Investment Banking in Germany
How is the investment banking in Germany? Should one start working in Germany and expect a better pay? How to approach the interviews of investment banking in Germany? How the recruitment process in investment banking works?
In this article, we will talk about the following –
- Investment Banking Market in Germany Overview
- Investment Banks in Germany – Services Offered
- Top Investment Banks in Germany
- Investment Bank Recruitment Process in Germany
- Culture in Investment Banks in Germany
- Investment Banking Salaries in Germany
- Investment Banking Exit Opportunities in Germany
Investment Banking Market in Germany Overview
As a candidate for investment banking, Germany is always a good bet. Because in Germany, you will get almost similar pay as in London and at the same time, you would be able to save a lot. Germany is for people who would like to grow in investment banking without any craziness of finance world/colleagues.
However, not all investment banks in Germany are good paymasters. You need to choose a bulge bracket investment bank Bulge Bracket Investment Bank Top 10 bulge bracket investment banks are - Blackstone, Goldman Sach & co, Morgan Stanley, J.P Morgan Chase & co, Bank of America Merrill Lynch, Credit Suisse, Citi, Deutsche Bank, HSBC, UBS.to be able to take the full advantage of Germany’s market and get some hands-on experience as an Investment Banking Intern.
In Germany, there is one particular thing that’s different than the rest of the world. In Germany, there’s nothing that is called investment banks. Banks act as commercial and investment banks both.
Thus, in Germany investment banking and commercial banking co-exist. However, there are some particular services which are provided by German banks so as to be called investment banking service providers. And all of these services are related to the capital market.
In Germany, the legal term “finanzdienstleistung institute” is used to mention German investment banks. And have a look at the services to get a good idea about how investment banking wing of German banks are wowing their customers.
- Professional Financial Analyst Training
- Training on Investment Banking
- Mergers and Acquisitions Online Training
Investment Banks in Germany – Services Offered
First, let’s look at the activities of investment banking in Germany and then we will explain each of them –
As we can see, that the investment banking in Germany can be divided into two major activities – first, the activity of financial intermediation and another is proprietary trading. And the whole activities are based on their research and strategy.
Let’s look at each broad category in detail.
This is the only similarity between investment banking and commercial banking – they both act as financial intermediaries, but the scope and services offered are completely different.
Under the activity of financial intermediation, there are three sub-categories – financial advisory, primary market, and secondary market.
- Financial Advisory: Under financial advisory, German investment banks mainly provide M&A advisory services where companies having similar intention to create synergies in M&A. Other than mergers and acquisitions, investment banking in Germany also provide equity capital markets advisory and debt capital markets advisory and show their clients about how to go for equity, bonds, and structured products. Other than these main two, they also provide a gamut of services which include syndicated loansSyndicated LoansA loan syndication is an arrangement in which multiple lenders pool their resources to lend to a single entity. It is done to meet a borrower's large requirements, and the lenders are typically banks and other financial institutions., risk management advisory, a financial advisory in venture capital and private equity, and rating advisory.
- Primary Market: In the primary marketPrimary MarketThe primary market is where debt-based, equity-based or any other asset-based securities are created, underwritten and sold off to investors. It is a part of the capital market where new securities are created and directly purchased by the issuer. as well, investment banks provide a boutique of services. These include assistance in IPOs (IPOs can be public or private, and they can also be an initial or secondary issuance of equity), debt issuance, aftermarket activities, construction of indices, securitized products, and certificates, derivatives, & hybrid services.
- Secondary Market: In regards to the secondary market, investment banks provide both products and services offerings. In products, they offer spot, derivatives, certificate indices on foreign exchange, money marketMoney MarketThe money market is a market where institutions and traders trade short-term and open-ended funds. It enables borrowers to readily meet finance requirements through any financial asset that can be readily converted into money, providing an organization with a high level of liquidity and transferability., bonds, equity etc. And in services, they offer dealer activities, brokerage, and market makerMarket MakerMarket makers are the financial institution and investment banks which ensures enough amount of liquidity in the market by maintaining enough trading volume in the market so that trading can be done without any problem. activities.
