Business Models of Financial Companies
Financial companies are financial institutions that facilitate the exchange of money. Financial services include a wide array of financial businesses, which encompass all the financial institutions that handle money, such as banks, credit unions, credit card companies, investment firms, etc. The financial services are categorized into two types: commercial and consumer financial services. In order to understand the differences between these two types of financial companies, let us have a look at the main financial services offered by the financial companies.
Commercial banks: A commercial bank is a financial company that lends money to businesses on the basis of collateral. In other words, the interest charged by a commercial bank is largely based on the risk associated with the loan. Commercial banks earn their revenue by extending credit and making loans. Banks generally lend up to 100 percent of the capital value of the asset. There are many types of commercial banks such as commercial banks, savings and loans, commercial mortgage companies, trust banks and thrift institutions.
Citigroup: The consumer financial sector also includes Citigroup. Citigroup is the fifth largest financial company in the U.S. by market cap. It is a global bank providing a range of financial products and services to the individual consumer and businesses. The consumer sector of Citigroup includes lender financing, insurance, savings and loans, commercial banking, investments, debt and consumer goods industries. As of now, Citigroup is undergoing rapid growth in order to meet the demands of the financial market.
Investment Bank: An investment bank is a specialized financial company that makes commercial loans, buys, sells, and disburses equities. The main function of investment banks is to make available a wide range of financial products to corporate borrowers. It also acts as a bridge between lenders and borrowers by providing investment management solutions to corporate borrowers. The investment banks derive most of their income from fees paid to them for their services. Other revenue sources include interest and dividend earnings from various financial companies and equity investments by the investment banks.
Private Placements: Private placements are a special type of financial transaction in which financial companies offer to buy or sell shares of certain specified private entities. These placements require upfront payments from the buyers or sellers of the securities. These transactions are often used as a means of raising capital for mergers and acquisitions. Private placements can be used for a number of different business models.
Nasdaq Composite: The Nasdaq Composite includes the tradable stock indexes of Nasdaq Small Cap, Nasdaq Small Industry, and Nasdaq Industry Select. These stock exchanges maintain daily listing of securities that have traded on the open market. The Nasdaq is divided into three sub-branches: NYSE, NASDAQ, and AMEX. Some of the major stock exchanges in the United States are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the Chicago Board Options Exchange (CBOE).
finance : A major part of the financial sector is represented by the banking industry. finance of financial institutions exist in the US, including commercial banks, savings and loans, mortgage companies, credit unions, investment banks, and insurance companies. A wide range of products are offered by financial companies. In addition, most banks sell products through their respective brokerages. A few banks have gone public, however, these transactions involve much risk.
Bonds and Notes: Financial companies also issue notes and bonds for their investments. Typically, finance is an IOU that is secured by a specific asset. Bonds represent an IOU that represents a future bond payment. Both notes and bonds are traded on traditional exchanges such as the New York Stock Exchange and the NASDAQ. Many financial sector products are traded on the Pink Sheets.