There are a lot of myths around investment banking interview questions. The truth is that’s it’s not so secret. If you’re interviewing for an analyst position, you’re bound to get a variety of these 9 questions. Learn how to answer them below.
Interview season is here, and investment banks are hiring. If you’re looking for an internship for next summer, or need a full-time offer before graduation, the time to apply is now.
- Read this article to figure out how to optimize your CV for a job in investment banking, and download free CV templates here.
Don’t try to find the answer to the question while you’re in the interview
Assuming you get your resume right, you will be asked for one or more rounds of job interviews. Preparation is the key to success here.
The questions they ask you are usually variations around the same theme. This gives you an excellent opportunity to prepare the best answers ahead of time.
Take notes for each question, and practice saying your answer out loud. If you’re not doing this, your competition has you beat already.
Understand the reason each question is asked
Most questions are asked for a reason, and it’s usually to determine either interest, intellect, capacity, or fit for the job. If you try to understand why the question is asked, you likely understand which answers are good as well.
You can expect both technical and personal questions. The more junior your role is, the more normal technical questions are.
As a junior, you will be doing a lot of technical grunt work. Plus, the risk of you not knowing how to do things is higher than if you’re an experienced higher.
Be prepared to answer at least the following 9 basic investment banking interview questions before any job interview in finance …
1. Walk me through your resume
This is an easy one, and it’s usually the first questions. It’s your opportunity to frame the conversation, so don’t throw this away.
One of the reasons this question is being asked is to see if you can show a red thread through your career choices.
Talk about anything that shows you are hard- working, smart, and passionate about the job.
Explain your reasoning for moving from one job to another. Especially any short periods or unexpected jumps. Tell them what you experienced that made you want to work in finance, or in that particular subsector.
Practice doing this in just a few minutes. It’s harder than it sounds. Don’t get lost on the way and start telling unrelated stories that don’t help you strengthen your position.
2. Why do you think this bank/fund is a good fit?
This is all about testing your motivation to work there and how you will fit with the team. You need to show that you have done your homework and know the company.
Mention specific details about the sector you will be working in and why you think working in that area will be interesting for you. Show them that you know what types of deals the company has done or what clients they often work with.
It’s also a good idea to have read up on the people you’re interviewing with so you can mention a deal they worked on, and say something about their background that makes you think you would work well with the team.
Did the interviewer work with a Solar company earlier? Well, now is the perfect time to mention how passionate you are about renewable energy and working for a cleaner future.
3. How did your last internship go / why did you not get an offer?
If you’ve had an internship in a similar job before, but you didn’t start there full-time, you will be asked why.
The harsh reality is that people expect there to be something wrong with you. “Why should we hire her if they didn’t?”
Be completely honest here. Tell them you didn’t fit well with the team, or that it was a different sector which you did not enjoy working in. That’s an answer everyone will respect and understand.
Don’t lie or make up weird excuses. The interviewer will look through it and label you dishonest.
4. Why finance and not consulting, accounting, or a start-up?
This is all about your motivation to work in the sector. Companies don’t want to spend time and money recruiting someone who isn’t going to stay a while.
A lot of people are uncertain at the time of interviewing. It’s normal. But you should never share that insecurity with the interviewer.
Instead, tell her about the experience you have from previous internships or from school subjects. Use the things you’re good at and enjoy.
If you love working with numbers, say that you look forward to going into the depth of financial modeling. Something you wouldn’t be able to do as much if you worked in consulting or for a VC.
5. What will happen in [insert industry] over the next 5 years?
This helps the interviewer understand how interested you are in the sector you’ll be working with. If you like something, you probably read about it as well.
This is especially important if you’re interviewing with a boutique, or a smaller investment bank that does a lot of deals in one specific sector.
A bonus is that the interviewer will see if you are able to talk intelligently about it.
Talk about changes in supply and demand. Shifts in technology. Rules or changes in the world economy as a whole that will change today’s situation. Anything you might find relevant.
It’s not about getting it right. It’s about showing that you can make reasonable assumptions and that you can build an argument.
6. What do you expect to do as an analyst?
This is where the interviewer wants to know how hard-working you are. Do you know that you will do a lot of boring tasks in the beginning, and that you will work a lot?
They want to hire an analyst that will get the comps done in time for a pitch, and doesn’t give up halfway because it’s boring. Be that person and you will score a lot of points.
Say that you know the hours are long, but that you are used to putting in a huge amount of effort.
If you have a good example from jobs, school, or sports showing that you’ve worked hard in the past, this is an excellent time to mention it.
7. Explain a DCF to me
You can get this question or a bunch of others revolving around valuation.
You should know how to value a company through a DCF, or multiples. Of course, you should know comparable transactions as well, but you likely won’t get asked to walk anyone through that.
Walking someone through a DCF means mentioning what you do step-by-step to get to each year’s cash flow, and how you discount them back. Knowing how to find the cost of capital also comes in handy here.
What do you do if I don’t have a finance background?
Don’t fake it.
I know people who did not have a finance background in school and said they knew nothing about it at the interview and still got the job.
That is not the rule though. And it might be easier at a boutique firm than at a large bank.
If you want to work in finance, you should have an interest in this and read up on it if you weren’t taught it in school.
8. What happens to the share price if X changes?
This is another typical valuation questions. It shows you understand how the P&L, cash, flow and balance change the valuation of a company.
The simple way to solve this is to start with the change the interviewer is asking about. Then find the indirect changes on the two others items.
Does it change the P&L, cash flow or the balance sheet?
For example, what happens to the P/E ratio if a company takes up more debt to pay dividends?
Directly, this only affects the balance sheet. The debt increases and the cash from the debt is paid out to shareholders. This makes the price fall by the amount of cash paid out.
When the debt increases, you have to pay more interest. This affects the P&L. You will pay less tax, but the net effect on the P&L is lower net income. The same happens with the cash flows.
Since both P and E decreases, we do not know what the net effect on the P/E ratio is.
9. How would you solve this modeling problem?
This is a question which is common for someone with 1-3 years of experience. You should be able to know what you’re talking about.
An example can be to explain the set-up of a model with multiple countries, assets, and tax structures.
Break the question down into pieces and explain how you would plan the model structure.
Which sheets would it have and what pitfalls should you look out for. An excel modeling course can be found here if you want some input.
Will you get crazy brain teasers?
The stories of crazy investment banking interview questions are endless. Like in this article from businessinsider.
I have never been any of those questions before. And I haven’t asked anyone that during an interview either. But I know of people who do.
Show them your rational thinking and say your reasoning out loud and you should be good.
Getting a full-time offer as an analyst requires both a bit of luck and a lot of preparation.
Next up is how to dress for a job interview. In the meantime, if you have any questions about investment banking interviews, give me a shout in the comments below.