What is the Difference Between Investment Bank and Commercial Bank?

The main difference between investment banks and commercial banks lies in the services they provide and the clients they serve. Here are the key differences:

• Clientele: Commercial banks serve consumers and small to medium-sized businesses, providing services such as loans, bank accounts, and credit cards. Investment banks, on the other hand, primarily serve large corporations and institutional investors.
• Services: Commercial banks focus on taking deposits, making loans, and safeguarding assets. They also offer services like wealth and asset management, broker services, and financial advisory services. Investment banks, however, assist institutional investors and corporations with financial needs, such as raising capital through stocks and bonds, mergers and acquisitions (M&A) services, and financial advisory services.
• Profits: Commercial banks generate profits from fees on services and interest on loans. Investment banks make money primarily through fees for the services they provide, such as helping companies issue stocks in an initial public offering (IPO) or assisting with mergers and acquisitions.
• Funding: Commercial banks use consumer deposits to fund loans and mortgages. Investment banks raise capital by selling stocks and bonds.

In summary, commercial banks cater to individuals and small to medium-sized businesses, providing a range of financial services and products, while investment banks focus on assisting large corporations and institutional investors with capital raising and financial advisory services.

Comparative Table: Investment Bank vs Commercial Bank

Here is a table comparing the differences between investment banks and commercial banks:

In summary, investment banks primarily serve large corporations and institutional investors, focusing on complex financial transactions and capital raising. On the other hand, commercial banks cater to individuals, small businesses, and corporations, providing a range of financial services such as loans, deposit accounts, credit cards, and wealth management services.