What is investment banking? (1 Viewer)

[seremify007]

Given the huge number of people who write up about wanting to get into IB, no doubt attracted by the marketing, brand names and salaries, how many people here have a decent understanding of what IB actually entails?

I work with a lot of IBers for my job when it comes to issuing debt products in various markets and would consider myself at the forefront of what's going on (e.g. Australian CB's), and I really do wonder if the people here who throw themselves at it hoping to get in actually know what they are wishing to sign up for.

 

[Azure]

I'm far from an expert on the topic, but I do know a few people who've gotten into investment banking and I can safely deduce that it is probably one of the most overhyped professions. Those who are trying to get in without the correct motivation will either fail miserably from the get go or will find it hard to stay afloat in my opinion.

 

[runnable]

I have a fair understanding of the industry. Maybe some basic information first?

Front Office

Investment Banking Division (IBD)
Mergers and Acquistions and Corporate Finance mostly. Some banks include Equity Capital Markets and Debt Capital markets in this too. Essentially ECM and DCM are just raising capital for companies using equity or debt. An IPO is example of ECM.

Sales and Trading (S&T)
As the name suggests, two distinct area in the Markets side of the business. This can be in areas such as Equities, Foreign Exchange, Commodities, Fixed Income, Derivatives etc. Trading deals with the execution of the trades in the market and Sales deals with the pitching and taking orders to and from institutional clients.

Equities Research (ER)
Conducting research in stocks of certain industries you specialise in. For example if you were in the Retail industry coverage, you may cover a number of stocks such as Woolworths and JB HiFi.

Back Office/Support
Functions such as IT, Human Resources, Accounting/Finance fall under this section.

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Merits of Different Investment Banks

Globally, 9 investment banks are known as the bulge bracket. Namely: Bank of America Merrill Lynch, Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS.

In Australia, these 9 have significant market position. Macquarie Bank is also very strong and considered a top tier investment bank in Australia, despite its recent troubles. Notable smaller boutique investment banks are Lazard, Moelis & Co, Greenhil Caliburn etc.

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Hours/Salary

Hours and pay vary between banks but for Banking work, usually 80-100 hours a week depending on activity. Markets work (S&T, ER) usually work market hours so weekends mostly off and around 6am-8pm on weekdays. Base pay vary from 80-115k depending on company and bonus will depend on performance throughout the year.

Let me know if I can add anything .

 

[enoilgam]

I'm far from an expert on the topic, but I do know a few people who've gotten into investment banking and I can safely deduce that it is probably one of the most overhyped professions. Those who are trying to get in without the correct motivation will either fail miserably from the get go or will find it hard to stay afloat in my opinion.

This. From what I have heard, IB is extremely hard to get into and the extremely high salaries arent obtained by many.

 

[Bendent]

ahh seremify i remember him irl. so powerful...so early

 

[Mature Lamb]

IB is gifs monies and mi parents say i haf to do

 

[runnable]

Perhaps entry is more interesting?

How to break in

I assume most people here are interested in entry level positions. A Graduate program is clearly the way to go. People can also take on an internship and receive a graduate offer at the end of it.

There are other ways too. Moving to an IB after some experience at a relevant business such as Big 4 Corp Finance or after doing Law at a law firm. You can also seek an MBA after some years of experience then apply to Associate programs at the end of the program.

What banks usually look for in screening

Resume Screening

Have your marks ready. Bonus if you have decent relevant work experience and ECs. A HD average is typical of people accepted into investment banking. You do need ECs and work experience to go with it so you don't appear like someone who just studies in a locked bedroom. However there are many instances of people with lower marks accepted and they must have very solid work experience and show incredible drive for the industry.

Interview Stage

Once you get to the interview stage your qualifications from your resume gets meaningless. You may be required to talk about the things on your resume.

Show genuine interest in the field, keep up to date with industry news and knowledge and be lively and cheerful.

Interviews are usually in two stages. First round interview with more junior bankers for technical interviews and also a to look at your organisational fit. Mostly technicals though, especially for Business/Commerce graduates.

Second round interviews are with more senior bankers who are more interested in your motivation and career plans. They also gauge your interest and dedication to the field. Perhaps a few technical questions but nothing like the first round interviews.

Number of interviews can range from 2 to 8 depending on organisation. Usually they are 1 on 1 or 2 on 1.

 

[Newbie]

i would argue that money is a great motivator and there is nothing wrong with that as the main reason for working in investment banking

I calculated i have made about about US$530k all up in 3 years (including 2008/09 GFC). Its not super huge by any means and small change compared to the super rich people but its also not bad for someone straight out of university. Compared to what PWC was offering (60k a year i think) its pretty good.

