At its core, becoming a corporate investment banker means understanding how companies, institutions and governments use money.
Sometimes referred to as corporate finance, investment banking is all about helping companies to grow. Three big ways that an investment banker’s clients use money are lending and borrowing, selling shares (also known as equity) or the whole company and buying or merging with other companies.
An investment banker acts in an advisory capacity, help clients raise money from capital markets in order to expand their businesses. They also have a role in pricing capital, ie. deciding the cost of the money companies need to raise from investors.
What do investment bankers do?
Investment bankers and their peers in project management, venture capital and equity markets, tend to work in one of three big areas.
One of the biggest areas of investment banking is corporate finance. If a company’s board decide the business would prosper by merging with another company, or acquiring it outright, they will need an investment banker to advise them.
Mergers and acquisitions (M&A) can help a company increase its profits, protect its market share or diversify to ensure long-term growth or survival in changing market conditions. Investment bankers play a crucial role in actually managing the whole transaction process, from modelling the outcomes of potential deals to analysing the risks.
Other corporate investment banking specialisms include debt capital and equity capital. The former requires the investment banker to design and restructure a company’s debt obligations in collaboration with lenders, credit rating agencies and other companies. The latter involves raising money for clients by issuing shares and sourcing buyers, either directly or through stock markets.
What can I expect as an investment banker?
Your experience as an investment banker will usually depend on your specialism. Initially that is shaped by whether you become a corporate investment banker or an operational investment banker.
As a corporate investment banker you generate business and perform client-facing duties, while in operations you ensure that business is conducted in an efficient manner, with money transferred as it should.
Corporate investment bankers advise businesses, organisation and governments on achieving financial goals and implementing financial plans over various periods of time.
You will have key duties during a typical two-stage corporate finance deal:
- Origination - assessing desirability, which can be a creative idea from the bank rather than the client. This requires a deep understanding of a sector and extensive research
- Execution - negotiating and structuring detailed terms of a deal.
As an operations specialist you are involved in developing new systems that maximise efficiencies and profitability.
You will be responsible for overseeing that transactions are cleared and reconciled in accordance with all regulations and control requirements.
Your operations duties will usually involve:
- Reconciling systems by monitoring data flow from the revenue-generating front office to the operations systems (operations control)
- Checking activity and reports of daily transactions
- Liaising with clients on transaction settlements
- Troubleshooting system problems.
The working environment may be extremely stressful at times because of high expectations and ambitious targets.
Related courses at City
If investment banking sounds like something you’d like to explore as a career, why not take the next step?
Whatever your level of interest in becoming an investment banker, City's courses can help you take one step closer to a career, develop specialisms that'll set you apart from the field or broaden your horizons with study in related subjects.
- BSc (Hons) Banking and International Finance
- BSc (Hons) Mathematics and Finance
- BSc (Hons) Mathematics with Finance and Economics
Who can I work for as an investment banker?
Investment banking employers come in three distinct flavours. First are the big international investment banks. Names most people with an interest in the industry will have heard of. J.P.Morgan, Morgan Stanley, Goldman Sachs.
Then you have the investment banking divisions of large commercial banks such as Bank of America, Citigroup and Barclays. Finally, the specialist, or boutique, independents. Names such as Allen & Company, Rothschild and Lazard.
The world’s big financial centres are London and New York, plus smaller but no less important cities including Frankfurt, Paris and Tokyo.
In London investment banks are usually divided into three categories. These are international investment banks, investment banking departments of large commercial banks and finally, specialist independent investment banks.
When applying to work for banks you should research their size and reputation. Larger banks can offer larger accounts, but your career progression may be quicker in a smaller organisation. Some are known for their work in debt capital while others might be strong in mergers and acquisitions
You might consider working for other employers offering relevant experience. These include the London Stock Exchange (LSE), The Bank of England, stockbrokers and investment firms.
Becoming an investment banker
This is a graduate career. Competition for jobs is intense, pushing up the minimum entry requirement to a 2.1 degree in a relevant subject. But competition for talent is equally fierce, leading to accelerated career progression for the hard-working and skilful few.
What about work experience as an investment banker?
One thing that is virtually essential is industry experience. Many employers in the sector offer summer internships, exposing interested students to the realities – and the rigours – of life as an investment banker.
Work experience employers in the sector would consider relevant includes investment banks themselves, but also the Financial Conduct Authority (FAC, the London Stock Exchange (LSE), The Bank of England plus stockbrokers and venture capital firms.
Candidates will be expected to develop in-depth knowledge of all the issues that could affect the success of their clients’ deals. Everything from baking and tax regulations to market knowledge.
The further up the investment banking hierarchy you progress, the more non-financial skills such as leadership, communications skills and negotiation ability become important.
Any experience you can gain working in an investment bank will be useful. It reflects your commitment to the profession, gives you an insight into the world and can help you start to build a network of contacts.
What are my prospects as an investment banker?
You are likely to spend your first two to three years in an analyst role before progressing to associate level. Associates usually manage a team of analysts.
With three more years’ experience you may progress to vice president (VP) level, managing the work of both associates and analysts. Beyond this are director, executive director and managing director roles, but such promotion is difficult.
Your high performance can lead to good bonuses, internal recognition and potentially being headhunted, which is common in the sector. Individuals or whole teams can be poached by other banks.
Alternative career tracks might include senior management positions in industry, commerce or government.