We’ve gathered together the questions you’re most likely to be asked at an interview for a graduate role or an internship at an investment bank – and we’ve even given you ideas for answers to some of them too.
Remember you’ll also need to be prepared for the questions that employers in any sector might ask – for example, ones about your professional experience, strengths and weaknesses, and aspirations.
Your time at university
1. What have you learned from your studies that can be applied to a career in investment banking?
You might initially think that if you haven’t done a degree in finance or economics you haven’t got very much to offer an investment bank, but you’d be wrong. Any numerate discipline will have given you a mathematical toolkit that will come in useful in technical banking work, and any good degree proves that you’re intelligent, hardworking, and effective under pressure. Extra-curricular activities may have given you a wealth of other skills that are valuable at an investment bank, such as being able to juggle a number of commitments and work with others.
Your motivation for working in banking
2. Why do you want to become an investment banker and is there anything that puts you off working in investment banking?
3. Why do you think you’re suited to a career in investment banking?
As you’re interested in a career in banking, plenty of reasons should spring to mind, and if they don’t you should consider choosing another path! Often students are attracted to the intellectual challenges and high-profile nature of the dealings of the finance world, the fast pace of the work here, and the rewards on offer, all of which are very valid reasons for applying to a bank. But they’re also valid reasons for applying for jobs in other parts of the finance world, so make sure you explain why you want a job at a bank, and in your chosen area in particular. Perhaps you’re keen for the broad and deep financial training and prestigious experience that only a leading bank can offer?
Your interviewers may also ask if anything puts you off banking. If you have any real doubts, an interview is not the place to air them, but it’s a great idea to show that you’ve considered the difficulties the industry is currently going through before choosing to make an application. You might say that you’re attracted to the particular professional challenges and opportunities a period of flux in an industry can offer.
Your understanding of a job in banking
4. What do you think you will be doing during your first year in investment banking?
Much of your answer to this question will depend on your role – so do some careful research into your chosen department. In M&A, you might spend much of your time on financial models related to the deals you’re working on, while in a trading role you might start out by assisting more senior members of the team before being given the chance to manage a trading book yourself. Beyond that, it’s important to show that you’ll be keen to take on responsibilities, but that you also recognise that your first year is about learning the ropes, usually means include following instructions from others and completing some mundane tasks.
5. What types of financial models will you build and what purpose will they serve?
6. What pieces of research might you be asked to do as a graduate recruit in the department you’re applying to?
Your understanding of the markets
7. What opportunities does a financial downturn present to financiers?
In a market where the value of assets is falling, known as a bear market, traders might consider taking short positions, that is, borrowing assets they don’t own, selling them, and buying them back to return them at a later date when their price has fallen. Meanwhile, those working in asset management or M&A might consider, or advise clients to consider, snapping up undervalued assets.
8. Name a live investment banking deal that interests you or that the interviewing bank is involved in. What are the main issues at stake?
9. What is the current price/level of: the FTSE 100, S&P 500, the Bank of England base rate, LIBOR, a barrel of Brent Crude, an ounce of gold, the US dollar, and the euro?
Your understanding of the bank
10. Explain our business model.
Banks provide their clients with advice, assistance in arranging financing, and other services, such as access to trading on the markets, investment management, and risk reduction. Their main source of revenue is the fees they charge their clients for these services. Some banks have departments which invest or trade the bank’s own money to generate returns, though the extent to which they can do so has become more limited in recent years.
11. What do we do differently or better than our competitors?
12. What are the key milestones in our history?
13. Who is our chief executive?
14. What deals that have been announced publicly are we currently involved in?
Your understanding of banking theory
15. What are the different ways to value a company, a share, and a bond?
16. When is a good time to sell/buy an asset?
17. What are the main issues to be negotiated in an M&A deal?
18. What are the advantages and the disadvantages of equity finance and debt finance to a company raising finance and investors?
The advantage of equity finance for a company – raising money by selling shares – is that this money does not have to be repaid. However, new shareholders usually get to have a say in how the company is run. Despite these rights, equity is often seen as a risky choice for investors as they will lose all their money if the company doesn’t prosper. If it does well, on the other hand, they may see their stake multiply in value many times over.
Debt finance – money raised through loans – must be repaid eventually by a company, usually with interest, but lenders won’t be able to exert as much influence as shareholders over how the company does business. The debt of a reliable company is usually seen as a safe investment, but fixed repayment schedules means that there are few opportunities for large returns.
19. What are the advantages and disadvantages of an IPO?
20. What are the risks involved in buying or selling a company or lending or borrowing money and how can they be mitigated?