London Banking Tour
Your way into the city of investment banking
In September 2021, the promising and exciting world of Investment Banking becomes reality for 26 Dutch academics. This year the FSA organizes the London Banking Tour for the 28th time. During this Tour, you get to see what life is like as an investment banker in London. You will visit banks in London and in the Netherlands. During this week you will enjoy presentations, solve cases and dine with employees of these prestigious banks. You will stay at a hotel in the center of London.
The city of London is one of the world’s leading international financial centers. Hundreds of financial institutions from all over the world have settled in one square mile. It is an enormous attraction for everyone interested in Banking and Investment Banking in particular. Find out what investment banking is all about by searching this page.
Working for an Investment Bank is not in any way comparable to any other job. It means total dedication to your job and it absorbs a lot of time and effort. But the advantages are obvious and the honor of working for an investment bank is significant. It is a career choice that will pay off for the rest of your professional life.
Who are we looking for
This project is designed for students from all backgrounds in their Bachelor’s or Master’s program. All students with an interest in Investment Banking can apply via our website. Fluency in Dutch is required.
Participating Companies 2021
ABN AMRO, Bank of America Merrill Lynch, Barclays, Citibank, Deutsche Bank, Goldman Sachs, J.P. Morgan, Kempen, Lazard, Morgan Stanley, Nomura, Royal Bank of Canada and Rothschild & Co. For more information on the participating companies, please visit their company profiles by clicking at their logos below or visit our partner page.
The typical investment banking department (IBD) is divided into multiple service lines such as Mergers & Acquisitions (M&A), Equity Capital Markets (ECM), Sales & Trading (S&T), Debt Capital Markets (DCM) and Leveraged Finance. To top that up, these areas are often further categorized per industry.
You’ve heard about the legendary long hours, the big bonuses, and the mega-deals. You can recite the names of the big firms by heart. You like to imagine yourself a power suit-wearing, jet setting investment banker. But suddenly it dawns on you. What is investment banking? You panic. What do investment bankers do? What’s the difference between sales and trading and corporate finance? More to the point, why do you want to be a banker?
What is Investment Banking?
Traditionally, commercial banks and investment banks performed completely distinct functions. When Joe on Main Street needed a loan to buy a car, he visited a commercial bank. When Sprint needed to raise cash to fund an acquisition or build its fiber-optic network, it called on its investment bank. Paychecks and lifestyles reflected this division too, with investment bankers reveling in their large bonuses and glamorous ways while commercial bankers worked nine-to-five and then went home to their families. Today, as the laws requiring the separation of investment and commercial banking are reformed, more and more firms are making sure they have a foot in both camps, thus blurring the lines and the cultures. Investment banking is not one specific service or function. It is an umbrella term for a range of activities: underwriting, selling, and trading securities (stocks and bonds); providing financial advisory services, such as mergers and acquisition advice; and managing assets. Investment banks offer these services to companies, governments, non-profit institutions, and individuals.
The action and players in investment banking are still centered in New York City, London, and Tokyo, but the list of players is getting smaller as the industry consolidates. Today, leading banks include Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, Citibank, Credit Suisse, J.P. Morgan, Deutsche Bank, Barclays Capital, Rothschild, Nomura, Lazard, UBS, and RBS (part of which is former ABN AMRO).
What You Will Do
The intensely competitive, action-oriented, profit-hungry world of investment banking can seem like a bigger-than-life place where deals are done and fortunes are made. In fact, it is a great place to learn the ins and outs of corporate finance and pick up analytical skills that will remain useful throughout your business career. Investment banking has a very steep learning curve and the opportunities are enormous.
London is filled with high-energy, hardworking young hotshots. Some are investment bankers who spend hours hunched behind computers, poring over financial statements and churning out spreadsheets by the pound. Others are traders who keep one eye on their Bloomberg screen, a phone over each ear, and a buyer or seller on hold every minute the market’s in session. Traders work hand in hand with the institutional sales group, whose members hop from airport to airport trying to sell big institutions a piece of the new stock offering they have coming down the pipeline. Then there are the analytically minded research analysts, who read, write, live, and breathe whichever industry they follow, 24/7.
