Investment Banking Analyst
What is an Investment Banking Analyst?
A job as an investment banking analyst is a challenging role that offers plenty of opportunities for a highly interesting and rewarding career. Analysts are usually recruited by investment banks directly from universities, although there are opportunities to join structured analyst programs from alternative career paths.
Life in an investment bank typically begins as a financial analyst. This is the entry-level position for graduates looking to break into investment banking and is a two-year-long program, which begins in the late summer. If the analyst performs well this may extend to three years, and later to the associate level. Successful applicants are typically assigned to a specific team for a 12-month period to learn the necessary skills for a financial analyst. These assignments are usually driven by the bank’s needs but will factor in the background and skill set of the analyst
Typically, analysts will work for a product group such as mergers and acquisitions, leveraged finance, restructuring, debt capital markets, or equity capital markets. There can sometimes be a rotation between product groups but usually, the analyst will remain in the same group and take on various roles within the team. Sometimes the analyst will be assigned to an industry group (e.g., healthcare, financial institutions, industrials, technology, oil, and gas, etc.) and perform different tasks focused on the same industry. This can help accelerate learning a particular sector, which is useful given the depth of knowledge required to understand some industries and their regulatory requirements and operations.
Investment banking analysts provide support to associates and investment bankers in areas that include equity and debt offerings, valuations, private placements, leveraged buyouts, mergers and acquisitions (also referred to as M&A), and strategic advisory work. A typical workload would include: building financial models, carrying out financial analysis and due diligence, creating presentations, and conducting research. They take on the role of gathering the information and presenting it to their team in a format that is quick and easy to understand – usually in Excel or in a PowerPoint presentation. This data will be enhanced by the team to explore investment opportunities or create scenarios for future performance.
Key Learning Points
- Investment banking analysts are entry-level professionals providing support to investment bankers and associates in related areas.
- They typically work for either an industry group, such as oil and gas, healthcare, financial institutions, industrials, or technology, or a product group, such as M&A, leveraged finance, restructuring, debt capital markets, or equity capital markets.
- Investment banking analysts are expected to possess skills in the areas of research, financial modeling, presentation, project financing, and financial statement analysis.
- Investment banking analysts also need to develop a combination of soft skills, technical abilities, and industry knowledge to be effective on the job.
- The career path for investment banking analysts is typically an upward trajectory through the IB hierarchical structure, although the skills are transferable to other financial institutions or companies within a specialist industry.
What Does an Investment Banking Analyst Do?
Investment banking analysts might be involved in a wide range of activities. Some tasks can include providing general and administrative support to the team, but usually analysts gather and/or analyze data. This might entail providing insight into economic trends and evaluating investment potential. Or it could include evaluating the financial positions of different companies within a sector, advising clients on potential investments, or helping identify or secure funding for new businesses.
Every role can offer different challenges, and due to the nature of financial markets, the data or information being researched can change very quickly, creating new opportunities and challenges!
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Investment Banking Analyst Responsibilities
Financial analysts are responsible for completing most of the groundwork, which is commonly yet unceremoniously referred to as ‘grunt work’. This has been coined so because they will spend a lot of time carrying out the more time-consuming tasks for associates. This includes putting together pitch books, completing the analysis in Excel, and even carrying out administrative tasks, like scheduling meetings. Nevertheless, their efforts and research also underpin important decision-making.
Though there are a wide variety of responsibilities, they can be broadly broken down into several principal categories:
Research – Company and Industry-specific
Investment banking analysts typically work on two kinds of research: company research and industry research. Investment banking analysts look at companies by examining earnings and profit as well as market trends within the industry.
In addition, investment banking analysts need to read company websites and do other online research to extract the core services and products of the company being analyzed. Other times, particularly when the companies are public, analysts gauge how other potential investors view the company.
Besides company research, analysts also delve into an industry to identify key trends. This could be to support a pitch book that will become a key client presentation. Because most senior investment bankers have been in the industry for a long time and have seen how industries have been transformed by mergers and acquisitions, their insights are trusted by clients. Investment banking analysts are tasked with reviewing industry research reports to augment these insights.
Investment banking analyst positions are highly coveted for the opportunity to build expertise in technical financial modeling. Though some groups within investment banking don’t engage in detailed modeling, most roles require this skill. Most of an investment banking analyst’s time is spent on understanding a client’s financial model. In addition, every deal requires valuations based on different methodologies and detailed analysis. Data science has developed quickly to include data visualization and data mining, which definitely adds new requirements for the analyst role. Analysts can expect to spend long stints working in Microsoft Excel on financial modeling.
In order to show key conclusions, investment banking analysts need to present the results of their research and investigation to the investment banking team, an investment banker, or even clients. Usually, investment banking analysts are also required to be engaging and well-informed when performing presentations. Presentation skills must be honed to be promoted to a lead analyst role. To tie all responsibilities together, investment banking analysts and their teams need to create pitch books and constantly review presentations to ensure that there are no mistakes. Pitch books are hard-copy versions of PowerPoints used in client meetings. Analysts spend the majority of their time formatting these for staff.
