Deutsche Bank Starts Shrinking

Well the basic idea is that an investment bank is in the business of helping companies raise money from investors. You’ve got your companies, and you’ve got your investors. It’s a business of connections, networks of information and access. You have some people—commercial bankers, investment bankers—who talk to the companies all day, and you have some people—traders, salespeople—who talk to the investors all day, and when a company wants to raise money the people who talk to the companies talk to the people who talk to the investors and work something out.

Generally there is a sense that there are synergies in having both groups, the people who talk to the companies (sometimes called the “corporate business”) and the people who talk to the investors (the “institutional business”). If you are tight with a lot of investors, then when a company wants to sell stocks or bonds it will come to you; this will help you win a lot of other corporate business (merger advising, lending, cash management). If you are tight with a lot of companies, then when investors want to buy new stocks and bonds they will come to you; new stocks and bonds are often the best ones to buy, so this will help you win a lot of other institutional business (trading stocks and bonds, doing derivatives trades). To be a full-service investment bank for corporate clients you ought to have the institutional business; to be a full-service investment bank for institutional clients you ought to have the corporate business.