Who Does Well
You shouldn’t go into banking just for the money as the lifestyle is too demanding. To survive in investment banking, much less to do well, you will need to like the work itself. To be honest: even if you love the work, an investment banking career can still be a tough road. If the market or your industry group is in a slump (or if your firm suddenly decides to get out of a certain segment of the business), there’s always the chance that you may find a pink slip on your desk Monday morning.
However, if you like fast-paced, deal-oriented work, are at ease with numbers and analysis, have a tolerance for risk, and don’t mind putting your personal life on hold for the sake of your job, then investment banking may be a great career choice. It is important to remember this before applying for the LBT, because if all this doesn’t sound like you, a job in investment banking could turn out to be a bad dream come true.
Skills & Talents
Work hard, play hard
Investment banking is a high work, high risk, high reward profession. When you start, your hours will typically be long but the work can be exciting. Be prepared for moments of frustration where you are stretched too thin and moments of exhilaration where everything clicks.
Tough to Break In
It’s relatively hard to break into investment banking. You need to be prepared to pursue firms on your own after you have thoroughly prepared yourself.
Believe it or Not, Bankers Have Social Value
Investment bankers are often the subject of social scorn in movies like Bonfire of the Vanities. Are investment bankers really greedy narcissistic scum? Some probably are. But keep in mind that they play a crucial social role of helping to direct capital to companies with great ideas that make people better off.
Analyst Jobs Are the Best Entry Point
Many college graduates start in investment banking in an analyst position. To succeed in these positions you need to be extremely dedicated, have good spreadsheet skills and be analytically fluent. Your next step will be to become an associate. Same skills, just raise the volume.
Communication and Completion Abilities Key
In mid-career, your success usually will depend on your ability to communicate with clients and get deals done. At this level, it is also important to have a good understanding of market trends, the political and macroeconomic environment and deal mechanics.
Math Skills Can Help
Some jobs in investment banking calls for very strong mathematical ability. If you are good at math, think about getting an advanced degree in a technical field (studying areas such as stochastic calculus and differential equations), then take some advanced finance courses in options pricing or bond valuation and apply to a research department in the City.
Accounting Skills Valuable
The ability to analyze accounting numbers critically is important in most analyst positions. Ultimately, you should aim for the CFA designation if you would like to be a securities analyst. The CFA helps you become much more mobile over time. If you have ambitions to “bail out” someday and become a corporate financial analyst you might also want to consider the CMA (Certified Management Accountant) designation.
Traders are Multi-Talented
It’s hard to define what makes a good trader. A good understanding of the market, quick reactions, analytical skills and the ability to bluff help. Read Liars Poker by Michael Lewis to learn more about sales and trading.
A crucial success factor in investment banking is teamwork. Being able to pull together persons with large egos to get a presentation together for a client is a challenge and is likely to be rewarded highly.
Scientists and Lawyers Wanted
There’s definitely an interest in people with backgrounds in science and law. Scientist types can work on everything from derivatives algorithms to biotech banking. Lawyers can help design new securities, sell leasing business and use their analytical prowess to talk to clients. This said you have to sell yourself. It often doesn’t hurt to go back and get an MBA from a top school, and then try to repurpose your career into investment banking.
Contacts are Everything
The key to breaking into investment banking is a good network of contacts. You may already be blessed with such a network, but if you don’t have one, you can start to develop one by going on informational interviews, attending industry conferences, finding alumni from your school in the business etc. Keep in mind that your network might not really “pay off” for some time. If you are young and haven’t gone for an MBA degree, try to get into the best possible school and then go for quantitative and analytical coursework.
Getting Things Done is Important
Starting off in an investment bank, you are usually responsible for getting projects done well and on-time, whether it be writing reports, running spreadsheets, putting together pitchbooks, trading, doing research or coding programs. Later, once you get involved with clients and ideas for generating revenue, you will be rewarded greatly if you can bring in business. At higher levels (usually Director, Managing Director and up) you are exposed to much greater risk. At this level, people are often fired for non-performance, whereas at lower levels you may not be scrutinized as closely.
In a corporate finance position, you would work to help companies raise the capital needed for new projects and ongoing operations. You would work to determine the amount and structure of fund needs of a client through equity, debt, convertibles, preferred asset-backs, or derivative securities. As a starting analyst in corporate finance, you would usually work on a client team and would have responsibilities to prepare registration statements, attend roadshows where investors are sold on securities etc. Sometimes jobs in corporate finance are referred to as investment banking positions. When you hear phrases such as IBD or IBK people are referring to corporate finance.
