Difference between Investment and Retail Bank

Investment Bank

An investment bank is involved in arranging capital and providing advisory services for institutional clients who plan to invest in capital markets. Their main income comes from selling the securities of public and private companies to institutional investors. Investment banks are also earning revenues by providing consultancy services to corporations in areas like buyouts, mergers, and initial public offerings. The field of investment banking is an important part of corporate or commercial banking that also focuses more on institutional clients than individuals. Investment banks also serve the capital market needs of institutional and corporate entities, apart from providing advisory services.

When any company needs to get additional capital via the issuance of debt or equity, investment banks take the responsibility of underwriting the security that is issued on behalf of institutions seeking capital. They provide consultancy services regarding the conditions and trends of the capital market, mergers and acquisitions and corporate finance. Investment banks generate their revenues primarily through the fee income that is negotiated as a part of the capital market transaction. The services provided by investment banks help to serve the economic needs of not just one single country but the entire global market.

Retail Bank

The retail banks are responsible for providing banking services as well as loans to individuals and small businesses. Their main area of focus is individual customers and their need for services like checking accounts, deposits and loans. Retail banks are also involved in providing ancillary services like automatic payment services and safe deposit boxes. The services provided by retail banks are often referred to as consumer banking, personal or retail banking services.

The customers are typically served in local markets via automated or branch tellers and the typical customers are individuals, small businesses and families. The depository activities also include things like savings accounts, checking accounts and certificates of deposit. Lending focuses on areas like personal credit (credit cards or personal line of credit), vehicle loans, home mortgages and other types of financing for larger consumer purchases. The retail banks also make money via charging fees (for credit cards, debit cards, checking accounts and other services) and interest income from loans. The key performance drivers for retail banks typically include things like geographic coverage and deposit growth. The banks also leverage technology, which will help it to grow their customer base.

Difference between Investment and Retail Banks

Both investment and retail banks have their advantages for the customers. They are also important for the proper functioning of the economy of a nation. However, it is important to note that there are many areas of difference between investment and retail banks, and we will discuss them below to get a better insight into this topic:

Investment Bank

Retail Bank


The investment banks are largely responsible for handling the financial transactions related to large corporations, institutions and the government.

The retail banks are largely responsible to cater to needs of the general public and take care of their daily monetary transactions.


Investment banking is involved in organising and supervising transactions of relatively larger monetary value.

Retail banking is involved in overseeing transactions of relatively smaller monetary value.


Investment banking offers services, such as underwriting, debt security, merger, and acquisitions, etc.

Retail banking grants access to services, such as individual bank accounts, loans, depositing and withdrawing money, ATM/Debit/Credit cards, etc.


Investment banking is constructed for the specific purpose of helping larger institutions to raise capital and advise them about investing.

Retail banking is mainly focussed on facilitating the daily and routine transactions of the general public.

Network of branches

There are not too many investment banking branches available locally.

There are a number of retail banking branches available locally.


Banking is a service that is involved in handling credit, monetary transactions and other finance related issues. Banks also provide the space for people to regularly transact money in a safe and secure manner. There are relatively minimal chances of losing one’s hard earned money through this channel. Both investment banking and retail banking are very different from each other.

Frequently Asked Questions

What is the main role of investment banks in the mergers and acquisitions of companies?

Investment banks play a very important role in the merger and acquisition of companies through the following steps:

  • They create different models to determine the valuation ranges for any company.
  • They conduct accretion or dilution analysis to make an assessment of the affordability for the acquiring company and the actual effect of consideration paid on the projected earnings.
  • They also help clients to evaluate the synergistic opportunities that will come from acquiring other firms

What is the role of investment banks in helping companies raise capital?

Investment banks play a major role in helping companies raise capital through the following steps:

  • They primarily help the clients raise money by way of debt and equity offerings. It includes raising funds by the method of Initial Public Offerings, selling shares through private placements, credit facilities with the bank or issuing and selling bonds on behalf of the client.
  • They serve as an intermediary between the investors and the firm. They get advisory fees for these services. Clients utilise investment banks to raise capital because of their expertise in valuation, access to investors and experience in bringing many companies to the market.
  • They will buy shares directly from the firm and sell at higher prices.

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