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A merchant bank is a profit-making wholesale bank that offers medium and large-scale financial services to wholesale clients.

It can also be defined as a financial institution that specializes in offering wholesale banking services to large corporations and high-net-worth individuals.

Merchant banks among other things, deal in commercial loans, engage in underwriting of securities and accept bills of exchange.

While commercial banks provide financial services to the general public, Merchant banks provide financial services to High net worth individuals and large corporations.

Functions Of Merchant Banks

1. Accept deposits: Merchants banks accept large deposits from large corporations and high net-worth individuals in the form of fixed deposits.

It's vital to note that merchant banks only accept deposits from major organizations; they don't accept deposits from the general public as commercial banks do.

Merchant banks in Nigeria are only permitted to receive deposits of at least 100 million naira 

2. Provision of long-term loans: While commercial banks provide short-term loans to individuals and businesses, merchant banks provide medium and long-term loans to large corporations.

3. Advises client: In addition to providing loans and finances, Merchant banks also advise corporate entities on matters relating to finance

Such advice could include: how to best increase equity shares or how to diversify the firm's investment portfolio to reduce risk.

Furthermore, they provide project management advice to huge corporate entities. They may advise their customer on the best way to complete a project, as well as provide advice on the feasibility and viability of a project

4. Portfolio management: Merchant banks help institutional investors manage their existing investment portfolios.

In most cases, they purchase and sell securities for their client to provide portfolio management

5. Underwriting of shares: Merchant banks are frequently used by large corporations to raise funds on the stock market. 

To achieve this, merchant banks usually evaluate the amount of stock to be issued, the worth of the business, and the use of proceeds.

 In most cases, they handle all the necessary paperwork and collaborate with the relevant marketing division to publicize the stock.

6. Loan/credit syndication: This can be defined as the process of involving different lenders in providing various portions of a single loan.

Merchant banks provide this service by engaging the services of a group of financial institutions to finance a business venture.

7. Leasing services: Leasing is another service provided by merchant banks to their customers.

A lease is a legal agreement between two parties, in which the lessor allows the other person called the lessee to use a specific asset for a specified period in exchange for a rental payment.

Merchant bankers help their clients by providing financing for the acquisition of assets leased on a long-term basis.

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