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70topbankinginterviewquestionsandhowtoanswerthem

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70topbankinginterviewquestionsandhowtoanswerthem
bySarahButcher(http://news.efinancialcareers.com/uken/en/author/sarahbutcher/)Aboutadayago

Soyouwantanewbankingjob?Goodluck.Banksarenotoriouslyfussy.Assumingyoureoneofthesmallminority
(http://news.efinancialcareers.com/uken/243792/applicationsforfinancejobs/)togetinvitedforaninterview,whatshouldyouexpect?Belowwehave
themostcomprehensivelistofbankinginterviewquestionsknowntoman.
Someofthequestionslistedareentrylevel.Othersaremorelikelytobeencounteredformidrankingroles.Clearly,thegreateryourseniorityand
specificity,themoreidiosyncraticthequestionsyoullbeaskedandthegreatertheeffortyourinterviewerwillmaketoestablishthatyoucangenuinely
addvaluetotheroleyoureinterviewingfor.Forjuniorjobs,expecttobequizzedonyourknowledgeoffinanceandinterestintheindustry.Forallroles,
expecttobeaskedaboutethics,culturalfit,andwhyyouwantthatroleatthatbankinsteadofothers.

Thewhybankingquestions
Bankingisnotoriouslyhardwork.(http://news.efinancialcareers.com/uken/196881/10worstbanksworkinghours/)Ifyoureanentrylevelcandidate,
recruiterswillthereforewanttoensurethatyouknowwhatyourelettingyourselfinfor.Whenyoureansweringwhybankingquestions,youneedtobe
originalandspecific.AvoidstatingthegenericsaysMergersandInquisitions.(http://www.mergersandinquisitions.com/whyinvestmentbanking/)It
helpstoreferencebankersyouvespokento(especiallyiftheyworkforthefirmyoureinterviewingwith)andtheextenttowhichtheyinspiredyou.Talk
aboutyourpassionfortheindustry.Explainthatbankingismorerewardingthanconsulting(http://news.efinancialcareers.com/uken/152549/working
formckinseybainandbostonconsultingvsgoldmanjpmandmorganstanley/)andthatyouremoreinterestedinstrategicplanningthanfinancial
modelling.(http://2yhbs.com/consultingvsinvestmentbanking/)Suggestyourentrepreneurialismhaspreparedyouforacareerdealingwithclients
muchlikethisDeutscheM&Abanker.(http://news.efinancialcareers.com/uken/189125/workinvestmentbankingdirectordeutschebank/)
WhenyoureinterviewingforaroleinM&A(http://news.efinancialcareers.com/uken/careersinfinance/219858/mergersacquisitions)inparticular,you
needtoshowthatyouresupercommitted,saysDerekWalker,anindependentcareersconsultantandaformerdirectorofcampusrecruitmentat
BarclaysandofstaffingfortheinvestmentbankatMerrillLynch.Corporatefinanceinterviewsdontwanttohearthatyoureseeingtheirroleasa
meanstosomethingelse,addsWalker.Ifyougointocorproratefinance,youregoingtohavetoworkreally,reallyhardandifyourenotabsolutely
passionateaboutityourenotgoingtobewillingtoworklonghours.
1.Icanseeyoureentrepreneurial,butyouwanttoworkinbanking.Whyisthat?

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2.Whatattractsyoutoacareerinbanking?
3.Whatkindoflifestyledoyouexpecttohaveinbanking?
4.Whyhaveyouchosenbankingoverconsulting?
5.Doyouknowwhatyourelettingyourselfinfor?
6.Whatwouldyoubedoingifyouwerentinfinance?
7.Doyouknowabouttheinvestmentbankinglifestyle?Whydontyouhaveaproblemwithit?

