The main business of the commercial bank is related to regular banking services, whereas merchant banks excel in providing consultancy and advisory services to the clients.
Loan extended by the commercial bank is debt-related.
Unlike equity related loans are granted by the merchant banks.
What is meant by merchant banking?
A merchant bank is a company that conducts underwriting, loan services, financial advising, and fundraising services for large corporations and high net worth individuals. Unlike retail or commercial banks, merchant banks do not provide services to the general public.
Is merchant banking and investment banking same?
While merchant banks engage in international financing activities, investment banks are concerned with underwriting and issuance of securities. Merchant banks provide trade financing facility to their clients. Conversely, there are only a few investment banks that provide trade financing services to its clients.
What is merchant banking and private equity?
Generally, a private equity firm manages private equity funds. A merchant bank is traditionally one integrated business (like a commercial bank). The merchant bank is capitalized by its owners, and borrows money, and then tries to earn a spread over the cost of borrowing.
How do merchant banks make money?
Making money: A commercial bank makes money by offering loans and earning interest. It also earns money by charging fees for checking accounts, ATM charges, charges on overdrafts, etc. On the other hand, a merchant bank makes money via fees they charge their big clients for providing financial services & consultation.