Mergers and Acquisitions
Setting up deals where one company buys another is an important source of fee income for many investment banks. This has been a hot area on Wall Street in the 1990s and is likely to continue hopping through the next century. If you go to work in this area you would help out with a team which acts as an advisor to a client, values transactions, creatively structures deals and negotiates favorable terms. Investment banks have increasingly participated directly in LBOs, spinoffs and bridge loans, often by taking their own investment stake (known as merchant banking). Your duties could involve analyzing the appropriate form of participation. Expect to start running lots of valuation models on spreadsheets and gradually get more client focus as you progress. You’ll help value the target and assess the acquisition’s impact on client earnings and work closely with Debt and Equity Capital Markets to determine the optimal financing structure. Lastly, you might help Equity Research market the deal to shareholders by highlighting the acquisition’s financial benefits to our clients.
Debt Capital Markets
As an analyst, you will play a central role in the Debt Capital Markets (DCM) team. The DCM team will rely on your analytical and time-management skills and expect you to take rapid ownership of key components of the interaction with clients. You will be actively involved in all aspects of new business solicitation, developing new ideas and pricing new issue opportunities. You will need to develop your skills quickly. You will be closely involved in the financing execution process and would be expected to coordinate the production and distribution of bond pre-marketing materials such as investor presentations, Bloomberg roadshows or loan information memoranda. You will work closely with the bank and bond Syndicate teams, help focus the respective sales forces on the transaction and assist them in answering credit-related questions. You will coordinate the documentation process with lawyers and the internal Transaction & Execution group, as well as due diligence sessions with Management. As a core part of the team, you will also assist with the marketing of the transaction internally and to other potential issuers.
Equity Capital Markets
In raising equity for a new company, for example, an analyst starts by writing recommendations on the nature and structure of the transaction. The next part is to work with management to prepare the company’s marketing materials, then organise the offering process with lawyers and accountants and start assessing the level of demand from targeted investors. It involves constant communication with M&A and Equity Sales, Trading and Research to understand the company’s strategy and valuation, and investor views on the story, and communication with syndicate banks to organise the marketing of the offering.
While working on an equity derivatives trade as an analyst, you’ll become a key liaison with the client, understanding their needs and assisting in cultivating the client relationship on an ongoing basis. By understanding the client’s objectives, you can then advise them on a wide range of derivatives solutions, using our trading and research capabilities to provide them with the optimal solution to their needs.
On an execution, analysts take primary responsibility for managing projects including assisting in the crafting of the company’s equity story, structuring the institutional marketing campaign and providing continuous feedback to the client regarding investor sentiment and equity market conditions. Once the client has determined their preferred strategy, you remain involved in executing the solution in coordination with the trading team until its successful completion.
The field of project finance is booming. Typically project finance involves funding infrastructure and oil capital projects off of a company or government’s main balance sheet. Project financed deals have been some of the first significant conduits of foreign capital into countries such as China, Yemen, and Indonesia. When other sources of borrowing dry up, project finance is generally still there.
Some of the most desirable jobs in investment banking are in sales and trading. Your responsibilities would involve undertaking transactions in equities, bonds, currencies (referred to as Forex or FX), options or futures with traders at commercial banks, investment banks, and large institutional investors. Trading can be tumultuous and requires a thorough knowledge of markets, financial instruments and an intuition for human psychology. Equities trading positions often involve “telling a story” to other traders about why they should purchase your stock. Fixed income trading positions call for strong analytical know-how and the wherewithal to manage large amounts of inventory in an often-thin market. Derivatives traders need very strong analytical know-how (perhaps even an engineering degree). Foreign exchange trading is based more on your instincts about markets, politics, and macroeconomics. There are a variety of other types of trading jobs in agency securities, commercial paper, repos etc.
Advisory services are often provided by investment banks to public and private clients involved in M&A and financings. The area of risk management advisory has been popular at many investment banks. Often work will be done to determine a client’s value, options for creating value or on a client’s industry conditions.
