercore is an independent investment banking advisory firm that focuses on M&A deals. Despite not being a bulge bracket bank, it ranks among the top in global advisory league tables by deal value.
Functions of Investment Banking
The functions of investment banking are at the heart of the global financial system. An investment bank functions as an intermediary, advisor, and strategist for high-value financial transactions. These functions go far beyond simply connecting companies with investors; they involve market expertise, legal compliance, negotiation, and innovative deal structuring. Here is a detailed breakdown of the 10 core investment bank functions, each explained with real-world cases.
1. Capital Raising
Capital raising is one of the most important functions of investment banking. It involves helping companies and governments generate funds by issuing equity shares or debt securities. Investment banks determine the right financing method, set the issue price, and connect issuers with the right investors.
- Equity Capital: Selling shares to public or private investors (IPOs, FPOs, private placements).
- Debt Capital: Issuing bonds or debentures to raise fixed-income funding.
Example: In 2020, Reliance Jio Platforms raised over $20 billion from global investors like Facebook and Google. Goldman Sachs and Morgan Stanley structured these deals, ensuring attractive valuations and strong investor participation despite market volatility during the pandemic.
2. Mergers and Acquisitions (M&A) Advisory
M&A advisory is a strategic investment bank function where the bank guides clients through the complex process of buying, selling, or merging companies. This includes valuation, negotiation, legal structuring, and integration planning.
Example: JPMorgan Chase advised Disney during its $71 billion acquisition of 21st Century Fox, overseeing deal financing and securing regulatory approvals. In India, Kotak Investment Banking advised Tata Motors in acquiring Jaguar Land Rover from Ford in 2008, a deal that transformed Tata Motors into a global brand.
3. Underwriting Securities
Underwriting means the investment bank guarantees that a company’s securities will be sold to investors by buying unsold shares or bonds itself. This protects the issuing company from the risk of insufficient capital being raised.
Example: Goldman Sachs underwrote the IPO of Zomato in 2021, enabling the company to raise ₹9,375 crore and ensuring full subscription even in volatile market conditions.
4. Sales and Trading
Investment banks buy and sell stocks, bonds, currencies, and commodities on behalf of clients or for their own accounts. This generates liquidity in the market and offers clients opportunities to earn returns.
Example: Barclays Investment Bank executes large-scale government bond trades in Europe, ensuring liquidity for institutional investors like pension funds.
5. Asset Management
Many investment banks operate asset management divisions that manage investment portfolios for individuals, corporations, and institutions. They select securities and strategies to achieve clients’ long-term financial goals.
Example: UBS Group AG manages over $4 trillion in assets, offering clients diversified investment strategies including equities, fixed income, and alternative assets like private equity and hedge funds.
6. Research and Analysis
Banks provide in-depth research on companies, sectors, and economies to support investment decisions. Research divisions publish equity reports, sector outlooks, and macroeconomic analyses.
Example: Credit Suisse’s equity research team provides stock recommendations that influence institutional investment decisions globally. In India, ICICI Securities offers detailed sector reports that guide domestic investors.
7. Market Making
Market making is when an investment bank provides continuous buy and sell quotes for securities, ensuring liquidity for other market participants. Without market makers, many securities would face wide price spreads and slow trade execution.
Example: Deutsche Bank acts as a market maker in foreign exchange markets, enabling smooth currency transactions between corporations, governments, and traders.
8. Risk Management Advisory
Risk management involves helping clients identify, measure, and mitigate financial risks such as interest rate changes, currency fluctuations, or credit risks. Investment banks often design custom hedging strategies.
Example: Citigroup advised Indian exporters on using forward contracts and currency derivatives to hedge against rupee depreciation during 2022’s global economic uncertainty.
9. Corporate Restructuring
When a company faces financial distress or aims to optimise operations, investment banks advise on restructuring debt, equity, or business units to restore profitability.
Example: Bank of America Merrill Lynch worked with Jet Airways’ creditors to restructure debt and explore strategic investor options during the airline’s financial crisis.
