Define a "Balance Sheet Bank"
Just wondering why the bulge bracket banks are considered balance sheet banks as opposed to your traditional EB's. Is it because these BB banks do retail banking as well and therefore have a balance sheet from all their deposits/loans and therefore can use their retail banking operation to facilitate loans to bigger companies?
How does a bank like goldman provide loans if they dont have retail?
Balance sheet banks are more like BAML and Citi where business relies a bit more on relationship Lending vs a Morgan Stanley or Goldman Sachs.
The term to me means that banks like BAML, Citi, WF, and probably JPM have a fairly heavy traditional banking operation (deposits and lending) so typically are more focused on their position (balance sheet), more/less, in order to facilitate their main business.
BBs are known as "balance sheet" banks because on top of the advisory services which EBs also provide, they provide debt/equity capital to their clients.
For example, GS might be advising a particular client on a buyside M&A transaction and at the same time be lending to the client to help fund the acquisition. On the other hand, an EB's role would be purely advisory.
That's not the case. Balance sheet banks as alluded to above are the likes of BAML, Citi, JP, WF, BNP, HSBC etc who have a balance sheet sufficient to provide extremely strong financing capabilities. GS and MS, despite their size, still wouldn't be considered balance sheet banks. Not all BBs are balance sheet banks, and not all balance sheet banks are BBs.
Maybe you're correct but I've always heard the terms "bulge bracket" / "integrated bank" / "balance sheet bank" used interchangeably.
Bulge bracket banks are 9 banks known for their particularly strong IB capabilities. A fully integrated banks offers all the products and services you'd expect from retail / commercial / investment banks. A balance sheet bank is a bank which offers IB services and has a large balance sheet which it can leverage for financing mandates. While most BBs are fully integrated and may be considered balance sheet banks (JP, BAML, Citi, DB, Barclays), the terms cover 3 different types of banks and should not be used interchangeably.
MS's B/S is 800B long dude.
Yes, MS, GS, and CS actually have pretty large balance sheets, but they aren't able to throw them around in the same way BAML is. The banks with bigger retail arms can essentially win business through their ability to finance deals, whereas the banks with smaller retail arms can't deploy capital as easily and so they traditionally have to go about winning M&A mandates from a "quality of advisory" angle.
It's not as simple as having a big balance sheet (though I'd say that's a pre-requisite). It's about having a low cost of funds, being well capitalized relative to your commitments, having the ability to syndicate large exposures which otherwise would paralyze your bank, etc. JPM/BAML/Citi can do this because they get cheap funding from their deposits, and have a long established track record as lenders alongside their IB advisory business (people forget that JPM had become a pure commercial bank for about 50 years before it got back into IB).
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