In this post, I share investment banking interview questions that fall outside of the nicely boxed categories I have talked about in previous posts such as competency questions, technicals, commercial awareness and brain teasers/market sizing questions.
Future Goals Question
Where do you see yourself in 5 years?
I won’t be delving into my answer for each and every question, but I think this one deserves some thought as it is one I struggled with for a while. I never liked the idea of lying to the interviewer that I have my life planned out and 90% of it will be in investment banking – how can anyone know that before even doing an internship or having worked in the field for a year? So instead, I go for a quantified approach that embodies certain values I hope to work towards in the future:
[1] Although the future is full of uncertainty, I know that I would want to acquire expertise in a field that allows me to give meaningful advice and service to clients.
[2] Alongside harnessing the expertise for clients, I would hope on spending 25% of my time mentoring juniors in a way that will accelerate their learning and foster new ideas. Speeding up the development of juniors will give them the confidence to contribute ideas that experts in the field would never consider from an out of the box perspective.
[3] I would hope another 25% of my time is spent learning from others and from people that believe they have insights into challenges the industry is about to face. This comes back to the idea of uncertainty and never getting complacent – always ready to learn and re-learn, even in my desired field of expertise.
Values-based questions
Remember to learn the firm’s values, because it is not just being able to apply past experiences to show a value you embody but also knowing what the firm values are in case they ask ‘how have you embodied one or more of our firm’s values?’.
When was the first time you proactively sought an alternative perspective to yours?
When was the last time you openly admitted you were wrong in relation to something?
When was the last time you exceeded someone’s expectations?
Do you think it is always possible to deliver flawless work?
Are you someone that can easily build on other people’s ideas?
Weakness questions
What do you see as potential challenges for you as an employee in an investment bank?
Why didn’t you convert your spring week? (Brutally asked more often than you think.)
For the why you didn’t convert your spring week in case this applies to you, remember to highlight the idea of growth and harnessing feedback loops. My response/approach would be that although I was weak on commercial awareness and technicals during the conversion interview, I implemented a new practice system where 1 hour of the day was spent consistently building a portfolio of commercial awareness trends, and another hour combining technical theory or a financial modelling course.
Questions interrogating your DCF model
Remember to think very carefully about whether you want to include a DCF if presenting a case study in an assessment centre, because this is where bankers get extremely comfortable at grilling you, particularly to prevent the risk of candidates thinking the role is easy. Perhaps these more in-depth questions that I got from one DCF presentation will make you realise how much of a liability the bold move can be.
Why did you choose the companies you chose?
Did you look at the size of operations as well?
Did you take into account FX rates?
Can you walk me through the assumptions in your DCF?
On revenue and EBITDA is that real or nominal?
So all your projections are based on the previous years – you’re just extrapolating?
What is the rationale for keeping debt growth and capital expenditure the same?
Video Interview Questions Jam-Packed with Details
If you follow the 2x examples per competency, you should be prepared for these types of questions, just be careful to tick all the different details asked for in the question if it is presented in a very prescriptive manner. Although I advocate using the STAR technique, do not become inflexible when posed with a different question structure.
[1] Tell me about an environment where you have been at your best
What did other people see during this time?
What did that enable you to do?
[2] In the context of acting like an owner, what does trust, integrity and respect mean?
Give an example of a time you have demonstrated this.
What was the situation, what did you do and what was the outcome?
[3] Tell me about a time when you realised something wasn’t quite right and that people were missing something?
How did you reach this view?
What action did you take?
Describe the data or intuition that led to your realisation.
Broad Commercial Awareness Questions
- Given information on a business and asked how you would value it (no maths); looking for thought process, weighing up techniques, macro factors, assumptions and thoughts. You’re allowed to brainstorm for up to 5 mins. This company is a clothing brand – 20 stores over the UK, no stores overseas. They have an online presence and recently went public. How would you value it?
For the question above, I would class this as a disguised technical question where you would break the valuation down into 2 approaches: intrinsic and comparable company valuation.
You could explain how you would go down the DCF route or comparable company route, but I would probably start with the DCF component as that way you can show a more fleshed out, logical approach, followed by giving the interviewer the option of hearing the comparable company analysis option at the end. Considering the company recently went public, you should have access to financial statements for the intrinsic and comparable company valuation.
Give me any business and talk about how COVID has impacted it and how it has responded.
Taking more of a broad view of COVID, how has it impacted different sectors and industries?
You can see that choosing which commercial awareness trends to write summary sheets on is more difficult than simply choosing what you’re interested in as you should also be able to break down extremely broad questions like the one above concerning the impact of COVID.