Why Investment Banking Analyst Is A Good Career Option? Investment banking analyst is one of the best-paying jobs available in the finance field today. It is significantly more profitable than other jobs in terms of pay. It is also one of the most challenging jobs, and you will face grinding hours. Investment banking is a popular field for graduates, particularly business and finance majors, with many opportunities and high earning potential.
Now you have already gotten a general idea of what investment banking is, you are probably interested in what investment bankers and investment banking analysts do, how to become an investment banking analyst, and how you can shape your career path in the long term. Here are some reasons why investment banking analyst is an excellent field for you.
Precap: Why Investment Banking Analyst Is A Good Career Option
What is investment banking?
Who is an investment banker?
Who is an investment banking analyst?
Investment Banking Analyst Job Description.
Investment Banking Analyst Working Hours.
Investment Banking Analyst Salary (Bonus).
Why Investment Banking Analyst Is Good For You?
Top Technical Questions for Financial Analyst Interview.
What is investment banking?
It is a type of banking that organizes large, complex financial transactions like mergers or IPO (initial public offer) underwriting. These banks may raise money for companies in different ways, including underwriting the issuance of new securities for a corporation, municipality, and other institution.
Investment banks were legally separated from other commercial banks in the U.S. from 1933 to 1999.
als0 read: Private Banking vs Investment Banking
Who is an investment banker?
Investment bankers are financial advisors to corporations and governments. They help their customers in raising money by issuing stock, floating a bond, negotiating the acquisition of a rival company, and arranging the sale of the company itself.
Investment bankers play an essential role in some financial activities undertaken by companies and governments. Below are some types of deals investment bankers are involved in.
- Arranging Financing.
- Equity Financing.
- Underwriting Deals.
- Arranging Private Placements.
- Negotiating Mergers and Acquisitions.
- Conflict of Interest Issues.
Who is an investment banking analyst?
Investment banking analysts are entry-level professionals who support associates and investment bankers in areas that include debts and equity offerings, private placements, valuation, leveraged buyouts, mergers and acquisitions, and strategic advisory work. Investment banking analysts build financial models, conduct financial analysis and due diligence, create presentations, research, and handle support duties like fetching coffee and making photocopies.
They are typically hired straight out of college, participating in a two-year analyst program with the possibility of being offered employment for the 3rd year or promoted to associate. After 2 and 3 years, many analysts leave to earn their MBAs or pursue other opportunities.
Basically, investment banking analysts raise money for businesses and individuals by issuing debt and selling equity. They oversee mergers, assist in preparing legal, and conduct research and financial documents related to their transactions.
Investment Banking Analyst Job Description
As an analyst, you’ll be “in charge of Excel and PowerPoint presentations, administrative work, and responding to requests from clients and potential clients,” according to many investment banking articles. Even though that is the case, the Analyst role is not being served.
As an Analyst, it is your responsibility to go above and beyond the call of duty to assist senior bankers in securing and closing deals, even if it means performing absurd duties unrelated to accounting or finance.
Investment Banking Analyst Working Hours
On average, you will be in the office 70 to 85 hours per week, though you won’t necessarily be working that entire time.
You will also be on call 24/7, and you’ll have to respond to urgent requests and emails all the time, making it difficult to have a life and plan regular activities.
Banks have tried to improve the hours with protected weekends and other mandatory time off, but the results have been mixed.
It’s a bit better for Analysts now than it was in the late 1990 and mid-2000s, but it’s still a demanding job that requires incredible sacrifice.
Investment Banking Analyst Salary (Bonus)
Banks moved analysts from the $85K to $95K progression for base salaries up to $100K to $110K.
Some boutique banks, like Centerview, went up to $130K annually by 1 Analyst. Then, in January 2022, banks went to $110K and $125K base salaries for 1st and 2nd Year Analysts, making the initial increase seem like chump change. Bonuses for 2021 spanned a wide range, going from $75K to $115K annually for 1 Analyst and $105K to $145K for Year 2 Analysts.
Some boutiques paid above these numbers, meaning that some 2nd Year Analysts could have earned closer to $300K, depending on the base salary number you select.
On the other hand, some regional boutiques might still pay base salaries of less than $100K along with substantially lower bonuses, which is why $150K is at the bottom of this range. At large banks this past year, rewards seemed to be around 100% of the old $85K to $95K base salary numbers, with some variation above and below that depending on the organization’s size and type. But with these higher base salaries, that % will almost certainly decrease so that total compensation will stay about the same.
Why Investment Banking Analyst Is Good For You?
Lots of investment Banking Analysts do the job because:
- It is not a Long-Term Position. You do it for 2 to 3 years, and then you move up into senior roles in investment banking, and you move into jobs like private equity or hedge funds.
- You earn a Lot; investment banking offers higher compensation than any other job out of university, except for a few quant finance roles and programming jobs at big tech organizations.
- You gain access to the best exit opportunities, and you can win more exciting roles in private equity, venture capital, hedge funds, corporate development, and other fields after working as an I.B. Analyst.
- By killing yourself for some time, you give yourself many future options in other, more interesting, higher-paying jobs.
If you value your free time and don’t want to waste your early 20s, this is not the right job for you. Because, as we read above, this is also one of the most challenging jobs.
Top Technical Questions for Financial Analyst Interview
- Q1. Explain financial modeling.
- Q2. Explain a “cash flow statement” to me.
- Q3. Is it possible for a company to have a positive cash flow but still be in serious financial trouble?
- Q4. What is the best evaluation metric for analyzing a company’s stock?
- Q5. What are the different types of working capital and what is working capital?
- Q6. Explain quarterly forecasting and expense models.
- Q7. What is the difference between a journal and a ledger?
- Q8. Mention one difference between a P&L statement and a balance sheet.
- Q9. What is ‘cost accountancy’?
- Q10. What is NPV? Where is it used?
- Q11. How many financial statements are there? Please name them
- Q12. What are ‘adjusting entries’?
- Q13. Do you follow the stock market? Which stocks in particular?
- Q15. What is a ‘composite cost of capital?
- Q16. What is ‘capital structure’?
- Q17. What is ‘goodwill’?
- Q18. What do you know about valuation techniques?
- Q19. What do you mean by ratio analysis?
- Q20What, in your opinion, constitutes the basic components of financial analysis?
- Q21. How is Cash Flow different from Free Cash Flow (FCF)?
- Q22. As a financial analyst, which factors do you constantly analyze?
- Q23 What technologies do you employ for sophisticated financial modeling?
- Q24 Which will you use—cash flow or income—to determine the company’s liquidity?
- Q25. Which programs do you use to prepare illustrated technical graphs, charts, or spreadsheets?
- Q26. What is variance analysis?
- Q27. When should a purchase be capitalized rather than expensed?
- Q28. What is essential to consider when deciding on capital investment?
- Q29. What is EBITDA? What is left out of it?
- Q30. What are the types of financial analysis? Explain at least three.
Conclusion
Why Investment Banking Analyst Is A Good Career Option?
As an investment banking analyst, you will get the chance to develop an entire array of skills, starting from accounting and financing and ending with networking or people skills. If you are lucky enough to work for a large investment bank, you will meet some fascinating people. These banks usually have large accounts from large companies or very wealthy individuals. You will get the many chance to relate to them on a personal level.