Thewhythisbankquestions
Dontjustregurgitateeasytofindinformationinthepublicrealm.Domakesureyoudoindepthresearchrecruitmentadvisorssuggeststudentstalkto
existingemployees(http://news.efinancialcareers.com/uken/186319/coverlettertemplatewillgetjobbanking/)forspecificinformationaboutwhatits
liketoworkforthatfirm.Weprovidealistofotherinformationsourceshere.(http://news.efinancialcareers.com/uken/185256/4thingsgoldmansachs
suggestsinterview/)
Unfortunately,peopledontalwaysbotherdoingthemostbasicresearchonthecompany,saysMalcolmHorton,headofrecruitmentatNomura
International.Whatsreallyneededhereissomethingthatexplainswhyyouthinkthebankyoureapplyingforisdifferenttoandbetterthantherest.
Youllneedtoresearcheverybankyoureinterviewingwith,saysHorton.Youranswersneedtobespecific:youneedtofindsomethingthatmakesthe
bankstandoutandtogowiththat.InthecaseofNomura,forexample,youmightsayyouwanttoworkforabankwithstrongAsianconnectionssothat
youhaveexposuretotheAsianmarket.
8.Whataresomeofthemostsignificantdealsourbankhascompletedinthelast12months?
9.Whatisourcurrentstockprice?
10.Whatdoyouthinkthisbanksbiggestregulatorythreatsareatthemoment?
11.Whatdoyouseeasthestrengthsandweaknessesofthisbusiness/division?
12.Whatdifferentiatesourfirm?
13.Whosourmajorcompetitor?Howdowemeasureup?Whataretherisksandopportunitiesweface?
14.Tellmeeverythingyouknowaboutourbusinessmodel.
15.Whichareaofourbusinessisstrongest?
16.WhosourCEO?

Thewhythisjobquestions
Ratherthanfocusingonwhyyouwantthejobinquestion,hereyouneedtofocusonwhatyoucanbringtoit.What,specifically,haveyoudoneinthe
pastthatwillsuityoutoperformingwellinthisjobinthefuture?Evidentlyyouneedadetailedunderstandingoftherequirementsofthejobinorderto
respondaptly.
17.Whatdoyouthinkthispositionrequires,andhowwelldoyoumatchthoserequirements?
18.Whyshouldwehireyou?
19.Whatdoyouthinkthisjobentails?

Thebrainteasers
Answeringbrainteaserquestionsisaboutmethodandattitude,saysMarkHatz,anexGoldmanSachsandPerellaWeinbergassociatewhonowoffers
adviceonpreparingforinvestmentbankinginterviews(http://www.investmentbankinginterview.com/).Bankswanttohearyourthoughtprocessesand
toseethatyoureflexibleenoughtoattemptasolution.Thisisparticularlythecaseforquestion20wherethereisnohardanswer.
20.HowmanypigsarethereinChina?
21.Asnailclimbsa10footpole.Itclimbsthreefeeteverydayandsleepsatnight.Whilesleeping,itslidesdownbyonefoot.Whendoesitreachthe
top?

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Youmightthinkthesnailclimbsanetoftwofeetadayandsoreachesthetopofthe10footpoleattheendoffivedays.Thisiswrong.Onthemorning
ofdayfive,thesnailstartsoutattheeightfootmarkafterslidingdownfromtheninefootmarkovernight.Itreachesthetopofthepoletwothirdsofthe
waythroughthefifthdayandthenstops,becausetheresnowhereelsetogo.
22.Youhaveeightredsocksand11bluesocksinadrawer.Theyareidenticalbutforthecolour.Youmustselectyoursocksinthedark.Howmany
socks,ataminimum,mustyoutakeoutofyoursockdrawerbeforeyouhaveamatchingpair?
Theansweristhree.Twosockscanbedifferent,butthethirdsockmustalwaysmatchoneofthefirsttwo.

Thecurrentmarketknowledgequestions
Currentmarketknowledgecantbeprescriptivebydefinitionitchangesallthetime.Makesureyouknowcurrentkeymarketmetricsandhave
opinionsaboutmarkettrendsandaselectionofinvestmentideas.
23.WhatistheDowJonesIndustrialAverage/FTSEasoftodaysopeningbell?
24.WhatistheBankofEnglandbaserate/Fedfundsrateasofthismorning?
25.Whatsthedifferentbetweenproptradingandmarketmaking?(Wehaveanexplanationofthishere).(http://news.efinancialcareers.com/uk
en/careersinfinance/219873/salesandtrading)
26.WhywouldyouorwouldyounotinvestinApple?
27.WhatareyouropinionsontheGreekcrisis?WhatsgoingoninChina?
28.Wherearethe1year,5year,and10yearTreasuryyields?
29.WouldyouinvestinUKrealestatenow?
30.Whatdoyouthinkisgoingtohappenwithinterestratesoverthenextsixmonths?
31.Whathasthemarketbeendoing?Why?Whatdoyouthinkitwilldointhecoming12months?
32.Tellmeaboutsomestocksyoufollow.WhyshouldIbuythem?
33.Whatdoestheyieldcurvelooklikenow?
34.WhatmajorfactorsdriveM&A?WhatarethemajorfactorsdrivingM&Ainyoursector?Howdoyouseethemevolvinginthenextyear?
35.Whereisthemarket(forbonds/equities/FX)going?
36.HowwouldyouhedgeagainsttheriskofaGreekdefault?
37.Wheredoyouseetheeuroin2018?

