Investment banks play a major role in global financial markets, but their business model is very different from traditional banks. They don’t earn money from savings accounts or personal loans. Instead, they generate revenue by offering specialized financial services to corporations, governments, investors, and other institutions. Here we explain the main ways investment banks make money—and who pays for these services.
Earning Fees for Expert Advice
Investment banks make money by giving expert advice on big financial decisions. These include mergers, acquisitions, selling companies, restructuring debt, and other complex deals. Banks charge advisory fees for this service. These fees are paid for the bank’s time, expertise, and ability to guide clients through high-stakes transactions.
Most advisory fees are success-based, meaning the bank only gets paid if the deal is completed. Fees are often a percentage of the deal size. Big deals can bring in millions. For example, JPMorgan earned over $3.2 billion in advisory fees in 2024 alone, making it one of the leaders in this space.
Banks also earn fees when they help struggling companies restructure debt to avoid bankruptcy. For example, Thames Water’s £19 billion debt restructuring in 2025 involved several banks earning fees estimated in the hundreds of millions.
Banks charge fairness opinion fees when boards or shareholders need an independent check on whether a deal is financially fair. Pure advisory firms like Lazard and Evercore earn most of their income this way, but larger banks like Goldman Sachs also report billions in advisory fees every year.
Getting Paid to Raise Capital
Another major source of revenue is underwriting fees. These are earned when banks help companies or governments raise money by selling stocks or bonds. Banks structure the deal, set pricing, and find investors. They often guarantee the sale by buying the shares or bonds themselves before reselling them to the public. This makes underwriting risky but potentially very profitable.
These deals are split between Equity Capital Markets (ECM), where banks help sell company shares, and Debt Capital Markets (DCM), where banks help issue bonds.
Famous examples include the Saudi Aramco IPO in 2019, where banks earned around $90 million in fees on a record $29.4 billion deal. Another example is Facebook’s 2012 IPO, which raised $16 billion and generated around $176 million in fees for banks like Morgan Stanley and Goldman Sachs.
Underwriting fees are bigger when markets are strong and companies are eager to raise money. They tend to shrink when markets are slow or uncertain. Still, underwriting remains one of the most important ways banks make money by connecting clients to investors.
Charging for Market Access
Investment banks also make money through commissions, or brokerage fees. These are earned when they execute trades for clients like hedge funds, pension funds, and asset managers. Clients pay banks to help them buy or sell stocks, bonds, currencies, and derivatives.
While technology has made trading cheaper and faster, banks still earn billions each year in commissions. In 2023, global equity trading commissions brought in over $42 billion for the top investment banks.
Clients pay higher commissions for complex or large trades that require human expertise. Banks also provide prime brokerage services, where hedge funds pay for trading, custody, and financing in one package.
Making Money from Trading
Investment banks don’t just act as agents for clients. They also trade financial products using their own capital. This is called trading income. When banks buy and sell securities—like bonds, stocks, or currencies—they make money from price changes or bid-ask spreads.
Most trading today is client-driven, meaning banks make markets by buying and selling what their clients need. In 2020, during the COVID-19 crisis, Goldman Sachs earned $7.2 billion in one quarter from trading bonds and currencies, showing how important this revenue can be in volatile markets.
Banks also create structured products, like custom investment solutions, and earn revenue from managing the risks of these products.
Charging for Managing Investments
Some investment banks also run asset management businesses. They manage money for pension funds, insurers, wealthy individuals, and other investors. Banks charge management fees, usually based on a percentage of assets under management (AUM).
For example, JPMorgan Asset Management managed $3.1 trillion in 2023, generating steady revenue from clients who pay for professional investment management.
Banks can also earn performance fees if they deliver strong returns. For example, hedge funds often follow the "2 and 20" model—charging 2% of AUM plus 20% of profits above a target return.
This part of the business provides recurring income, which helps balance the more volatile earnings from trading or deal-making.
Earning Returns from Their Own Investments
Investment banks also invest their own money. They buy stakes in companies, invest in funds, or hold financial assets. When these investments grow in value, banks earn investment income.
For example, Goldman Sachs made early investments in Alibaba, Uber, and Facebook, earning significant profits when these companies went public.
Banks also co-invest alongside clients in private equity, real estate, or infrastructure deals. While this revenue is less predictable, it can be highly profitable when markets perform well.
Bottom Line
Investment banks make money in many ways. They earn fees for giving advice and raising money, commissions for trading, income from buying and selling financial products, management fees from running investment portfolios, and profits from their own investments.
Some of these revenue streams are stable and recurring. Others depend on market conditions and deal activity. Understanding how investment banks make money helps explain why they matter in the global economy and what drives their performance.