Equity and Fixed Income Research
Security analysts are usually assigned to an industry or region. You could be responsible for making buy or sell recommendations to investors about a stock or bond. Your duties would involve visiting companies and heavy telephone contact with institutional investors. Investment banks often like to hire people with industry experience into analyst positions (as opposed to fresh MBAs or undergrads). For example, if you were a restaurant executive you could probably get hired as a restaurant industry analyst with a healthy pay raise. Knowing the business, being able to talk to clients well and having good forecasts are key in this position. You want to help your firm avoid the dreaded Worst Analysts list. Analysts are often referred to as either quants or fundamentalists. Do fundamentalist make recommendations based on what’s going on at a company–how’s the CEO, what are the earnings etc? In contrast, quants look at computer programs that identify undervalued securities, markets or even whole countries. There are fewer quant jobs, but they often pay more because the required skills are greater.
In institutional sales, you would be responsible for conveying information about particular securities to institutional investors. You would be likely to have heavy contact with portfolio managers and your own firm’s analysts and traders. Sales skills and product knowledge are crucial in this area as is the ability to get through to busy institutional investors. Working in sales for an investment bank (on the sell side) is often good preparation to move over to the buy side (insurance companies and mutual funds). For many, institutional sales offer the best of all worlds: great pay, fewer hours than in corporate finance or research, less stress than in trading, and a nice blend of travel and office work. Like traders, the hours typically follow the market, with a few tacked on at the end of the day after the market closes. Another plus for talented salespeople is that they develop relationships with key money managers. On the downside, many institutional salespeople complain that many buy-siders disregard their calls, that compensation can exhibit volatile mood swings, that they are overeducated for what they do, and that constantly entertaining clients can prove exhausting.
Day of an I-Banker
A day in the life of an I-banker. Here is a look at a day of an associate I-banker at Goldman Sachs.
8:15 Arrive at 85 Broad Street. (Show Goldman ID card to get past the surly elevator guards).
8:25 Arrive on 17th Floor. Use “blue card” to get past floor lobby. (“Don’t ever forget your blue card. Goldman has tight security and you won’t be able to get around the building all day.”)
8:45 Pick up work from Word Processing, review it, make changes.
9:00 Check voicemail, return phone calls.
9:30 Eat breakfast; read The Wall Street Journal. (“But don’t let a supervisor see you with your paper sprawled across your desk.”)
10:00 Prepare pitchbooks, discuss analysis with members of the deal team.
12:00 Conference call with members of IPO team, including lawyers and client.
1:00 Eat lunch at desk. (“The Wall Street McDonald’s delivers, but it’s the most expensive McDonald’s in New York City; Goldman’s cafeteria is cheaper, but you have to endure the shop talk.”)
2:00 Work on restructuring case studies; make several document requests from Goldman library.
3:00 Start to prepare analysis; order additional data from DRG (Data Resources Group).
5:00 Check in with vice presidents and heads of deal teams on the status of work.
6:00 Go to the gym for an abbreviated workout.
6:45 Dinner. (“Dinner is free in the IBD cafeteria, but avoid it. Wall Street has pretty limited food options, so for a quick meal it’s the Indian place across the street that’s open 24 hours.”)
8:00 Meet with VP again. (“You’ll probably get more work thrown at you before he leaves.”)
9:45 Try to make FedEx cutoff. Drop off pitchbook to Document Processing on 20th Floor. (“You have to call ahead and warn them if you have a last-minute job or you’re screwed.”)
10:00 Order food again. (“It’s unlikely that there will be any room left in your meal allowance — but we usually order in a group and add extra names to bypass the limit.”)
11:00 Leave for home. (“Call for a car service. Enjoy your nightly meal on wheels’ on the way home.”)
Rejection top 9
Bankers are supposed to be cocky, aren’t they? Not true, our banker sources replied. “Arrogance and confidence are too easily confused,” said one. “This is still a business where people expect you to pay your dues. You’re not going to make it if you think you’re too good for a project.” Another source said, “One of the most important aspects of succeeding in this business is getting along with people. All kinds of unusual and sometimes difficult personalities occupy senior positions. The last thing we need is a fresh MBA with a big mouth.” A lack of “crispness”
Other sources replaced “crisp” with the words “sharp” or “polished” to describe a candidate that “has it together.” Basically, the bankers noted that candidates have to be well prepared. “You would be surprised how many people don’t know how to walk you through their resumes. You have to know your story and tell it convincingly,” advised one source. Another added a caveat to preparing oneself for the interview. “Don’t be too slick. I hate when I feel like I’m hearing a rehearsed speech word for word.”
