14th November 2022 / By Neil Johnson

How to best prepare for an investment banking interview

How to best prepare for an investment banking interview?
Job interviews at investment banks have a bit of a reputation and not a small amount of online-chat-perpetuated mythology surrounding them, and perhaps rightly so considering the rewards and the career opportunities. But this doesn’t make them impregnable.

What is investment banking?
Investment banks provide corporation, institution and government clients with two core services: firstly, capital raising by selling securities to investors; and secondly, strategic advisory and deal-making for mergers and acquisitions (M&A).

Why is investment banking a good career path for you?
Investment banking is highly coveted for its career progression possibilities, it’s also highly competitive and demanding. While this may sound ominous, it’s an ideal environment in which to grow and develop professionally, and ultimately forge a long and exciting career. And given the profession’s international scope, careers can easily lead overseas.

Preparing for an investment banking interview
Application timeframe: Typically, 3-6 weeks, but can take three months

  • Application process:
  • Application and CV
  • Aptitude test (in some cases not all)
  • First interview — increasingly a virtual interview using specialised recruitment software in which you record your answers
  • Final round, sometimes called assessment centres for internships and graduate schemes, can be virtual but are often in-person, with several interviews and activities over the course of a day

How do you land an interview for an investment banking job?

Yes, banking industry recruitment is highly competitive, but let’s bust a myth — banks don’t only hire from the Oxbridge elite, those with the best grades and a laundry list of big bank work experience.There are different sizes of banks, from the boutique to the bulge brackets, such as Goldman Sachs and Morgan Stanley, and while they all often dive into similar recruitment pools, don’t assume they’re all looking for the same type of person from the same background. Generally, the candidate profile for first-year analysts is a CV displaying a minimum 2:1 bachelor’s degree and all-important work experience.

Target and non-core universities
If you’re at a target university, make the most of the on-campus recruiting by investment banks, which means attending their information sessions, workshops and online events (JP Morgan, for example, has an ‘Online Academy’, webinars in which you hear from employees and take part in a Q&A). Impress recruiters through one-to-one face time, asking insightful questions. They’ll be looking for people they can spend long hours working with, so being remembered fondly will put you in good stead when it comes to applying.

If you don’t fit the top target profile, there are still avenues, you just need to be very proactive in developing a network targeted to working in investment banking. This means connecting with banking alumni, attending relevant events or academic programmes, and really using LinkedIn to connect and engage with people.

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Work experience
Whatever your background, what generally evens out the playing field is work experience. This is preferably along the lines of summer internships with investment banks and/or in relevant areas like asset/wealth management, private equity or Big 4 consultancy.

What is the interview process for an investment banking job?
The first interview can take up to an hour and involve up to 10 mainly behavioural questions, but also ones specific to business, finance or the department you’re applying to. Here they want to understand your level of interest, commitment and motivation by asking questions along the lines of ‘why investment banking?’ and ‘tell me about a time when…’.

If you make it to the final round for an entry-level role, you’ll likely be invited to spend a day at an assessment centre with other candidates if it’s with a bulge bracket firm. This can involve many interviews, as well as group exercises and giving presentations. While boutique firms might not operate assessment centres, you will still likely spend up to a day doing several interviews and tests.

During these interviews you can expect to speak to analysts, associates, vice presidents and managing directors, as well as potentially with other groups and ranks within the bank.

Types of questions:

Are you a good fit?Investment banks will want to know why you want to work in finance, why you want to work in an investment bank and, more specifically, why you want to work at theirs. They’ll want to feel confident you know their business, and the duties and purpose of the role you’re applying for.

Demonstrating the right attitude will go a very long way. Show that you have humility and are willing to learn. They’ll want to hear your story, a kind of elevator pitch that details the inspirational spark that led to pursuing a career in finance and why you’ll be suited to it.

They’ll also want to see that you can work hard and get along well with people — this industry is very people orientated, you’ll work long hours in teams and deal frequently with clients.

Knowledge and skills tested
They’ll also want to see technical knowledge, which you would have gained at university and during your work experience and internships. Subject matter will likely include accounting concepts, such as knowledge of financial statements and how balance sheets, and income and cashflow statements are interrelated.

They’ll want to see that you’re at least familiar with some techniques used to value companies, such as discounted cash flow, the multiples approach and comparable transactions. They’ll also want to see a grasp of being able to differentiate between debt and equity, and their risks and benefits in capital raising.

Potential investment banking interview questions
Behavioral and fit questions
  • Walk me through your CV (in other words, tell me your story)
  • Why investment banking and this bank specifically?
  • What’s your greatest strength and your greatest failure?
  • Can you describe a time you worked with a difficult team member?
  • What feedback did you receive from your most recent internship or job?
  • Can you describe what a banker does during an M&A and an IPO?

Topical questions
  • Tell me about a recent deal this bank has been part ofTell me about a company you’re interested in
  • What makes a certain market or asset class interesting to you?
  • What do you think of the recent merger between X and Y?

    Technical questions
  • Walk me through the three financial statements
  • Name three ways to value a company
  • When should a company consider issuing debt instead of equity?
  • What might cause a company’s present value (PV) to increase or decrease?
  • What does the internal rate of return (IRR) mean?
  • A company with a P/E multiple of 25x acquires another company for a purchase P/E multiple of 15x. Will the deal be accretive or dilutive?
  • What is WACC and how do you calculate it? (WACC = Weighted Average Cost of Capital)

Investment banking interview tips
Search online for investment banking interview tips and often the first piece of advice you’ll see among the multitude available is… prepare, prepare, prepare!

This means researching the bank you’re applying to. Know its business, its leaders, its geographic scope, its success stories, its strategy and performance, its finances (if publicly available).

Practice mock interviews in front of the mirror and with friends and family. Bone up on the technical aspects.

When it’s your turn to ask questions, have some prepared, usually ones to the interviewer specifically, such as ‘can you tell me about your career path to date?’, ‘what’s been your favourite deal you’ve worked on at the bank?’.

Online interviews are increasingly commonplace. To this end make sure your computer is set up well, with camera at eye height (no one wants to look up your nostrils) and that your background is smart and uncluttered. Make sure your internet connection is reliable. Treat it as you would an in-person interview — look smart, be punctual, think about your body language.

Finally, as an ex-Goldman Sachs banker said: Try to smile. Because of nerves, candidates often forget to smile, but it will go a long way to making a connection with your interviewer.

If you’ve made it as far as getting an interview with an investment bank, congratulations, that is already an achievement. Now, don’t let yourself down… prepare, prepare and prepare some more, after all, it’s within your grasp, and remember, interviewers are just people.