Business — Banking — Management — Marketing & Sales

Commercial banks. Merchant and Investment Banks

Category: Branches

Commercial banks

These banks, also known as «retail» of «clearing» banks, are usually understood to be banks that provide a «full» range of services via an extensive branch network and receive a large part of their funding from the public in the form of retail deposits.

In these commercial banks, several specialities exist:

Savings banks, which specialise in deposit collecting. Their main responsibility is to safeguard savings from people.

Export-import banks, whom, to the contrary, are supposed to focus on corporate business, and finance foreign exchange.

Regional banks, whose business is to offer lending and deposit services to all kinds of customers in a restricted area.

Universal banks, which intend to develop in providing all types of products/services to all types of customers, while trying to cover the largest possible area.

Merchant and Investment Banks

Merchant banks historically were primarily active in the financing of international trade. They prosper by exploiting various market niches, and a willingness to participate in equity ventures, as well as a wide and specialised variety of banking services generating fee (as opposed to interest) income. Among this category, we can identify several speciality banks:

Asset management specialist banks, whose business is first of all to sell investment products and services aimed at investors of specified size and profile (specialists of pension funds asset management are not the same as specialists in private wealth management).

Trading and arbitrage banks. These are specialists of financial markets and take position on behalf of their customers or for their own account.

M&A banks. Those banks are specialists in arranging and financing capital deals: mergers, acquisitions, divestitures, buy-outs, etc. These require only a small team of high level specialists, and a very narrow or non-existent network.

Example: Svenska Handelsbanken

Objectives and principles (source: annual report):

Handelsbanken’s central objective is to have a higher profitability than a weighted average of other listed Swedish, Norwegian and Finnish banks.

Our cost level should be lower than in other banks

Profitability must always be given higher priority than volume. It is intended that higher profitability should benefit the shareholders via a higher dividend growth than the average for other Swedish banks/

Second: the branch network

What is the rationale of its branch network? What is it made for?

What are its advantages and its handicaps compared with the market as analysed previously?

The first stage is to examine the current network, in the light of the bank’s strategy. Is it consistent?

But before being able to answer this last question, give trainees tips on how to analyse their current network.

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