5 Investment Banking Interview Questions You Will Get Asked

In this tutorial we’re going to look at 5 interview questions straight from the bulge bracket interview room.  We’ll take our time on each one, showing you all the ins and outs of answering them to a high standard.

We won’t just ply you with common advice though; instead we’ll let you inside the mind of your interviewer so you can really see how to shape answers differently to all those other students who simply read the Vault Interview Q&As guide!!  By the end of this you’ll be answering questions like a true insider.

 

BONUS: Download a free reportand see a student answer some of the toughest interview questions (plus hear the bankers’ feedback), plus find out how 5 of us managed to break into bulge bracket banks without having perfect grades, the best schools or insider connections.

 

1) “Why do you want to do investment banking?”

In a sea of overachievers who are equally talented, likeable and prepared, the why investment banking interview question can be the only differentiating question left for bankers to ask; making it both a popular & decisive question.

Whilst for college students who don’t look like aspiring bankers on paper (i.e. no fin/acc major, business degree or relevant work experience) it’s of epic importance. 

After all, you guys need to be able to explain why you want to do investment banking when your past decisions don’t suggest anything of the kind.  

 

How do you give a 10/10 answer to the why investment banking interview question?

There’s a huge selection of points you could make, but keep it short and sharp.  Generally a good answer will contain 3-5 solid reasons why you’re interested in IB. Typical examples like world class education, skills development, type of work, the challenge, real responsibility in billion dollar transactions etc. are all acceptable.

But try not to trot out the same BS as everyone else. Importantly, avoid reasons that are self-centered in a ‘bad’ way. 

Let me explain. As a banker interviewing you I’d be ok if you mentioned investment banking attracts you because of the learning opportunities, as this is a selfish reason that also, and ironically, benefits the bank – passionate 24 year olds put in 100-hour work weeks with ease after all.

But if I heard you wanted to do IB simply in order to ‘build your resume’ and/or to secure an exit opportunity I would – in my mind at least – throw you out the freaking door and then proceed to lay a BlackBerry beat down on your ass!

Being made to feel like a halfway house for financial vagrants, a mere stepping-stone, is not my idea of good times you see.  So even though everyone knows investment banking is attractive for the resume & exit opps don’t say it!  

 

What can help you avoid a BlackBerry Beat Down?

Well, you would get me extremely interested if you answered the why investment banking interview question by talking about how you have older friends in banking who have over the years shared with you what it’s really like to be a banker – both the good and the bad.

And then how that’s made you realize 3 specific things about banking which make it stand out above any other graduate job. Not only will I believe you still love banking despite the war stories, but that you’ve actually given it some thought beyond “I need a salary of Blankfein proportions if I’m ever going to pay off these student debts”.

What I’m trying to say is that a great answer will list unique and specific reasons ‘why investment banking’ and it will connect them to the sources you learned them fromwhether they be friends, professors, books etc.

 

Want 6 specific reasons ‘Why investment banking’ that are sure to work?

Try talking about how you love the…

  • Cornerstone role investment banks play in deals and/or the role they play more broadly within the world of business – IBs are to business what the White House is to the world…central hub HQ!  And this is why bankers are called masters of the universe.  So bring up this point, albeit laced in more formal language and without ever mentioning ‘masters of the universe’!!
  • Coalface exposure to industry and financial markets, which is unique to IB – there’s not a graduate job on the planet that puts you closer to the action than banking.
  • Results-driven deal-oriented approach – this point distinguishes banking from so many other professions like law, consulting etc, where players often get paid for simply ‘doing’, as opposed to ‘achieving’.  And by specifically mentioning this point you will show bankers that you’ve got the right mentality and that you’re not an increment-fiend like lawyers.  PS Once again be sure to phrase this in a more professional kinda way!
  • Type of people that work in banking – talk about this from both a learning and enjoyment point of view, and most importantly reference people you know in banking (particularly at that bank) to avoid looking like you’re simply shining shoes and kissing ass!
  • Nature of the work – analyzing, problem solving, real-world focused.  If you are going to talk about this then make sure you bring up a handful of examples in passing; eg 10k analysis, spreading comps, deal structuring etc.  We’ll take you through the 39 most common tasks investment banking interns do in a later free tutorial, which should help.
  • The specific industry/product group you are interviewing with – this is a must!  By talking about why IB through the lens of that specific group, you’ll really narrow the reasons down to specific, tangible, relatable ones – and that means bankers are more likely to believe you and like you.  eg If you say to TMT that you want to do investment banking because you find the business/investing side of the tech industry fascinating after working as an unpaid intern at a social media start up over summer, then you’ll hit the why investment banking question out of the park!