10. Private Equity and Venture Capital Advisory
Some investment banks specialise in connecting growing companies with private equity or venture capital investors. They prepare investor pitches, structure deals, and negotiate terms.
Example: Evercore advised a global SaaS start-up in raising late-stage funding from a leading private equity firm, securing capital for international expansion.
What Role Do Investment Banks Play in the Financial System?
Investment banks are more than just dealmakers — they are the backbone of global capital markets. Their functions directly influence how money flows in the economy, how companies grow, and how governments fund public projects. By combining financial expertise with market access, investment banks create an efficient link between capital providers (investors) and capital seekers (businesses, governments, and institutions).
In India, as well as globally, their role extends into four key areas: capital formation, market stability, risk management, and economic growth.
1. Facilitating Capital Formation
One of the most critical contributions of investment banks to the financial system is enabling capital formation. When companies raise money through an IPO or governments issue bonds to fund infrastructure, investment banks design, price, and sell these securities.
- Indian Example: Kotak Investment Banking helped LIC launch India’s largest IPO in 2022, raising ₹21,000 crore and broadening retail investor participation in the stock market.
- Global Example: Goldman Sachs helped Saudi Aramco raise $25.6 billion in 2019, marking the largest IPO in history.
Capital formation fuels business expansion, creates jobs, and enhances a country’s GDP.
2. Maintaining Market Liquidity
Liquidity ensures that securities can be bought or sold quickly without causing drastic price swings. Investment banks maintain liquidity through sales and trading and market-making activities.
- Indian Context: ICICI Securities plays a role in bond market liquidity by actively trading government securities for institutional investors.
- Global Context: Deutsche Bank acts as a market maker in forex markets, allowing smooth currency transactions for global trade.
This function keeps financial markets efficient and prevents bottlenecks in investment flows.
3. Managing and Distributing Financial Risk
The financial system constantly faces risks such as interest rate hikes, currency depreciation, or credit defaults. Investment banks design derivatives, swaps, and hedging strategies to protect clients from these risks.
- Indian Example: Citigroup advised Indian exporters to use currency futures to offset losses from the rupee’s depreciation in 2022.
- Global Example: JPMorgan Chase structured interest rate swaps for U.S. corporations to stabilise borrowing costs during rising interest rate cycles.
By managing risks, investment banks protect both investors and borrowers, contributing to financial system stability.
4. Enhancing Financial Market Efficiency
Investment banks improve market efficiency through research, analysis, and pricing expertise. Accurate valuations, market insights, and economic forecasts help investors make informed decisions.
- Indian Example: Axis Capital provides detailed equity research reports that influence institutional investor strategies in India.
- Global Example: Credit Suisse’s equity research division offers in-depth reports on global industries, guiding large investment decisions.
Efficient markets benefit everyone — from small retail investors to global funds — by ensuring fair prices and reducing volatility.
5. Supporting Economic Growth and Development
When investment banks raise funds for infrastructure, energy, and technology projects, they indirectly contribute to a country’s long-term growth.
- Indian Example: SBI Capital Markets arranged financing for metro rail projects in multiple cities, boosting public transport infrastructure.
- Global Example: Barclays Investment Bank helped finance renewable energy projects in Europe, supporting the transition to green energy.
These projects not only improve public services but also stimulate employment and attract foreign investments.
6. Global Capital Flow Integration
Investment banks link domestic markets with global capital pools. Cross-border M&A, foreign direct investments (FDIs), and international debt issuances all rely on investment bank expertise.
- Indian Context: Morgan Stanley has been instrumental in attracting foreign institutional investment into Indian capital markets.
- Global Context: Citigroup often leads cross-border bond sales for emerging market governments, integrating them into the global economy.
This global integration allows developing nations to access low-cost capital and expand trade relationships.
What Services Do Investment Banks Provide
When we ask, “what services do investment banks provide?”, the answer spans far beyond just raising money. These institutions deliver a mix of advisory, financing, trading, and research services that cater to large corporations, governments, institutional investors, and, in some cases, high-net-worth individuals. Each service is designed to optimise a client’s capital structure, manage risks, and support strategic growth.