I think despite all the moments that make me want to ragequit, i would not talk someone out of wanting to do it

 

[runnable]

I calculated i have made about about US$530k all up in 3 years (including 2008/09 GFC).

That sounds like a lot for Hong Kong. Are you in trading? I know the package for Hong Kong bulge brackets and that's quite a bit over.

 

[Newbie]

No its investment banking and that number is total compensation, ie salary + bonus, pretax basis for comparability

That number is also on the low side as my firm has traditionally underpaid the street.

Australian banking pays the same if not more (my sydney office counterparts got higher this year) and i know the base pay in australia is higher also

 

[runnable]

That's weird because I've heard different.

530k (let's just say AUD is 1-1 even though back in 08,09 it's not) averages 177k per year. In progression terms, let's say 140k, 180k, 210k USD/AUD. At the top end of the market you might get those figures in New York but through GFC and also in Hong Kong? I know that Hong Kong intake receives a lower pay than Australia but you are suggesting 1 million HKD in your first year.

Underpaid the street and from the ones you listed before, I think I know which one you're at. If that's the case, I doubt the numbers even more. I'm not saying you're lying, just intriguing to me.

 

[Newbie]

lol actually your guess on each year are pretty close!

People outside of hong kong dont know this but hong kong pay is actually greater than NY pay because we have the so-called "housing allowance" which is another 25k a year cash. bonuses are paid in global equivalent levels.

Anyway i have no incentive to lie here (i dont possess an e-penis) and the older members will know im legit. Just here to give answers to questions people might be afraid to ask in real life

 

[Bendent]

hk yy disparirty is like 55. usa is 40 something meaning the pay is more balanced. and it's true if u go to hk regarding hte disparity

 

[runnable]

lol actually your guess on each year are pretty close!

People outside of hong kong dont know this but hong kong pay is actually greater than NY pay because we have the so-called "housing allowance" which is another 25k a year cash. bonuses are paid in global equivalent levels.

Anyway i have no incentive to lie here (i dont possess an e-penis) and the older members will know im legit. Just here to give answers to questions people might be afraid to ask in real life

HK usually takes US base + 20-25k housing + bonus on base. Still, 140k USD in first year is ambitious. I did some quick numbers, it takes huge percentage bonus to reach those numbers you provided. But good on you for getting those numbers.

I'm not trying to catch your bluff; just found some of your numbers weird.

And here's a suggestion, try not to get caught forum posting at work.

A note here is that Australian pay is actually higher than US/HK given the virtue of our exchange rate.

 

[seremify007]

Investment Banking Division (IBD)
Mergers and Acquistions and Corporate Finance mostly. Some banks include Equity Capital Markets and Debt Capital markets in this too. Essentially ECM and DCM are just raising capital for companies using equity or debt. An IPO is example of ECM.

I work primarily with people in DCM from the various US and Japanese banks. Their work is not something I could be stuffed dealing with everyday but I think some people would get a kick out of their forecasting/etc. To be honest I would even go as far to say the work itself isn't that hard, but it's the agility required and the sudden (and excessive) demands placed upon the staff who work there that make the job challenging.

And here's a suggestion, try not to get caught forum posting at work.

LOL I am doing that right now and a Partner just walked up to me. In all seriousness though, once you've built up a reputation in most professional workplaces, noone babysits you and watches over your back as long as you get the job done right.

 

[runnable]

To be honest I would even go as far to say the work itself isn't that hard, but it's the agility required and the sudden (and excessive) demands placed upon the staff who work there that make the job challenging.

I would say DCM is more vanilla and clear cut than other aspects like M&A and ECM. It has much lower margins too hence they get paid slightly less than M&A. Big 4 banks dominate DCM in Australia.

Good luck at work haha..

 

[Bendent]

^ rep me ivy's friend (seremify)

 

[Newbie]

im still confused as to why im justifying this - am i that hard to believe lol scanning my payslip now! haha

first year pay is salary + sign on + housing + bonus
60 + 10 + 25 + 45 total comp 140... thats 9 months bonus, ie GFC level

back to my point, IB will pay you 500k in your first 3 years. This is likely to be 2-3x what an accountant makes and no we dont work double the accountant's hours.

 

[Bendent]

thanks op

 

[muzeikchun852]

im still confused as to why im justifying this - am i that hard to believe lol scanning my payslip now! haha

first year pay is salary + sign on + housing + bonus
60 + 10 + 25 + 45 total comp 140... thats 9 months bonus, ie GFC level

back to my point, IB will pay you 500k in your first 3 years. This is likely to be 2-3x what an accountant makes and no we dont work double the accountant's hours.

so would hong kong be a better market for IBs career wise?