How Is An Investment Bank Different From A Commercial Bank?

When navigating the financial world, the terms ‘investment bank’ and ‘commercial bank’ often arise. While both are integral to the banking industry, their core functions, services, and clientele differ significantly. Here’s a breakdown of both types:
Primary Functions:
  • Investment Bank: Focuses on assisting companies and governments in raising capital, either by issuing securities in the capital markets or providing advisory services for mergers, acquisitions, and other major corporate actions.
  • Commercial Bank: Primarily deals with deposits and loans for individuals and businesses. When you open a commercial bank account or apply for a commercial bank loan, it’s typically with a commercial bank.
  • Investment Bank: Their clients are corporations, institutional investors, and governments.
  • Commercial Bank: Serves a broad clientele, including individual consumers, small businesses, and large corporations.
  • Investment Bank: Services include underwriting, mergers and acquisitions advisory, asset management, and proprietary trading.
  • Commercial Bank: Offers services like accepting deposits, granting loans, mobile banking features, and other traditional banking services.
Revenue Generation:
  • Investment Bank: Earns primarily from fees for their advisory services, trading commissions, and investment profits.
  • Commercial Bank: Earns interest from loans, mortgages, and fees for various banking services.
Regulatory Environment:
  • Investment Bank: Generally subject to different regulatory guidelines focused on securities trading and corporate finance activities.
  • Commercial Bank: Comes under stringent regulatory scrutiny, especially concerning the safety of deposited funds and the integrity of their lending practices.
Unlike investment banking, which focuses on raising capital and advisory services, commercial banking directly serves individuals and businesses in their daily financial needs. They offer services like deposits, transactions, and loans, emphasizing accessibility and safety due to stringent regulations. Commercial banking is practical for those seeking regular and secure financial management.
At Peoples Bank & Trust, our commitment extends beyond mere transactions; we strive to build lasting relationships, understanding each client’s unique financial journey. With a robust suite of services, state-of-the-art mobile banking solutions, and a team dedicated to your success, partnering with Peoples Bank & Trust means aligning with a bank that prioritizes you. To learn more, contact us today at (770) 932-1900!