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Investment Banking 101: Start your journey towards an investment banking job

Throughout history (think Rothschild family, Rockerfeller family) and modern culture (think characters like Gordon Geckko from Wall Street and Jordon Belfort from Wolf of Wall Street) bankers have held a special place, for both good and evil reasons, in the society.

People have long flocked to the strong social reputation, fast-paced high paying jobs, front page of newspaper deals, and glamour associated with an enviable career in investment banking.

However, how many of people who aspire for career in investment banking actually know what an investment bank is or what an investment banker does?

This post will provide a Investment Banking 101 for career aspirants in investment banking

What is an Investment Bank?

Investment Bank is a financial services organization that acts as a middleman between investors (who have the money) and Organizations (who need the money). Investment Banks are involved when a firm prepares for raising capital (initial public offering (IPO) or through debt markets) or when organization acquires another company.

JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Credit Suisse, and Deutsche Bank are all among the world’s largest investment banks.

Three key activities of an investment bank

1. Financial Advisory

An investment bank may provide strategic guidance and informed financial advice to entities, which usually consist of private equity funds, mutual funds, life insurance companies, and hedge funds.

The advice can be in the following areas

  • Raising Finance: If a business is looking to finance a project or an acquisition for which they need to raise capital or if a business is interested in going public to raise funds and needs to come up with an appropriate initial public offering (IPO). If you want to work in this area, the key teams you can apply to are Equity Capital Markets, Debt Capital Markets

  • Mergers and acquisitions: Investment banks can also assist entities when they are looking to buy another business. They can offer advice to parties on both sides of the acquisition. For the business looking to acquire another, they can advise them in valuing the company and coming up with a realistic price. For the business being acquired, investment bankers can help evaluate the asking price.

2. Research

Investment banks have research divisions that evaluate companies or markets (such as FX, interest rate, commodities) and provide studies on their prospects, usually with the buy, hold, or sell recommendations. Although this study does not directly create income, it does benefit the company’s traders and sales department.

These teams generate revenues by providing ideas to clients who then complete a trade through the bank’s trading desk, generating money for the bank.

Credit research, fixed income research, macroeconomic research, and quantitative analysis are also utilized to advise customers and keeps an investment bank’s institutional expertise up to date.

If you want to work in this area, the key teams you can apply to are Equity research, fixed income research, Macroeconomic research desks etc

3. Sales and Trading

Most investment banks also have a trading department that can execute financial instruments including stock, bond, and derivative transactions on their clients’ behalf. Some banks have previously engaged in proprietary trading, in which they essentially bet their own money on securities; however, post financial crisis, the regulation has stopped this practice.

The banks match up buyers and sellers looking to buy and sell securities they already own. They can even act as an agent for the client, conducting all of the activities of the trading on their own.

What will you do as an analyst?

As an analyst in any of the above teams you will be the work engine for the team on all transactions. Day to day roles can vary from researching about a company/financial instrument/ markets, financial modeling, preparing pitches for client presentations to administrative tasks which are required from compliance and regulation perspective.

How can you get into investment banking?

Investment banks play a vital role in the working of the financial markets and in the life cycle of an organisation by assisting them in capital raising and /or acquisitions.

A career in investment banking can be fast paced, with steep learning curve and financial rewarding; however, it also remains one of the most competitive career choices with high demand with 1000s of application for a few roles each year with acceptance rates close to 2%

If you are interested in a career in investment banking and don’t know where to start or want to ensure you prepare for this year’s graduate program intake in the most optimal way to give you the best chance of securing an investment banking role, book in a free 30 min appointment with us to start your journey and get expert advice from active investment bankers in the industry.

Further Resources

An investment banking guide for dummies can be found here

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