Help with Basic Q: Bank using balance sheet?
Hello--apologies if this is a basic question, but I've seen the term "balance sheet" being thrown around on this site for investment banks.
I've read a comment that says "Bank X relies on their balance sheet to win deals, whereas bank Y is more advisory"... what does it mean for a bank to rely on their balance sheet? Does it mean they use their previously built relationships?
Thanks for any input.
It means lending money. Essentially a form of bribery.
Got it, so when banks use their balance sheet to win deals it is less impressive? What are some other ways to win deals?
Thanks again
Yes in two different dimensions: from the shareholders perspective using credit to win deals turns a high return on equity business to a low one before even taking account the possibility of crippling loan losses in a recession. From the employees perspective, in general the more an employee is responsible for winning the business as opposed to the firm, over the long term on average the employees share of the profits are higher than would be otherwise.
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