The investment bank sector
Because the investment banks also take the lead role in arranging finance for the firms in the ‘front line’ of financial services provision (the commercial banks, building societies and insurance firms), they clearly perform a critical role within the superstructure of the industry. Indeed, many of the leading commercial banks do have investment banking arms – Barclays Investment Bank (formerly Barclays Capital), for example, is the investment banking division of Barclays plc.
The table below provides details of the main investment banks that are active in the UK. One interesting point to note is how many are overseas-owned (US ownership, in particular, is prevalent), emphasising the truly international nature of this sector of the industry.
| Market capitalisation | |
|---|---|
| J.P. Morgan Chase | $231bn |
| Bank of America (owners of Merrill Lynch) | $167bn |
| Citigroup | $153bn |
| HSBC | $151bn |
| Goldman Sachs | $80bn |
| Royal Bank of Canada | $79bn |
| United Bank of Switzerland (UBS) | $78bn |
| BNP Paribas | $77bn |
| Barclays | $66bn |
| Morgan Stanley | $66bn |
| Credit Suisse (owners of Credit Suisse First Boston, CSFB) | $43bn |
| Deutsche Bank | $40bn |
| Société Générale | $38bn |
The 2007/08 financial crisis had a materially damaging impact on the investment banks, with the greatest casualty being Lehman Brothers, which collapsed in September 2008. Other investment banks, including Bear Stearns and Merrill Lynch, were taken over (by J.P. Morgan and Bank of America respectively), and some others had to seek governmental support. The investment banking sector is therefore very different now from what it was prior to 2007. Note that some of the banks listed in the table also undertake commercial banking activities in addition to the services provided by their investment banking arms.