Whatever you choose, be sure you can talk intelligently about it if probed by the bankers. If you have work experience in accounting, consulting etc. then tell the bankers that whilst your time at KPMG or BCG or wherever you worked was a terrific experience, it didn’t offer…[reasons why you love IB].

This is a hidden opportunity to further explain your story, point out why you want to change into banking now and assure them again that IB is what you truly want above all else. Any comparison you make should be delivered subtly though.  Not because your interviewer might have worked at KPMG or BCG, but simply because it looks unprofessional to blatantly badmouth others. 

Negativity in any form doesn’t look good.

PS for those of you who get this question in an investment banking analyst interview (ie not a summer internship interview), you’ll need to push your story of why IB even harder to convince bankers to take you on. 

This is because bankers hate offering permanent spots to candidates who might quit the minute things get tough.  Passion is a banker’s best insurance policy against this – so make sure you show it guys!!

If you want to go one step further and really impress the bankers with your answer, thentell them how you became interested in IB years ago and point to the real life things you’ve since done that have confirmed your passion; studies elected, college clubs joined, people met, friends talked to, books read, jobs taken.

Showing a long and considered journey to get into investment banking is the idea here.  

 

What’s the final secret to a magic answer here?

Recognize the downers of banking, not just the uppers. 

Bankers you see, want to hire students who aren’t being drawn to banking based simply on Hollywood-hype or CNBC-glamor. 

They want to know you are realistic about the job, prepared to do grunt work, and yet still super passionate. After all, the Jimmy Cramer fan club and the Gekko Wannabe students will never be able to hack it when they find out what investment banking really in mentioning ‘masters of the univut costs the banks a bomb.

So with all that in mind, during your answer briefly mention how your friends in banking have clued you in on the realities of the job too – the long hours, sacrifice and other downers which we talk candidly about here. Of course, don’t end your question on a downer – meaning be sure to follow up any reality checking with your 3 main reasons why IB repeated in very very short form, kind of like “…but of course banking is an easy choice for me, because of…”.  

 

2) “Tell me about your favorite and least favorite units at college”

It’s always funny to see students search the back of their minds for this one.  Like with most investment banking interview questions and answers, if you don’t prepare you’ll end up coming off slow and aloof. Thankfully all you need to do is talk about your favorite subject (or two) and one that didn’t quite get you buzzing, including…

  • A very brief explanation of what was involved
  • 3 reasons why you liked/disliked it with explanation
  • 2 major takeaways/lessons learned from it

If you can encase these explanations in a story and draw on anecdotes you will rock it, because stories and anecdotes can convince even the most skeptical of bankers. Also, you should craft an answer keeping in mind why bankers ask this question;

Bankers want to uncover yourscinating after working as an unwhether business subjects get you excited and if you can talk articulately about key lessons you have learned.

 

But what should you pick as your favorite subject?

The only mandatory selection criterion is genuine interest, because bankers want to see unbridled enthusiasm above all else when you answer this question.  Energy matters more than content here.

But if you want to guarantee a 10 out of 10 answer select a business/finance subject or anything that sounds ‘meaty’ and you managed to garner a top score for (PS of course don’t mention your score unless asked!).

Also the more advanced the better, because no banker wants to hear how you found studying beta in Finance 101 interesting – their kids in prep school have learnt that!

One caveat you need to know; whatever subject you select be prepared for follow up questions on the key lessons you learned in the class.

i.e. if you decide to rave on like an attention-starved Liza Minnelli about how you discovered comps, LBOs and all that jazz in M&A 101, don’t be surprised if you’re knee deep in some messed up technical questions one minute later.  

 

What’s the biggest mistake you could make with your answer?

I’ve heard many students answer this question before and the major f**k up they make is BSing!! Half the time I shudder at the insincerity

For example, how am I meant to believe you love studying debt finance when your facial expression is about as animated as a Jamaican-Red smoking Al Gore.

In other words, you have to love what you pick otherwise the interviewer feels like they’re getting a heart serve of bullshit fed to them.

So if you can’t muster up enough love for a finance/business subject, but you can get peppy as anything about thatMedieval Pirates class you took in junior year, then go for it. Although you won’t get to push the finance-passion envelope with this, it does allow you to show off an interesting side to you, which can be as effective.  

 

What should you answer for least favorite?

