Overview of Investment Banking in New York City
Investment BankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc. is a part of broad banking and finance-related activities to create wealth for institutions, individuals, government, or corporations. An investment bank offers a lot of services to its clients. They employ professionals from top universities with an attitude to succeed.
Investment banking functionsInvestment Banking FunctionsInvestment banks perform various functions for their clients, including initial public offerings (IPOs), mergers and acquisitions, risk management, equity research, structuring of derivatives, merchant banking, and investment management. in New York can be classified as below:
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- Public Offerings of Debt and Equity Securities: Investment banks help companies offer their shares or debt securities to the public. This could be either an initial public offeringInitial Public OfferingAn initial public offering (IPO) occurs when a private company makes its shares available to the general public for the first time. IPO is a means of raising capital for companies by allowing them to trade their shares on the stock exchange. or further to IPO, or they also support a large shareholder to cash out his position in the company by selling shares to the public. They also help in the underwriting of securities by which if they are not able to sell the securities to the investors, they will buy them from the issuing company.
- Private Placement of Shares: Investment banks help companies raise capital by privately issuing securities to an individual/ institution or a group of individuals/institutions. Such discreetly placed securities do not require too many disclosures compared to the public offering and often give higher returns to the investors.
- Mergers and Acquisitions (M&As): M&As are a major activity of most investment banks where banks help the companies work out a deal at a fair price. The investment bankers lead the M&A and find, facilitate, finance, and negotiate the deal.
- Structured Finance/Securitization: Investment banks help in the securitization process for various asset-backed securitiesAsset-backed SecuritiesAsset-backed Securities (ABS) is an umbrella term used to refer to a kind of security that derives its value from a pool of assets, such as bonds, home loans, car loans, or even credit card payments. like MBS, CDO, CDS, etc. They help in finding investors for securitized products.
- Risk Management: The investment banks help enterprises with risk management and provide service to hedge positions in interest rate swapsInterest Rate SwapsAn interest rate swap is a deal between two parties on interest payments. The most common interest rate swap arrangement is when Party A agrees to make payments to Party B on a fixed interest rate, and Party B pays Party A on a floating interest rate., Fx, options, futures, commodities, etc.
- Public Trading of Securities: Most investment banks publicly trade in securities. They may be brokers, dealers, market makersMarket MakersMarket 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.. The investment banks do not restrict their trading capabilities to stocks and fixed income but trade in other securities like derivatives, commodities, securitized products, etc.
- Investment Research and Analysis: Investment banks provide research and analysis on equities, debt products or IPOs, M&As, etc. Their research can vary from a corporate action to a detailed analysis of its stock price.
Investment banks are at the center of finance. They are involved in some form or the other in each financial transaction.
Recruitment Process in Investment Banking in New York City
The recruitment by investment banks in New York City is of two types – on-campus and off-campus. The structure and procedures for the two types vary. On-Campus recruitment is when the companies visit the B-schools and hire candidates. It is more structured and the best way for candidates to get hired by investment banks.
- The first step will be to submit the resume.
- The investment banks in New York City will shortlist potential candidates and call for an interview.
- The interviews for all candidates will be scheduled on a day given by the university’s placement committee.
- Typically, one or a team of 2-3 investment bankers will interview the candidates and grill them on various technical and soft skills.
- Potential candidates are then shortlisted for the next round.
- The next round, called the “superday,” is the final round that may involve interviews with the analysts, associates, VP, MD, or Director.
- It becomes difficult for candidates to get an interview call in off-campus recruitment.
- The investment banks get thousands of resumes every day for job openings. Thus, the best way is to apply through an employee referral.
- Once the resume is shortlisted, investment banks will call for the first round of interviews, which could be either face-to-face, telephonic, or video conferencing.
- Next, if the candidate is shortlisted after the first round, they will be called for the final round, similar to the ‘superday’ process of on-campus recruitment. The candidate will have a series of interviews with bankers at each level.
- The recruitment process varies from company to company. The mentioned process is similar to that commonly observed between investment banks in New York City.
There are some traits an investment bank recruiter looks into the candidate. While college GPA and related courses are important, they do not help much in the interview. Instead, they highlight the candidates’ resumes and help them get shortlisted for the investment banking interviewInvestment Banking InterviewThe purpose of this Investment Banking Interview Questions and Answers is simply to help you learn about the investment banking interview topics..
The interviewer is mostly an investment banker with years of experience. They look for people with a winning attitude along with knowledge about finance. The interviewers evaluate the candidate on various skills like leadership, technical skills, and motivation to be an investment banker in New York.
Culture of New York Investment Banks
Investment Bankers in New York typically work 80-100 hours per week. Sometimes they need to work on Saturdays and Sundays too. Most of the time, the employees only work on a cup of coffee and don’t get time to eat the proper meal. Most of their time is consumed by research. This is why the recruitment process of investment banks is grueling, and they try to find the right person for the job with the right motivation.
But personal motivation is not the only factor that keeps an employee going. The employees are motivated to take high risks for better performance. Their long-term and short-term goals are mapped to compensation and bonuses. Such an alignment of goals would make them take high risks for short-term profits.
Investment banking is one of the best paying industries in the market. However, the salaries vary with skills, knowledge, and experience.
As per one of the career portals, indeed.com – an average salary of an investment banker in New York is $ 116,578 per annum, ranging between $ 24000 – $ 280000.
Based on a survey, Glassdoor reports an average salary of investment bankers in New York of $ 97,145 ranging between $81000 and $114,000.
Source – Glassdoor
While investment banking in New York offers good compensation, working conditions are stressful with long working hours, tight deadlines, and too much peer competition.
Thus, most people work for 3-4 years and look for exit opportunities. For example, an investment banker has the following exit opportunities:
- Private Equity – Private equityPrivate EquityPrivate equity (PE) refers to a financing approach where companies acquire funds from firms or accredited investors instead of stock markets would require research and analysis of unlisted companies and start-ups to invest privately and earn good returns for the investors.
- Hedge Funds – Hedge funds can be an opportunity for those who have worked on the trading deskThe Trading DeskA trading desk is a section within a bank or company that buys and sells securities such as bonds, shares, currencies, and commodities to facilitate their own or clients' trades in the financial markets, ensuring market liquidity. and know the in and out of trading strategies. However, the roles at hedge funds are more stressful as a huge loss would take your job right away.
- Consulting and Advisory – Consulting and advising is a big market, and people working in the area are specialists in their domains. One can choose an area of experience and knowledge to advise big corporations on various decisions like raising funds, mergers and acquisitions, risk consulting, etc.
- Fintech – An investment banker with a solid technology background can look for Fintech companies. These companies are different from regular banks but provide a wide range of banking services using technology.
- Personal Trading – One can use his trading knowledge and experience and start personal trading. While it is risky because the person is trading his own money without a full-time job, it could be rewarding both in terms of satisfaction and money-making.
- Equity Research – Equity researchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. is for people who like data, reporting, financial modelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact. and would like to research stocks and advise on buy/sell decisions. Such a job is lucrative as it has similar compensation but fewer working hours and less stress.
- Boutique Banks – A person, especially senior investment banking professionals, can look for a boutique bank that provides a better work-life balance than investment banks with similar activities.
While investment banks are lucrative, they come with stressful, long working hours and risk-taking corporate cultures. It is not for everyone to be on their toes every time and make deals on tight deadlines. People should weigh the pros and cons before making a 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. .
This has been a guide to investment banking in New York, their services offered, recruitment process, culture, top investment banks, salaries, and exit opportunities. You may also have a look at the following article for learning more about Investment Banking –