Investment banks typically divide their services into three main categories: Corporate Finance & Advisory, Capital Markets Services, and Ancillary Financial Services.
1. Corporate Finance & Advisory Services
Mergers and Acquisitions (M&A) Advisory:
Investment banks act as strategic advisors during mergers, acquisitions, divestitures, and joint ventures. They handle valuation, negotiation, and deal structuring to ensure the transaction benefits the client.
- Example: JPMorgan Chase advised Tata Motors during its $2.3 billion acquisition of Jaguar Land Rover, enabling Tata to enter the global luxury car market.
Restructuring Advisory:
When companies face operational or financial distress, investment banks assist in reorganising debt, assets, or business units to restore profitability.
- Example: SBI Capital Markets advised IL&FS on debt resolution strategies during its financial crisis in India.
Private Equity and Venture Capital Advisory:
Some banks connect high-growth companies with investors, structuring deals to secure funding while preserving ownership value.
- Example: Evercore advised a SaaS start-up in India on securing late-stage funding from Sequoia Capital.
2. Capital Markets Services
Equity Capital Markets (ECM):
Investment banks help companies raise equity by launching IPOs, FPOs, or private placements. They manage the entire process, from preparing a prospectus to marketing the shares.
- Example: Kotak Investment Banking led the book-running process for the LIC IPO, raising ₹21,000 crore.
Debt Capital Markets (DCM):
They arrange bond or debenture issuances for clients seeking fixed-income financing.
- Example: Citigroup facilitated a $3 billion sovereign bond issuance for the Republic of Indonesia, connecting it with global investors.
Underwriting Services:
Underwriting ensures the issuer receives the required capital by having the investment bank purchase unsold securities. This provides assurance to both the issuer and investors.
- Example: Goldman Sachs underwrote the Zomato IPO, guaranteeing the funds would be raised even in volatile market conditions.
3. Ancillary Financial Services
Sales and Trading:
Banks buy and sell securities, currencies, and commodities for clients or their own accounts, generating market liquidity and returns.
- Example: Barclays facilitates large corporate bond trades in Asia to meet institutional investor demand.
Research and Analysis:
Equity and fixed-income research reports guide institutional investors on market opportunities and risks.
- Example: Credit Suisse’s research division produces reports influencing large-scale investment decisions in emerging markets.
Asset Management:
Some investment banks manage client funds across stocks, bonds, and alternative investments to achieve targeted returns.
- Example: UBS manages assets worth over $4 trillion globally, offering customised portfolio strategies for ultra-high-net-worth clients.
Risk Management:
They create tailored risk-hedging products, such as derivatives, to protect clients from interest rate, currency, or commodity price fluctuations.
- Example: Citigroup advised Indian exporters on hedging against rupee depreciation through currency futures.
Functions of Investment Banking FAQs
1. What are the functions of investment banking?
The main functions of investment banking include raising capital through equity and debt markets, advising on mergers and acquisitions, underwriting securities, providing asset management, conducting market research, offering risk management solutions, and maintaining market liquidity. These services help businesses grow, investors earn returns, and economies expand.
2. What is the key feature of investment banking?
The key feature of investment banking is its ability to connect capital seekers with capital providers while delivering strategic financial advice. Unlike commercial banks, investment banks specialise in high-value transactions, complex deal structuring, and global capital market access.
3. What is the role of the investment banking unit?
The investment banking unit focuses on advisory, financing, and trading activities for corporate, government, and institutional clients. It structures deals, manages public offerings, facilitates mergers, and ensures regulatory compliance, making it a critical driver of capital market activity.
4. How do investment banks manage risk in the economy?
Investment banks manage risk by designing customised hedging strategies using derivatives, swaps, and futures. They help clients reduce exposure to interest rate fluctuations, currency volatility, and commodity price changes. This risk management function supports financial system stability.
5. What services do investment banks provide?
When asked “what services do investment banks provide?”, the answer covers capital raising, mergers and acquisitions advisory, underwriting, asset management, sales and trading, market-making, research, and risk management. These services benefit both private and public sector clients globally.