It’s wise to go with an introductory unit – preferably outside of finance – and state in very simple terms that despite the teacher’s best efforts you found the unit lacked bite, wasn’t readily applicable, suffered a disconnect from the real world, involved an unhelpful detour from the core curriculum, and/or whatever jimmer-jammer you like.

No need to go into specifics, get brutal on curriculum or verbally beat up on past professors who still haunt your sleep with this one.

Brevity is your friend. You will deliver a top class answer if you can finish your response off by saying how despite a lack of interest you still; 1) Put in the hours and did the work, 2) Mastered the material, 3) Found your Professor (teacher) interesting outside of the curriculum and 4) Chalked up a top grade

In fact, bankers will probably be more impressed by your answer here, because what is the work of a junior banker if not grueling, often uninteresting, shit kicking tasks.  And you have just shown (not told) them you can do this very thing… happily.

Don’t be surprised if they want to offer you on the spot! Timing this question is important, and as you can see from our advice here it’s possible to end up laying down a 4-minute answer, but that’s not going to win bankers hearts or minds. Instead, spend 30 seconds talking about your favorite subject and 20 seconds on your least favorite – and wait for the follow up questions!  

 

3) “Why do you want to work for Goldman Sachs?”

Although you’re more likely to get asked the why investment banking interview question, it’s still worth considering this question, because if you don’t use the answer during any interviews you’ll at least use it in your cover letters.

When all the banks seem to be carbon copies of each other, how are we meant to answer this question? Well, you could take the easy road and just trot out the same things every student does for every bank in every interview. 

Almost verbatim from some crazy Vault Survey or D grade investment banking interview guide, students will say; “Work with the smartest people, access to world class training, program rotation, steep learning curve, real responsibility, meritocracy, entrepreneurial culture and top transaction experience” or some variation of that.

But if you want to stand out and make it look like you’ve actually given this question some thought, first mention three bank-specific things you love. E.g. a particular training program only they have or a group’s focus on certain types of deals.

The smartest way to find this information is by asking the banks own analysts why they joined the analyst program and why they like working there. Not only is this method painless since you only have to attend a networking event or email an alumnus, but it can also yield real ‘insider’ reasons that you can’t pull off a recruitment website, e.g. a recently implemented initiative at the bank.

Bonus marks if you relate your reasons “why Goldman Sachs” back to an experienceyou mentioned in your story and/or to a banker you spoke with.  Combining good research with thoughtful self-analysis like this will convince bankers you genuinely want to work for them.

Apart from what a bank’s analysts may tell you, it’s wise to mention that you are attracted to the bank because of thepeople you have met there, followed up with their names and the stories of how you know them. 

This alone can put you in the ‘inner circle’.

Feel free to rattle off 3 standard reasons for wanting to join them at the end of your answer.  The #1 way to deliver this like a good little sycophant-in-the-making is by saying “and obviously Goldman Sachs works on the leading deals, has the best people in the TMT world and offers first-class training”.  

 

4) “What recent deals have interested you?”

You have to crush this, because a good answer here will show bankers you possess 2 qualities they love.

  • You find IB interesting – because who else is whacked out of their mind enough to read about M&As or IPOs in their spare time!
  • You can talk intelligently about it – assuming you give an answer the Inside Investment Banking way.

Unfortunately, this is a question aspiring bankers usually bomb on, so it’s vital that you read our advice here very carefully.  

 

What are the dangerous mistakes to avoid here?

First up, don’t pick a deal that is on the headlines of every freaking financial paper. Bringing up Apple’s bid for Google looks lazy and it’s an M&A deal your interviewers will be far too knowledgeable about for your analysis to be even slightly wrong.

On that note, don’t pick a deal the bank has done – especially the group you are interviewing with – or any deal that is even remotely within their field of expertise. Going to TMT to talk about Intel scooping up McAfee is as fine an example of insanity as one can find – as is attending an interview with Resources Supremo MD Larry Larryson and casually chatting about CVRD’s bid for the zirconium deposits of Banwanaland Inc.!

You see one slip up on some random detail and you’ll get taken to school.  Avoid bankers’ circle of core competency like the freaking plague and you won’t get killer follow up questions or be found out on key analysis.

But…if you are insanely well prepped up on a deal in their circle of core competency and are ready to wax lyrical about it, then take the risk and talk about Intel v McAfee! Although it’s high risk – and something 80% of students shouldn’t opt for – if you can nail it with intelligent analysis, then you’ll slap bankers in the face with your raw passion and intellect for their area of work.  You’ll look like a ready made plug-n-play candidate.  