Proprietary TradingProprietary TradingProprietary trading refers to the process adopted by the commercial banks and financial institutions to earn profits by investing their funds in the financial instruments rather than making commission by trading on behalf of their clients. is another wing of investment banking of German banks. Under this, German investment banks provide two types of trading services – first, trading in the own names of banks; and second, providing trading advisory services. And they also provide products which are traded in the secondary market.
These services may vary depending on the AUM of the banks and the types of clients they serve.
Top Investment Banks in Germany
Leaders League has done a survey of top investment banks (based on telecommunication, media, and technology) of Germany in 2017. And they have found out few investment banks which they have divided under “leading”, “excellent”, and “highly recommended” ratings.
Let’s have a look at the names of the top investment banks under these ratings –
According to Leaders League, “leading” investment banks are the topmost performers of the year 2017 in terms of telecommunication, media, and technology advisory. These names are –
- Crédit Suisse
- Oakley Advisory
After the “leading” investment banks, there are few banks which come under “excellent” category by performance –
- BNP Paribas
- M&A International
- Morgan Stanley
After “leading” and “excellent” ratings, there are investment banks which come under “highly recommended” by Leaders League in terms of performance in TMT –
- Deutsche Bank
- Nomura Holdings
If you’re planning to get a job in investment bankingJob In Investment BankingThe investment banking job description is a formal narrative that lists out the essential qualification, basic skills and technical skills required in a candidate to fill in the vacant investment banker position. It also explains the roles and responsibilities to be performed in this job position., try to get recruited or get internships in these investment banks. These are the top-notch investment banks of Germany and these will definitely push your career to its next level.
Investment Bank Recruitment Process in Germany
The recruitment process in Investment Banking in Germany is just like London with few exceptions. Let’s have a look at the recruitment process of investment banking candidates in Germany –
Pool of candidates:
In Germany, the candidates are primarily from business administration or finance. Rarely people from other backgrounds apply for investment banking. That’s why the technical background and knowledge of these candidates are much better than the candidates in London. Thus, it has often been seen that people who are not getting shortlisted here end up applying in the investment banks of London.
Types of interviews:
In Germany, when people are interviewed for investment bankingInterviewed For Investment BankingThe purpose of this Investment Banking Interview Questions and Answers is simply to help you learn about the investment banking interview topics., the level of interviews is much tougher. There are two reasons for this. First, the technical aspects of the interviews are higher than the personality types of questions. Because the interviewers here need to know whether the candidates have knowledge of the basics or not. The second reason for which the level of the interview is tougher is that instead of asking tough questions, interviewers ask many detailed questions. For example, instead of giving a candidate to do the valuation of a company, they go on to ask which valuation methodValuation Of A Company, They Go On To Ask Which Valuation MethodDiscounted cash flow, comparable company analysis, comparable transaction comps, asset valuation, and sum of parts are the five methods for valuing a company. will yield more benefits and which will generate lower returns.
Type of preparation:
As a candidate, you need to prepare thoroughly. As the technical aspect is much more here in proportion, you need to know what you’re talking about during the interview. You can’t escape just by scratching the surface and not knowing exactly what you utter. Thus, prepare well. Know your stuff. If you aren’t confident about the fundamentals, go through them and hone your skills. Without in-depth technical knowledge, it’s almost impossible to break into investment banking in Germany.
Application & Interview Process:
Let’s now have a glance at the application and interview process –
- Off-cycle interview: Off-cycle interviews keep on happening throughout the year which is making things easy for candidates to apply and get recruited as interns/ full-time employees.
- Application process: In Investment Banking in Germany, you will get shortlisted by online submission. If you want to apply for a position (intern/full time employee) in an investment bank in Germany, all you need to do is to go through the competency questions of the online application (usually math and logic tests). Then, the VP of the bank would shortlist your candidature depending on your past experience, grades, and the technical background.
- Interviews with interns: Usually, four rounds of interviews are taken to hire the interns. In Germany, the investment banks hire up to 3 interns at one time. The first two rounds would be with analysts. If you go through the first two rounds, you will be sitting with an associate. If you clear that round too, the last round would be with VP.
- Interviews for full-time positions: For full-time employees, the interview process is similar as in London. As a candidate for full time, you need to go through an additional round or two than interns to get selected. You will be going through a usual 1-1 round of interview till MD level; there will be an assessment center to judge your knowledge and skills plus you need to make case presentations as well.