Thepastexperiencequestions
Beforeyoustepintoafinanceinterview,youneedtoknowyourCVinsideout.Makesureyoucananswerdetailedquestionsaboutanyandevery
aspect(yourchoiceofuniversityanduniversitycourse,yourexperiencesasanintern,howyouaddedvalueinapreviousrole)ofyourCV.Beprepared
tousetheS.T.A.R.technique(http://news.efinancialcareers.com/usen/74526/thestarinterviewtechnique/)toframeresponsestoquestionsabout
yourpast.Youllneedsomeexamplesofsituationsyouwerein,tasksyouwereaskedtoperform,actionsyoutookandresultsyouachieved.
38.Walkmethroughadealyoudidinthepastsixmonths.
39.WalkmethroughyourCV/resumewithoutlookingatit.
40.Whydidyouleaveyourlastposition?
41.Whathavebeenyourfailuresandwhathaveyoulearnedfromthem?
42.Whatareyourproudestaccomplishments?

Thetechnicalinvestmentbankingquestions

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IfyoureinterviewingforajuniorjobinIBD,MatanFeldmanatWallStreetPrepsaystechnicalknowledgeisbecomingincreasinglyimportant.Thisis
echoedbyotherfinanceinterviewpreparationprofessionals:bankswantpeoplewhoknowthebasics,evenifyouhaventworkedinfinance(orstudied
finance)previously.
43.DefineBeta
Betatellsyouhowmuchthepriceofagivensecuritymovesrelativetomovements
intheoverallmarket.ABetaof1meansthatifthemarketmoves,thestockmovesinunisonwiththe
market.ABeta<1meansthatifthemarketmovesacertainamount,thestockwillmovelessthan
thatamount.ABeta>1meansthatifthemarketmovesacertainamount,thestockwillmovemorethanthatamount.
44.DefineCAPM
CAPMisthecapitalassetpricingmodel,anditisamodeldesignedtofindtheexpectedreturnonaninvestmentandthereforetheappropriatediscount
rateforacompanyscashflows.
45.Whatisaccretionanddilution?
Accretionisassetgrowththroughadditionorexpansion.Accretioncanoccurthroughacompanysinternaldevelopmentorbywayofmergersand
acquisitions.Dilutionisareductioninearningspershareofstockthatoccurswhenadditionalsharesareissuedorthestockchangesintoconvertible
securities.
46.IftwocompaniesaretradingatthesametrailingP/Emultiple,aretheyalsotradingatthesametrailingEV/EBITDAmultiple?
47.WalkmethroughaDCF
ADCFproposesthatthevalueofaproductiveassetequalsthepresentvalueofitscashflows.Youllalsoneedtotalkaboutrelativevaluationmultiples,
inwhichyouvalueacompanysimilartoitspeersbaseduponmeasureslikeenterprisevalue/revenue(http://www.investopedia.com/terms/e/ev
revenuemultiple.asp),enterprisevalue/EBITDA(http://www.investopedia.com/terms/e/evebitda.asp),andtheprice/earnings
(http://www.investopedia.com/terms/p/priceearningsratio.asp)ratio.
48.Whatarethedifferentmethodsofvaluationandwhataretheirprosandcons?
ThethreemethodsareDCF,publiccomparables(comparingotherpubliclytradedcompanies
(http://financialmodelingtutorial.com/valuation_methods_public_comparables/))vs.transactioncomparables(similarcompaniesthathavebeeninvolved
inprevioustransactions(http://www.wallstreetoasis.com/financedictionary/whatareprecedenttransactions)).Eachhasitsadvantages:aDCFshows
themaximumacompanyisworthnotjustthevaluethemarketsassigntoit.Thetransactioncomparablestakeintoaccountthesynergiesthatcanbe
expectedtoflowfromadeal.Formoreinformation,seethistutorialfromNYUStern.Clickhereformoreinformationoncompanyvaluations.
(https://www.wallstreetprep.com/knowledge/aboutinvestmentbanking/)
49.Howarethe3financialstatementslinked?
Clickhere(https://www.wallstreetprep.com/blog/howarethefinancialstatementslinkedtogether/)forWallStreetPrepssuggestedanswer.
50.Whatisworkingcapital?
Workingcapitalistheamountofliquidassetsacompanyhasonhand.Itamountstocurrentassetsandcashminuscurrentliabilities.
51.WalkmethroughthemajorlineitemsofaCashFlowStatement
Clickhere(http://www.wallstreetprep.com/blog/investmentbankinginterviewprepaccountingquicklesson/)forWallStreetPrepssuggestedanswer.
52.WhatisDDM?
DDMisthedividenddiscountmodel(http://www.businessinsider.com/cfadividenddiscountmodel20135?IR=T)ofvaluingacompany.
53.Whichishigherthecostofequityorthecostofdebt,andwhy?
Thecostofequityisalmostalwayshigherthanthecostofdebt.Thisismostlybecausedebtholdershavelessriskthanequityholdersofnotgetting
theirmoneybackandarethereforewillingtoacceptlowerreturns.Debtissecuredagainstacompanysassetsandisthereforelessriskyforthe
creditor,whichcanseizethoseassetsifthecompanydefaults.Ifacompanygoesbankrupt,debtholdersreceiveproceedsoftheliquidationaheadof
equityholders.Anddebtholdersreceiveinterestontheirinvestmentinallsituations(whereasequityholdersareonlypaiddividendsifthecompanyis
doingwell).Ithelpstoothatdebtstaxdeductible.
54.Whyshouldacompanypreferequityfinancetodebtfinance?