 

How do you deliver a knock out answer?

For starters, hunt out and study a slightly obscure deal. Just ensure it is sizeable enough that there are articles online or in print for you to extract facts, data and opinion from. 

No student I know has time to do ‘primary’ research after all! Importantly, tell bankers why you chose this deal as this will strengthen your ‘IB passion’ claims. Before sharing your thoughts on the deal, give bankers the background of it, even if you think they might know the deal. 

This involves a 15-second summary about the;

  • Parties – companies, advisers (including the banks)
  • Numbers – think price, valuation multiples etc; please distinguish between rumored or real
  • Outlook, or if it’s done, the outcome

With them up to speed, proceed to share your thoughts on;

  • Whether it’s a good deal and for who – company A, company B, stockholders, suppliers, customers etc.  Importantly, ply the bankers with figures, data and expert opinions in support of your thoughts, otherwise you’ll end up sounding about as substantiated as Perez “look at my shoes” Hilton!
  • The chances of the deal going through.  If it’s already done, talk about how successful the deal has been for the companies and the advisers involved.
  • Anything else of interest – e.g. how it will change the competitive landscape in that industry, how regulators have responded to it, material risks etc

Next, sit back and wait for the follow up questions.

Bankers will want to quiz you on all the material issues you didn’t cover, but that’s alright.  In fact, it’s wise not to share everything you know straight up because this will most surely heighten the difficulty of the follow-up questions.

 

Bankers may ask an alternative version of this question

“Tell us about a recent deal we’ve done that has interested you”. To prepare for this question you need to become really intimate with 1 or 2 deals the bank has done.  Naturally this will stymie your chances of talking about a deal they are unfamiliar with.

Our advice then is to familiarize yourself with extra gusto (especially if you’re attending an investment banking analyst interview) and be sure to preface your answer by saying “Although I am no expert on it, the Hebeijiu-Apple merger interested me because…”.  

 

5) “If I gave you $100,000 right now, what would you do with it?”

Ah the classic “does this kid have a brain?” question. 

It’s got to be one of the easiest investment banking interview questions you’ll ever get and quite fun once you’ve nutted out your 5-part answer. But in order to crush it you must avoid the one answer-killing mistake that about 2/3rd of students make; they think the banker is asking them what they would do with the $100,000 if they personally had it. And although the question seems like it is aimed at you and your personal situation, it is not.  It’s also not aimed at the banker interviewing you.  

 

How are you meant to handle this question then?

Like a budding consultant you need to first answer this question with a question “Who is the investor and what are their goals, risk profile etc.?”

Yeah that’s right. 

Put on your $60k-a-year financial planner hat and enquire about the type of return the mythical investor wants, cash flow requirements over time, their personal tax situation, preferred asset classes, favorite industries etc.

PS Unlike management consulting case interviews, don’t expect a banker to offer you that much extra information – 2 or 3 points and they’re usually done.  This is after all but one small question in investment banking interviews.

Based on this new information you can explain what you would do.  Suggesting an investment strategy that even remotely takes into account this new information will earn you an A here.

If you want to bring your answer to an A+ level…

  • Put together a diverse portfolio of stocks, bonds, real estate, cash and other alternative asset classes. Students who fail to combine asset classes and instead offer up just one in a “Oh, risk averse, then I’d invest the money in bonds” fashion, are idiots.  That is a blunt investment strategy with zero ounces of finance finesse – different asset classes deliver different risk / return / cash flow / tax consequences etc, so mix & match with that in mind.
  • Mention how much of each in $ amounts, not % – this is a small point, but it can make a big difference to bankers.
  • And explain the allocations using the investor’s personal information – particularly their risk profile, income requirements over time, lifestyle goals and personal tax situation.

But when all is said and done, don’t get so sophisticated that you confuse yourself!  Wondering aloud “Oh, but hang on, maybe…” like your Drew freaking Barrymore will undo all your hard work in an instant.

PS If the bankers turn around and says the mythical investor is in fact you – and thus what would ‘you’ do with $100,000 – use the same answering strategy as above, but tailor it to your youthful circumstances.  Hint: a 40+ year time horizon = heavy in stocks!  

 

 

BONUS: Download a free reportand see a student answer some of the toughest interview questions (plus hear the bankers’ feedback), plus find out how 5 of us managed to break into bulge bracket banks without having perfect grades, the best schools or insider connections.