It is worth highlighting that not all banks are the same in terms of the services that they offer.

While most large banks do have some elements of both commercial and investment banking, we're going to consider the differences between these two types of banking, since there are significant differences between the operations and, as a result, an impact on how the financial statements of these banks will look.

To begin with, let's first think about the fundamental business models.

Commercial banks take in deposits and make loans, profiting from the difference between, or margin on, the interest income on loans and the interest expense on the deposits and other debt financing.

Investment banks provide advisory services such as M&A activity or financial structuring, capital raising, both debt and equity, and trade execution services, for which they earn fee and underwriting income.

Another difference is in terms of the revenue profile.

For commercial banks, revenues tend to be relatively stable, driven by that interest margin. While investment banking revenues are much more driven by deal and transaction volumes, which are more closely aligned to the performance of financial markets.

In terms of costs, commercial banks have substantial infrastructure costs covering customer service, either in-branch or virtually, regulatory compliance requirements, and having the right technology in place to support digital banking.

In addition, commercial banks can suffer significant credit losses from defaulting loans if the risk of loss isn't adequately managed.

For investment banks, the biggest costs are staff costs, with senior experienced individuals providing tailored advice and increasingly technology-related staff costs.

Beyond their core revenue model, both types of banks look to generate additional sources of income.

For commercial banks, the focus is on generating fee income to support the net interest income, including cash management services or foreign exchange for companies, or credit card or mortgage fees for retail customers.

The additional fee income that investment banks look to generate is from diversifying their income streams, including private and wealth management and treasury services such as settlement and custody.