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Introduction to Investment Banking
Business Model
Learning Outcome
5
Connect business model to real-world finance
4
Understand value creation in investment banking
3
Recognize major client segments
2
Identify key revenue streams
1
Understand how investment banks make money
Story — How an Investment Bank Earns
Did you ever think...
If banks don’t rely on savings deposits… how do they earn?
Who pays investment banks?
Why would companies hire them?
Story — How an Investment Bank Earns
Imagine a growing company that wants to expand into new markets
but it needs money, expertise, and the right connections
So the company hires an investment bank
Story — How an Investment Bank Earns
The investment bank help them :
Advises the deal
Finds investors
Structures financing
Ensures execution
Story — How an Investment Bank Earns
Result :
Company gets funds
Investors get opportunity
Bank earns fees
Investment banking is a service-driven revenue ecosystem
Story — How an Investment Bank Earns
This simple story shows what a business model really is ..
In investment banking, it’s the system that explains how an organization creates value, delivers value, and earns revenue.
Now let’s explore the three pillars of the investment banking business model.
Pillar 1: Revenue Sources
Underwriting Fees
-
IPO/FPO management
-
Bond issuance
Advisory Fees
- M&A advisory
- Restructuring guidance
Pillar 1: Revenue Sources
Trading Income
-
Market-making
-
Proprietary trading
Interest Spread
-
Bridge financing
-
Structured debt placement
Pillar 2: Client Segments
Investment banks serve:
Key idea: Institutional-focused client ecosystem
Corporates
- Capital raising
- Expansion & restructuring
- Public fund raising
- Disinvestment programs
Government / PSUs
Institutional Investors
- Mutual funds
- Insurance firms
- Pension funds
Pillar 3: Value Creation
Investment banks contribute by :
Enabling Capital Efficiency
Faster, structured fundraising
Core insight: They strengthen capital flow in the economy.
Market Access
Connecting to global investors
Trust & Risk Management
Compliance, Accurate pricing, Financial stability
Real-World Integration
A company launching an IPO:
Revenue earned + value created = functioning business model.
Investment bank advises structure
Underwrites issue
Connects investor
Summary
4
Business model = revenue + clients + value creation
3
Their role improves capital efficiency and trust
2
They serve corporates, governments, institutions
1
Investment banks earn through service-based revenue
Quiz
Investment banks primarily earn through:
A. Savings deposits
B. Advisory & underwriting fees
C. Retail loans
D. ATM charges
Quiz-Answer
Investment banks primarily earn through:
A. Savings deposits
B. Advisory & underwriting fees
C. Retail loans
D. ATM charges
Foundations of Investment Banking & its Operations - Business model
By Content ITV