Unlike any other places, in Germany networking isn’t used as an effective tool. But if it can be done, it would create better results within short period of time. Here’s why –
- First, in Investment banking in Germany, the team is much smaller. So an individual banker has more influence on who would get interviewed and who would get hired.
- Second, very few people network in Germany. So the way of networking is still new and you can tap into networking immediately to get an edge over others.
For Investment Banking in Germany, it’s important that you know German. Knowing German would help you network better. Usually, 99% of meetings and presentations are done in English; so in that case, you don’t need to know German. But, knowing German would definitely benefit you as a candidate.
Culture in Investment Banks in Germany
In Germany, things are much different than other locations like New York and London. In Investment Banking in Germany, the team members are much lesser in an office. In a full office, only 30 people work. As a result, everyone knows each other. And the behavior and culture are very professional. No-one screams at each other. People love to work and step up whenever required.
In smaller offices like this, it’s easy to shine as well. As an entry-level employee, you can enter into any MD’s office and ask them questions if you have any. Plus, as the team is smaller, you can contribute in any deal as an individual. And your position will not act as a hindrance in the path of your contribution (if you know what you’re doing in the first place).
Moreover, you would get client exposure much earlier in your career. In Investment banking in Germany, you would get significant client exposure just after getting recruited which is not the case in New York or London.
And the culture overall is very relaxed. As a result, people can concentrate on work and can maintain a healthy work-personal-emotional balance.
Also, have a look at Investment Bankers LifestyleInvestment Bankers LifestyleLong working hours, weekend work, a lot of hard work, and little sleep are all part of an investment banker's life. Life as an investment banker is described as hectic, but for those who want to live a life of dedication, competition, and risk while also performing well, investment banking is the appropriate choice.
Investment Banking Salaries in Germany
According to eFinancialCareers.com, Germany’s investment banks pay much lesser than the London-based investment banks.
As per the report of eFinancialCareers.com, the average salary paid by Deka Banks is $127,000 per annum. In comparison, London-based Jupiter Asset Management paid around $251,000 per annum.
Not only Deka Bank, Munich-based investment banking wing, HypoVereinsbank is also a poor payer in regards to compensation. It pays an average of $232,000 per annum. In contrast, Goldman Sachs pays a lot more, around $399,000 per annum. And Jefferies pays around $466,000 per annum on average.
The main reason behind this is in London, the bonus is much higher than Germany. In Investment banking in Germany, the amount of bonus is less. But if you live in Frankfurt, you would be able to save a lot of money upfront.
Investment Banking Exit Opportunities in Germany
In New York, people work for 2-3 years in investment banking and then quit to join something else.
However, in Investment Banking in Germany, things are much different. Most of the candidates here come into investment banking for a long term. And rarely they opt for exit options.
But as there is always an exception for everything, in Germany also, few investment bankers choose to stay in an investment bank for few years and then move away to find a better career prospect.
Usually, three exit opportunities are most common here.
- First is private equityPrivate EquityYou can break into Private Equity if you're an undergraduate in finance or relevant fields like economics, accounting or an investment banking analyst or already been working in a PE firm.. Since there are many firms located in Munich and Frankfurt, people don’t worry about getting placed. They quit investment banking and try to get into private equity and mostly into top-notch companies like Blackstone, BC Partners etc.
- Second is corporate development careersCorporate Development CareersThe top four roles in a corporate development career are Analyst, Associate, Vice-president, and Director. Their primary responsibilities include activities such as planning, implementing, and regulating organizational strategies for a company's growth and development.. Many investment bankers opt for this profile.
- And the third common option is working as a strategic partner in any corporate firm.
German isn’t a bad place to build your career in investment bankingCareer In Investment BankingAn investment banking personnel is a motivated professional who aims to help their clients reach their financial goals and objectives. The top four investment banking careers are - Analyst, Associate, Vice president, Managing director. . Yes, the pay is lesser, but the learning curve is much better than London and New York since the main emphasis is given in technical aspect in an interview.
If you can build your technical skill at the beginning of your career, it will surely pay a dividend in the long run in your career.
This has been a guide to Investment Banking in Germany, their services offered, recruitment process, their culture, top investment banks in Germany, salaries and exit opportunities. You may also have a look at the following article for learning more about Investment Banking