How to Answer the 'Why Investment Banking?' Interview Question
By Indeed Editorial Team
Updated 7 October 2022
Published 18 May 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
When you begin seeking a job in the investment banking field, it's beneficial to prepare yourself to answer the potential questions your employer could ask during the interview. Since it's a demanding career that involves various analytical, critical thinking and mathematical skills, the interviewer may seek to test your capacity to utilise such skills. Learning how to answer the questions accurately and effectively can increase the possibility of you getting the job. In this article, we provide fundamental questions asked in an investment banking interview and share sample answers to help you craft your own.
Why do employers ask the 'Why investment banking?' interview question?
As an opening question, the hiring manager may ask you the 'Why investment banking?' interview question. It's crucial to be ready to answer questions about experience and background and more in-depth investment banking questions. Interviewers use these technical questions to gauge how much you know about the financial services industry.
Answering 'Why investment banking?' in an interview
Follow these few useful steps when the interviewer asks this question:
1. Show that you're interested
At the beginning of your interview, you can start by showing how interested you're to start working in your position as an investment banker. You can also briefly discuss what you know about investment banking and how it's applicable to your future responsibilities in the position. Showcase your work ethic and readiness in facing challenges you may encounter during your time in the company.
2. Highlight your contributions
Although discussing how the position can increase your competencies is important, it's also crucial that you explain how you can contribute to the company. One of the main responsibilities you may have as a professional in investment banking is to determine how to increase the company's revenue. Therefore you can demonstrate your contribution to your previous company and explain how you can leverage your experience to help the company achieve their current profit goals.
3. Discuss your education
If you're pursuing a career in investment banking, you most likely have to earn at least a bachelor's degree from a reputable university. Many investment bankers enhance their skills with a master's degree or any other related major like finance or accounting. You can also discuss any internship experiences during your time studying.
4. Emphasise your strengths
As you come to the end of the interview, be sure to emphasise your strengths as a potential employee. This may help the interviewer note that you're a dedicated and persistent individual. Discuss your strengths related to the investment banking industry like math, analytical thinking or problem-solving.
Sample answers to 'Why investment banking?' interview question
Here are a few sample answers to use if you get asked this question:
Use this example as a guide to highlight your educational experience:
'I'm looking forward to enhance my expertise as an investment banker. I just completed my MBA, during which I was fortunate enough to be an intern working with a prolific professional in investment banking. During my internship, I was responsible for preparing accounting data for my mentor which allowed me to handle real-life cases. This experience prepared me for this full-time position. I'm prepared to move forward in this industry. I believe I can be an asset to your company with my advanced skills in finance and accounting.'
This example is useful in talking about your work experience:
'I always have been very passionate about investment banking. During my university time, I spent the majority of my time working on projects related to the finance sector and I did my internship in one of the top investment banking companies here in Singapore. I'm ready to take on this challenge and I believe my knowledge in the finance, specifically in the merger and acquisitions can help your company to achieve your growth target.'
Other investment banking interview questions with sample answers
Here are more investment banking interview questions with example answers:
What are the positions in investment banking you've held before?
Interviewers may ask this to determine your level of experience. To answer this question, you can explain your previous experiences in the investment banking industry. You may also discuss the responsibilities of the positions you held.
Example: 'When I was a university student, I was shadowing a top investor in one of the biggest financial firms in my city. My responsibilities include gathering and analysing data for the investor to use. I've acquired the ability to work in high pressure and demanding environment. I'm positive that my past working experiences have equipped me to contribute to this investment banking firm.'
How do investment bankers value an organisation?
The interviewer may ask this to determine if you understand valuation techniques. You can demonstrate your ability to assist other companies with making financial projections. By researching and rehearsing answers to technical questions, you can reply in a precise and efficient manner during your interview.
Example: 'The two methods you can value a company are intrinsic valuation, or discounted cash flow, and relative valuations, or multiples. The discounted cash flow valuation helps to determine if a firm receives expected returns from investments, resulting in a consistent valuation. Multiples are subjective, and they can result in a variety of valuation computations. The pace at which a firm grows is still taken into account when calculating its value.'
Can you detail the differences between commercial and investment banking?
Interviewers may ask you this question to assess how knowledgeable you're about the financial sector. You can show your in-depth knowledge by providing a detailed answer.
Example: 'Customers deposit money with commercial banks and use the money earned from deposits to provide loans. When it comes to their financial sheet, the loans they make are assets. An investment bank serves as a mediator between businesses and investors. Investment banks sell investments and hold on to any debt or equity from the bank.'
What are the three financial statements every investment banker should know?
Interviewers may ask this question to determine your expertise and knowledge. When you explain the three financial statements, you show that you have great technical knowledge of financial terms and theories. To answer this question, specify the details and processes of each financial statement.
Example: 'A balance sheet, an income statement and a cash flow statement are the three financial statements to consider. A balance sheet shows a company's assets and liabilities in the top half and equities in the bottom half. It also provides an overview of the company's financial situation. An income statement shows a company's profitability and summarises its quarterly or annual financial performance. The amount of cash flow from operations, investment and financing are shown on a cash flow statement.'
What skills have you learnt from your previous experiences that you can use in this investment banking position?
The hiring manager may ask this to determine if you have any transferable skills. Many professionals in the investment banking industry have previously held roles requiring knowledge in finance, accounting or mathematics. Review your resume to decide on which skills you want to elaborate on during the interview.
Example: 'I think that my ability to grasp and perform complex calculations gives me the confidence to provide financial advice to clients due to my accounting background. I assisted the controller with proofreading balance sheets, invoices and financial reports during my prior accounting internship to assure their accuracy. I repaired two errors, allowing the management team to deliver these reports on time to external stakeholders. This experience has prepared me for interacting with customers in high-pressure scenarios.'
Why is it better for companies to issue debt rather than equity?
This is another technical question that interviewers may ask to know if you possess in-depth knowledge and skills to accomplish financial tasks. Practise answering so that you can remember all the details.
Example: 'From my knowledge, there are a few reasons a company would rather issue debt than equity. First, issuing debt is more risk-free and uses up much less capital compared to issuing equity. Second, when the business has taxable income, tax shields are available. Third, issuing debt is better for companies with consistent cash flows that can make interest payments. Fourth, higher financial leverage helps maximise the profits from invested capital. Fifth, when issuing debt can produce a lower weighted cost of capital (WACC) in comparison to issuing equity.'
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