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Equityfinancingislessrisky(youwonthavetopayitback).Youllhavemorecashonhand.Youwonthavetochannelprofitsintoloanrepayment.
Yourequityinvestorswillhavealongertermview.Yourcompanywillhavemorecredibility.Andyoumightgettotapyourinvestorsnetworktohelpyou
developthebusiness.

Theculturequestions
Banksareincreasinglyrealisingthatexcellenceisntjustaboutmakingmoney,saysLoganNaiduatrecruitmentfirmDartmouthPartners.Expectto
beaskedquestionsrelatingtobanksownvaluesandcomewithfirmexamplesabouthowyouvetackledethicaldilemmas.
55.Whenhaveyouworkedinabadteam?Whichstepsdidyoutaketomakeitbetter?
56.Whatisthemostethicaldecisionyouveeverhadtomake?
57.Givemeanexampleofapersonyouthinkhasintegrityandexplainwhy.
58.Givemeanexampleofapersonyouthinkiscredibleandexplainwhy.
59.Howwouldyoudescribeyourleadershipstyle?
60.Whatwouldyoudoifyoudidnothavetoworkformoney?Howdoesthatrelatetothisjob?
61.Haveyoueverhadtobendtherulestogetthejobdone.Whywasthat?
62.Canyoudescribeasituationinwhichyoumadeamistakeandhadtoadmitittopeers?
63.Whatkindsofpeopledoyoufinditeasiesttoworkwith?Why?
64.Howdoyouhandlestress?
65.Whyareyousospecialandwhatisonewordthatdescribesyoubest?
66.Howwouldyourclassmates/colleaguesdescribeyou?
67.Whatsthelastbookyouread?
68.Whatistheriskiestthingyouveeverdone?
69.Howwouldyouspend$1mbesidesinvestingit?
70.Wheredoyouseeyourselfinfiveyearstime?
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Comments(1)

Oldest First (http://news.enancialcareers.com/uk-en/213388/70-top-banking-interview-questions-and-how-to-answer-them/oldest/)

Latest First (http://news.enancialcareers.com/uk-en/213388/70-top-banking-interview-questions-and-how-to-answer-them/latest/)

Proposedanswerstoquestions48and50arewrong.
On48,DCFsisnotnecessarilythemaximumvalueacompanyisworth.Infact,transactioncompsusuallyyieldahighervaluethanDCFs,
becausetheyincludesynergiespremiums/andsomeacquirersmayhaveoverpaidbecauseofabiddingwar.However,ifsynergiesarefactored
intheDCF,thevaluesshouldintheorybeclose.
On50,workingcapitaldoesnotincludecash.Theideaofworkingcapitalishowmuchcashdoesthebusinessneedtofunditsongoingoperations
?.Thismeansthatarguably,youcouldincludetheminimumcashbalancethecompanyisrequiredtokeeponitsbooks(thoughinpractice,you
neverknowthat),butdefinitelynotthewholeamountofcashoutstandingonthebalancesheet.
gui63
Reply(/uken/213388/70topbankinginterviewquestionsandhowtoanswerthem/?
utm_source=GLOBAL_ENG&utm_medium=SM_FB&utm_campaign=ARTICLE&replytocom=109927#respond)

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