While this is an investment banking-related blog, it would be instructive to explain the concept of a commercial bank, if only to contrast what they do with what investment banks do. At the same time, universal/integrated banks like Citi and JPMorgan can really only be understood after you understand both their commercial and investment banking components.

First and foremost, commercial banks are what people on the street normally see. These are the so-called normal banks where you deposit and withdraw money (and do many other things of course). In the UK, these are banks like NatWest or Lloyds TSB, while in the US, we’re talking about banks like Citibank (i.e. the commercial banking component of Citigroup), Bank of America (which also has an investment banking arm, though a relatively small one) and Capital One.

Okay, so what do these banks do? Among others, they:

• Take deposits from individuals and institutions, and pay interest on them.
• Lend money, whether in the form of overdrafts (short-term) or longer-term loans (e.g. mortages on houses).
• As an extension to the previous point, these banks also provide credit card services.
• Provide trade finance and other services to companies.

It is important to note that commercial banks serve both individuals and companies/organisations/governments. The former is called retail banking, while the latter is called wholesale banking.