Forgive the dumb Q, but why is Lev Fin housed in IBDs separate from the Commercial Bank?
Is it that Lev Fin deals are just more complex? That they don’t stay on the bank’s balance sheet and normal commercial loans do?
Thanks in advance.
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Commercial banking tends to serve middle market clients. Their needs aren't as sophisticated as large corporates, so when they need to raise capital, they can just do so with debt for example - and doesn't have to be via the capital markets e.g., DCM/bonds. Not particularly large amounts either. Commercial banking also has a whole suite of other products like cash management, treasury services, cross border services, etc.
Lev fin is an Originations business i.e., they don't use their own balance sheet, they earn money from fees, not interest (unlike CCB). They deal with Sponsors for quite large transactions and M&A situations. They access the capital markets (HY Bonds).
Some key differences of why levfin is IBD/Capital Markets and not CCB.
Super helpful - thank you.
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