Corporate Banking Typically Refers To Financial Services Offered To Large Clients (Wholesale

Corporate banking, also known as business banking, refers to the aspect of banking that deals
with corporate customers. They make loans that enable businesses to grow and hire people,
contributing to the expansion of the economy. The term was originally used in the United
States to distinguish it from investment banking after the Glass-Steagall Act of 1933 separated
the two activities.
Corporate banking typically refers to financial services offered to large clients (wholesale
clients).
The services offered by corporate divisions of banks include:
(a) General commercial banking activities.
(b) Services particularly tailored to large clients such as multinational companies.
Corporate banking is a key profit center for most banks; however, as the biggest originator of
customer loans, it is also the source of regular write-downs for loans that have soured.
Corporate Banking
The corporate banking segment of banks typically serves a diverse clientele, ranging from small-
to mid-sized local businesses with a few million in revenues to large conglomerates with billions
in sales and offices across the country. Commercial banks offer the following products and
services to corporations and other financial institutions:
Loans and other credit products: This is typically the biggest area of business within corporate
banking and, as noted earlier, one of the biggest sources of profit and risk for a bank.
Treasury and cash management services: Used by companies for managing their working
capital and currency conversion requirements.
Equipment lending: Commercial banks structure customized loans and leases for a range of
equipment used by companies in diverse sectors such as manufacturing, transportation, and
information technology.
Commercial real estate: Services offered by banks in this area include real asset analysis,
portfolio evaluation, and debt and equity structuring.
Trade finance: Involves letters of credit, bill collection, and factoring.
Employer services: Services such as payroll and group retirement plans are typically offered by
specialized affiliates of a bank.
Through their investment banking arms, commercial banks also offer related services to their
corporate clients, such as asset management and securities underwriters.
Corporate banking is all about providing a range of tailored banking services, in particular loans,
to companies (rather than people) to help them run their day-to-day operations. Corporate
bankers often called ‘relationship managers’ (RMs) because they are tasked with growing client
relationships over the long-term rather than focusing on a single deal.
If that sounds a bit dull, bear in mind that corporate banking is a key profit centre for many
large banks and has been rising in prominence since the financial crisis showed up the more
speculative activities of trading and investment banking. By helping their clients to grow their
businesses, corporate bankers also play an important role in the expansion of the wider
economy.
While corporate banking is often used interchangeably with the term “commercial banking”,
the latter is actually an even broader sector and typically encompasses not just corporate
banking but also retail/consumer banking services to individuals. Some firms run corporate
banking separately from investment banking, while others – like Deutsche Bank and J.P.
Morgan – combine the two divisions to allow bankers to cross-sell products to their larger
clients.
By helping their clients to grow their businesses, corporate bankers also play an important role
in the expansion of the wider economy
Corporate banking clients come in all shapes and sizes, from multi-billion dollar conglomerates
to small and medium-sized enterprises (SMEs) with a few million in revenues. Smaller
companies can generate large revenues for banks if you have enough customers, so some
banks have dedicated SME teams.
Corporate bankers also tend to manage clients in just one or two industries – healthcare,
communications or retail, for example – and they develop highly specialised product knowledge
and financing expertise as a result. Those servicing energy, mining or utilities companies might
be project finance experts, working out the business case for funding a new power plant or
mine.
Providing loans is one of the main services that most corporate bankers provide regardless of
industry. They are tasked with structuring and arranging the terms of the loan for their clients –
for example, a single bank can arrange a secured loan for a company, which is relatively
straightforward. On the other hand, banks could be involved in a more complicated ‘syndicated
loan’, where several banks combine to provide the funds for a loan, spreading the risk amongst
them.
A loan can also be specific to what the company is using it for – as the name implies,
‘equipment lending’ involves customising loans and leases for equipment in sectors like
manufacturing and transportation. Although loans and other credit products typically make up
the bulk of a corporate banking division’s business, they are also its greatest source of risk if the
loans go sour.
Corporate banking clients come in all shapes and sizes, from multi-billion dollar conglomerates
to small and medium-sized enterprises
Corporate banking extends beyond loans, however. ‘Transaction banking’ is an important sub-
set of corporate banking and includes both cash management and trade finance. Cash
management involves collecting and managing a company’s cash to ensure its financial stability,
managing changes in foreign exchange rates, and offering treasury solutions. Corporate banks
routinely provide trade finance services – such as factoring and export credit and insurance – to
clients with international operations. The most common service is a ‘letter of credit’, a bank-
backed guaranteed payment to the exporter.
Corporate banking involves a range of other services, such as commercial real estate (banks
might help with portfolio evaluation, real asset analysis, and debt and equity structuring) and
employer services (including payroll and group retirement plans). It also provides similar
services to those offered by retail banks to members of the public – the issuance of cheques
and bank drafts, or overdrafts, for example.

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Corporate banking, also known as business banking, refers to the aspect of banking that deals

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