Administrative tasks and team support
Investment banking transactions are always high-value and require significant due diligence. As a result, there are usually many parties involved in a deal, including multiple investment banks, the client team, and lawyers. Multitudes of meetings and calls are required with both clients and internal teams to plan various work streams.
Administrative tasks such as arranging meetings, generating reports and other materials, and making sure the team operates smoothly is part of the analyst role. Though it may sound trivial, the meetings and calls required for each transaction are a large part of an investment banking analyst’s day. They may have their entire day booked with meetings and calls, leaving only the night to get any “real work” done if timeframes are tight.
Table 1: Investment banking analyst responsibilities
Key Skills Required for an Investment Banking Analyst
Investment banking analysts need to develop a combination of soft skills, technical abilities, and industry knowledge in order to be effective. Here are some of the key skills.
- Research: Identify and make use of reliable resources, for example, government-regulated financial reporting sites, and search for financial information or broadcasts about markets and corporations.
- Industry regulations: ensure their clients or institutions operate in accordance with federal laws by maintaining knowledge of current financial regulations in collecting data and making recommendations.
- Financial modeling: be fluent in Excel and able to create complex models that incorporate data to generate reliable financial projections and valuations.
- Numerical ability and quantitative skills: be able to deploy fundamental and advanced math skills to build and analyze financial models and make projections regarding the outcomes of investment decisions.
- Excellent Communication skills: analysts must be able to present in formal or informal settings, adapting their language and presentation style to suit the audience.
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A career at an investment bank typically begins as an analyst. This is an entry-level position for graduates and is a two-year-long program, which begins in the late summer. Typically, analysts will work for a product group such as mergers and acquisitions, leveraged finance, restructuring, debt capital markets, or equity capital markets, or an industry group for example, healthcare, financial institutions, industrials, technology, oil, and gas. They will perform tasks focused on the same industry which can help to accelerate learning in a particular sector, building in-depth knowledge of an industry and their regulatory requirements and operations.
If the analyst performs well this may extend to three years, and later to the associate level.
Typically, an investment banking associate is an analyst who has been promoted to associate level after three years within a firm or a newly graduated MBA.
They are still responsible for a number of fundamental tasks within a team, like producing presentations, arranging client meetings, and performing financial analysis. However, their models are more complex, and they are also responsible for checking analysts’ work. Associates are also expected to project manage their deal teams, including senior members of the team as well as analysts. Associates are the ‘middlemen’ and much of their time will be spent talking to Vice Presidents (also known as VPs) and directors and chasing analysts to get their work done.
Associates normally stay in the role for three years before either advancing to the VP level or leaving a firm.
A vice president (VP) is the most junior level of a senior banker in an investment bank. A vice president’s responsibilities are to coordinate a team in completing pitch books and importantly managing client relationships.
Director or Senior Vice President
Often called a director or senior vice president, the role is different depending on the bank and group they are working for, but their main focus is winning new business. A director’s role is somewhere between a VP and a managing director.
Managing Director (MD) is the most senior level within the hierarchy of an investment bank apart from the executive positions. MDs are responsible for relationship building, revenue generation, and the day-to-day operations of their department. They typically head up a division and ensure each group is meeting its responsibilities.
Investment Banking analysts will earn a huge amount of valuable experience in the role which will help to set them up for a promising future, either within the investment banking industry or outside of it. Future career paths for investment banking analysts include:
- Serving as lead analyst for a particular sector, perhaps starting with some of the smaller listed companies.
- Progressing to management, supervising other investment analysts, and taking on responsibility for an investment area or type of fund.
- Developing expertise in a chosen field and becoming recognized for specialist knowledge, expertise, and results.
- Becoming an investment manager for an insurance company or in-house pension fund.
What to Expect
Being an investment banking analyst isn’t for the faint-hearted. Working hours can vary from around 70 to 90 hours a week depending on the firm, which means there is little time left for spending outside the office. To put it bluntly, work will be your life. While there are some quieter days, financial analysts can expect to be on call 24 hours a day, with some nights demanding an all-nighter. On top of this, many weekends will require time spent in the office.
So, What’s the pay-off? Why does a career in investment banking appeal to so many?
Firstly, remuneration is high. Typically, investment banking analysts can expect a starting salary of £90,000 in UK, and $150,000 in US, with plenty of room for an additional bonus (note: bulge brackets tend to pay more than smaller boutiques). Not only that, but financial analysts will earn a great deal of valuable experience in the role by carrying out day-to-day tasks and from the professional development provided. This will help to set graduates up for a promising future, whether that continues to be in investment banking or another industry instead.
Investment banking analysts are entry-level professionals who provide support to investment bankers and associates and can be involved in a wide range of activities and disciplines. Analysts typically work in either an industry group, like Oil and Gas, or a product group, like M&A. Investment Banking Analysts need to develop a strong set of technical skills in the areas of research, financial modeling, presentation, project financing, and financial statement analysis. Soft skills, technical abilities, and industry knowledge will all help an analyst be effective.