Updated: Sep 6
Investment banking night summary
“Walk me through a DCF” …
As a student looking to break into banking, I’m sure this is a question most of you have memorised the answer to. But this question and many more like it just scratch the surface of what is needed to get into investment banking’s coveted positions.
If you have only just found investment banking and want to learn more about what it’s like to work as an analyst, or you are starting your internship next week and need to know whether it’s more professional to wear a grey or black R.M quarter zip, this article will have something for you.
Recently, the Financial Student’s Association hosted a “Fast Track to Investment Banking” night. The session featured an informative panel discussion with investment banking analysts and associates from Credit Suisse, J.P. Morgan, Macquarie, MA Financial, and Flagstaff Partners.
There were many fantastic answers from our panellists that provided students with clarity and focus for investment banking interviews.
Q: What are the biggest challenges graduates or interns face when entering the field?
Investment banking is a very fast paced industry and there will be a lot of stuff that you don’t know when first entering the job. It’s crucial to learn very quickly in your first few months and to ask a lot of questions because the people senior to you will be more than happy to answer questions and clarify. It’s very important to learn from mistakes and understand that there may not be an experienced analyst or associate to assist you, so you will need a level of autonomy to seek out answers through colleagues and online.
Technical skills can be very challenging and there is a massive learning curve when first starting as an analyst. Be persistent and just make sure you’re keeping yourself busy and try not to burn out. To that extent, it’s very important to ride the ups and downs so that you don’t burn out i.e., get a coffee and catch up with a mate if you have a free hour or two.
Q: What are things that students can do in each year of their degree to prepare themselves for banking:
In the first year just keep your options open and have fun. Try to join as many clubs as you can and do stuff that you wouldn’t normally do to expand your horizons. Try and develop or maintain your life outside of university, as it will help you with work/life balance when you progress into your career.
In the second year, try and just make sure your WAM is high enough. Anywhere between 75-80 is typical for breaking into investment banking but it’s not a guarantee so anything above that will have you in good stead.
In your third year try and get some work experience and especially look to get into an internship program. A lot of banks do them but any exposure to finance will provide you with an understanding of the etiquette and improve your chances of securing a role in IB.
Q: What does a typical interview look like?
1. Resume and cover letter
2. Online testing
3. 1st round interview with analysts and some associates
a. Technical and behavioural questions
b. Personal questions
4. 2nd round interview with more senior personnel
a. Trying to see if you are a good fit for the team and have the right attitude
(The interviewing process did differ depending on the bank, but this is the most popular process)
Q: What are some standout qualities in a potential candidate:
When applying for interviews, it’s important to have a concise and clear resume structure with a cover letter that can paint a vivid picture of who you are as a person. Also, within the cover letter tailor it to that specific firm, don’t just use a generic template.
When a candidate can speak to a deal that the bank has previously worked on with a good level of understanding it’s a very good way to make personal connections with interviewers as they may have been involved in the deal-making process. This would typically involve asking questions about why a specific valuation method was chosen and some obstacles that the team had to overcome. It shows a level of genuine interest that can distinguish you from other potential candidates.
During the interview, it’s very important to convey your individuality to the employers and don’t act how you think they expect you to. Showing that you’re a great communicator that can hold a conversation and is easy-going is what most recruiters look for.
In technical questions, memorizing answers may get you through the first five minutes but interviewers often ask you to explain the intuition behind the answers. As a result, it’s best practice to take the extra time to understand the fundamentals instead of trying to learn the answer to every practice test. While there are drawbacks to this, when you don’t know the answers to questions our panellists suggested that you can draw upon these foundations when you don’t know the answer to the question in such a manner that “I know X and I know Y, so it must be some combination of them”. You WILL be tested to failure, and you are expected to answer even if you don’t know. If you need more time to answer a question you can ask for a second to think or take a drink of water without judgement.
A common question often asked will ask you to tie in a situation where you displayed leadership or problem-solving skills. Before your interview, take some time to write down 2-3 things about yourself for a range of situations and try to avoid repeating the same thing.
At the end of the day, understand that it’s the interviewer’s job to test you to failure and put you in an uncomfortable position to see how you handle pressure. Staying composed and relying on logic will give you the best chance at success.
Q: What types of technical questions are asked in interviews
Discounted cashflow analysis
Leveraged buyout offering
Multiples (trading comps)
Trading comps are an analysis of similar listed companies and determining implied value based on share price
Precedent transaction comps involve an analysis of similar companies when they were acquired and the value of the sale
Accretion/dilution analysis measures the impact of a merger or acquisition on the buyer’s post-deal (Pro-forma) earnings per share.
Cost of capital and WACC calculation
Company and industry-specific questions
Understand the underlying factors that can affect the valuation and performance of a company for 2-3 different sectors
The night was packed full of knowledge and experience that we’re sure everybody found extremely useful.
Be persistent when you’re going through the interview process and understand that there is a myriad of factors that can affect your chances of success; some of which are out of your control.
From all of us at the FSA, we want to thank our representatives that came and shared their insights with us. We also want to extend a massive thank you to the students that attended, and we hope that you enjoyed the night, walking away with a better grasp on not only what a job in investment banking may offer, but how to secure your spot in the close future.