2. A lack of social skills
“I’ve been bored by people in interviews,” said one I-banking source. “I hate to say it because it sounds so elitist. But investment banks are selective organizations – highly selective – and some people have great resumes and no personalities.” Another added, “It’s a people business. I’m not saying that everybody at [my firm] is the most exciting person, but there are basic sociability requirements.” One more I-banker said his selections process includes a beer test. “I basically ask myself: could I sit down and have a beer with this person?”
Some people are boring, and others are bored. “Enthusiasm is key. I don’t want someone giving me a line about how much they love working all night, but I like to see some energy,” explained one source. Another I-banker added, “It’s important that people think you’re ready to go. A lot of us get burned out sometimes, and it’s refreshing to meet someone who has just had a two-year vacation [that is, business school], and is raring to go. I like to hear that they’re looking forward to getting back to work. Some people come in here and seem so exhausted. I think, if they’re tired now, what will they do when they haven’t slept in two days? I guess some people get nervous and just clam up. That’s going to hurt you a lot in an interview.”
4. Shut up already
The opposite side of the “clam-up” problem, one source told us is “verbal diarrhea.” “Some people, I guess,” our source explained, “get nervous and they talk. And talk and talk. You give them a simple question, something that should take them one minute to answer, and you end up listening to a life history.” “Brevity is key,” another source added. “In banking, speed and efficiency are key. There’s no room for rambling.”
5. Not tough enough
“One thing I hear a lot [in meetings when candidates are discussed],” one source explained, “is people saying: “that guy would get killed in this job.”” Despite efforts by investment banks to promote more positive work environments, at least one insider told us that “you still need to be tough. I meet someone sometimes and know 100 percent that the person would get eaten alive here.” Projecting an ability to handle the unexpected is part of the toughness that interviewers seek. As one source explained, “I’m sure that a lot of these candidates we turn away might be able to hack it, but no one wants to take a chance on a maybe.”
6. Doesn’t demonstrate enough quantitative skills
“Some candidates just don’t make me feel like they can handle the numbers,” said one source. “It’s a tough thing to explain, because it has a lot of components. If they don’t seem to have the coursework or professional background, I worry that they won’t be comfortable with the quantitative side of things. A lot of candidates don’t seem to realize the problem in their resume and so they never go out of their way to show us that they have the skills. I think that’s key, looking at your resume and finding the blanks.”
7. Personality doesn’t fit with the firm
“Once in a while,” one source explained, “you meet someone who you know will just hate it here.” He went on to say that this situation was often a combination of various factors, some of which we’ve already listed. “They could be a fine banker, but something about their philosophy or their personality doesn’t seem to fit. I don’t want it to sound snobbish because it’s not about being good enough. Certain places have personalities. Big places are often very different form small places. Some people want a lot of structure, and some people can’t stand too much structure, for instance. People here often say, “I could never have worked at such and such bank.” I’ve found that people who like the Merrill culture and people who like the Goldman culture are often very different, for example. There’s a dynamic that you have to keep in mind when you’re recruiting people.”
8. Little white lies
“It seems like at least once during each Super Saturday session,” one source reported, “we get one candidate who gets caught lying on his resume. Not an outright, ridiculous lie, but someone will ask them about something on their resume and it will be obvious that the candidate doesn’t know as much about a project as his resume might imply.” Another source agrees, and says that a rejection is guaranteed if someone uncovers a “highly embellished resume.” “People are going to ask you about your resume. If something looks too good to be true, you’ll be called out on it,” he comments. “Be prepared. And don’t lie. If you said you worked on some complicated transaction, you better be prepared to discuss it.”
9. It’s not you, it’s me
“Sometimes,” one source says, “one [interviewer] will really have a bad reaction to somebody.” Many of our sources agreed that people had been rejected based on an unexplainable reaction by one (usually senior) person. “I feel bad even saying it, because I’m not sure what kind of advice I could offer to prevent it from happening.” One source adds, “I would say that some candidates have a tendency to focus on their next answer and don’t concentrate on gauging how they’re doing with the interviewer. Sometimes if you pick up a bad vibe from someone, you can perform some damage control.” Another source was less optimistic about these situtations. “Some people decide they don’t like a candidate the second he walks into the room. That’s just the luck of the draw if you get one of those interviewers. I wouldn’t say a lot of people are like that, but they are out there. To some extent, interviewing is a crapshoot. Some people get lucky, others don’t.”
We recommend the following books:
Barbarians at the gate, Bryan Burrough & John Helyar
“Barbarians at the Gate” is the classic account of the defining takeover in Wall Street merger history. The authors’ gripping record of the frenzy that overtook Wall Street, in fall of 1988, gives a richly textured social history of wealth at the twilight of the Reagan era.
The Accidental Investment Banker, Jonathan A. Knee
A colorful and readable story into the broader strategic context of the transformation of financial services over the past twenty years.
Golden Handcuffs, Polly Courtney
Experiences of a first-year analyst at an American Investment Bank in London told in a cynical and light-hearted way. She didn’t like the job and the story demonstrates the importance of a strong motivation before entering the I-banking world.
Den of Thieves, James Brewer Stewart
Chronicles the dealings of four men who wreaked havoc with the American securities system–Michael Milken, Ivan Boesky, Martin Siegel, and Dennis Levine.
Liar’s Poker, Michael Lewis
Michael Lewis retired from being a bond salesman at the age of 28, having risen from being a mere trainee. He looks back at his career, at the Golden Age of banking, at the company he worked for and the memorable figures within it, and at the spectacle of the financial boom which marks the 80s.
Monkey Business, John Rolfe
“Monkey Business” is the hilarious confession of two young investment bankers of what it’s like at ground zero on The Street. This tell-all pulls off Wall Street’s suspenders and gives the reader the inside skinny on what working at an investment bank is all about.
Rogue Trader, Nick Leeson
Starting with the cover-up of a colleague’s small error, and resulting in the crash of Britain’s oldest bank, this is Nick Leeson’s own account of his role in the ruin of Barings. He shows how an escalating addiction to reckless speculation led to more cover-ups and finally his own arrest.
The Predators’ Ball, Connie Bruck
During the ’80s, Michael Milken at Drexel Burnham created the corporate raiders. He was the billionaire Junk Bond King. But, in the corner stood the U.S. District Attorney waiting to file criminal and racketeering charges.
When genius failed, Roger Lowenstein
This title tells the story of long-term capital management where a group of elite investors believes they can beat the market and, like alchemists, create limitless wealth for themselves and their partners. In fact, they create a trillion-dollar hole in the international banking system.
A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, Lawrence G. McDonald, and Patrick Robinson
We get a close-up view of the participants in the Lehman collapse, especially those who saw it coming with a helpless, angry certainty. We meet the Brahmins at the top, whose reckless, pedal-to-the-floor addiction to growth finally demolished the nation’s oldest investment bank.
De Prooi, Jeroen Smit
Based on 120 interviews, Jeroen Smit explains how the management of ABN AMRO lost their grip on the future of their company. The author describes this in frightening details and he also provides a good overview of the personal relations between the main players. A ‘must read’ for everybody within and outside the industry.
Cityboy: Beer and Loathing in the Square Mile, Geraint Anderson
Drawing on his experience as a young analyst in a major investment bank, the six-figure bonuses, monstrous egos, and the everyday culture of verbal and substance abuse that fuels the world’s money markets are brutally exposed as Cityboy describes his ascent up the hierarchy of this intensely competitive and morally dubious industry, and how it almost cost him his sanity.
The following websites could be useful to practice for an interview or get informed about the ‘hottest’ news of the Investment Banking world.
Numerical/verbal test practice:
Websites relating to I-banking:
> www.barrons.com (US oriented)
Funny I-banking gossip
> Lucy Gao – www.ft.com/cms/s/2/7ea9af82-342b-11db-bf9a-0000779e2340.html
> Alex Cartoon – http://www.alexcartoon.com/
> TheLeveraged Sellout – http://www.leveragedsellout.com