Public Finance I-Banking Interview, Help!!

I have spent a lot of time reviewing for investment banking interviews using various guides (wetfeet, vault, etc.) The potential technical questions seem to be straight forward after a little bit of studying. Does anyone have insight into potential technical questions one might receive during a interview for the role of an analyst within a public finance banking team? Any thoughts would be appreciated, thank you....

 

public finance is banking for government entities, ie cities, states, toll road authorities, public power utilities essentially anyone that has the ability to issue municipal/tax exempt debt. corp fin is for corporations so there is M&A, equity, debt and exposure to a broad array of products that arent available to a municipality

 

sometimes you go with the best opportunities presented to you. i wanted to get onto a trading desk but had no luck and this role allowed me to learn more about fixed income & derivative products plus it gave me experience structuring cash flows. not great exit opps bc you arent looking at the entire capital structure so your skill set is limited if you want to go to the traditional PE/HF route, though I have seen both happen. if you want to move within the bank that is definitely possible. at the end of the day its not a bad place to start off but there are certainly more desirable areas to be imo. after my analyst stint i moved onto a derivatives trading desk

 

Thanks. I'm reading up on municipal bonds right now. I really only know the very basics of bonds in general, but know that munis are exempt from income taxes. Is there anything else specifically about munis that would be beneficial?

Also, regarding interest for this aspect of finance, is there anything in particular they are looking for? I've read up on some of the answers for ibanking (e.g. enjoy analytical work, learning about valuation, working on challenging deals, etc.), but don't really know if there is something in particular that sounds good for public finance? My honest answer is the work seems interesting because it looks analytical and contributing to projects / financial advisory for local governments is interesting, but that seems like a weak answer and I of course want to stand out as best as possible.

 
[Comment removed by mod team]
 

Tax exempt is an important feature of muni bonds but you should have a broaders understanding, including the differences between GO bonds and revenue bonds and know how to calculate tax-exept equiv yield (or at least be comfortable with the concept). Being comfortable with basic fixed income concepts, in general, would be a good idea.

What kinda bank is it?

 

-Difference between short term vs long term bonds.

-If a taxable bond yields 10%, at a %30 tax rate, what would a tax exempt bond have to yield in order to be equivalent

Case Analysis:

How would you finance a 200 million dollar sciene center your Univ. wants to build?

andrew amato
 

Find out if it is for a specific pub finance group (higher ed, healthcare, p3, etc) and then note some of the bigger deals they have done in the last year ("yeah, I went to ____ University and I saw you were the senior underwriter on $250mm of their debt last year"). Look at MMD rates and where they spread to treasuries right now. Look at MMD today vs MMD over the last 10 or so years. It's probably not going to differ too much from any first round ib interview except that most any technicals will deal with debt. Know what coupons, yields, kicker, etc are. If you have any specific questions feel free to ask.

This to all my hatin' folks seeing me getting guac right now..
 
Best Response

Where is the interview (state)?

This is my advice:

  1. Have your story down and know why you want to work with public agencies ("focus on everyday citizen, interested in finance, policy, and civil service and this role is PERFECT for that").

  2. Expect the interview to be light on technicals, only basic bond math and vocabulary (and even that's not likely in the first round, if it comes up it will likely be from a conversational standpoint, not a real knowledge-testing scenario).

  3. Research recent deals/what group you're in. Underwriting and advisory/structuring are totally different functions.

  4. Even though you love the public sector so much, you don't want to work for a government agency (like a city financial office) because you've observed that they have less flexibility regarding advancement and job functions and you like serving several clients.

  5. DO NOT compare PubFin IB to corporate IB. If they ask, just revert to your original reason for wanting to work for them. Do not say PubFin is "easier" or "has more manageable hours" or "I don't even care that I'll make less money!"

  6. You totally love reading/writing legal documents

  7. Never miss a chance to take a jab at Meredith Whitney

Things for you to talk about:

  1. Ask about DBC

  2. Ask about procurement process (Role of analyst for monitoring RFP issuances, what % of time is split between RFPs/execution of existing deals)

  3. Ask about deals they've worked on in the past year, and which deals they think they'll work on in the next year. They'll probably enjoy speculating about government. Be informed and know how to pose slight questions/challenges (in a friendly way)

  4. It's not always clear who their primary client base is; you may have to ask them about their most common clients.

  5. What % of deals are competitive/negotiated (this one is admittedly pretty lame)

  6. Ask if they can show you an Official Statement/Preliminary Official Statement. It's public record anyways, so they'll probably grab one for you. If not, it's a great reason to follow up.

Good luck!

Nothing short of everything will really do.
 
bonks:
Where is the interview (state)?

This is my advice:

  1. Have your story down and know why you want to work with public agencies ("focus on everyday citizen, interested in finance, policy, and civil service and this role is PERFECT for that").

  2. Expect the interview to be light on technicals, only basic bond math and vocabulary (and even that's not likely in the first round, if it comes up it will likely be from a conversational standpoint, not a real knowledge-testing scenario).

  3. Research recent deals/what group you're in. Underwriting and advisory/structuring are totally different functions.

  4. Even though you love the public sector so much, you don't want to work for a government agency (like a city financial office) because you've observed that they have less flexibility regarding advancement and job functions and you like serving several clients.

  5. DO NOT compare PubFin IB to corporate IB. If they ask, just revert to your original reason for wanting to work for them. Do not say PubFin is "easier" or "has more manageable hours" or "I don't even care that I'll make less money!"

  6. You totally love reading/writing legal documents

  7. Never miss a chance to take a jab at Meredith Whitney

Things for you to talk about:

  1. Ask about DBC

  2. Ask about procurement process (Role of analyst for monitoring RFP issuances, what % of time is split between RFPs/execution of existing deals)

  3. Ask about deals they've worked on in the past year, and which deals they think they'll work on in the next year. They'll probably enjoy speculating about government. Be informed and know how to pose slight questions/challenges (in a friendly way)

  4. It's not always clear who their primary client base is; you may have to ask them about their most common clients.

  5. What % of deals are competitive/negotiated (this one is admittedly pretty lame)

  6. Ask if they can show you an Official Statement/Preliminary Official Statement. It's public record anyways, so they'll probably grab one for you. If not, it's a great reason to follow up.

Good luck!

Thanks, this is in New York City if that makes a difference. I plan on restudying much of the bond math I've gone over during the years; also have a list of Pub Fin lingo that I can discuss (RFPs, DBC, GO, Rev Bonds, Procurement, etc). Not sure what group they're filling, most likely wherever I fit; but I know the groups (for the most part) so I'll ask about them specifically.

"History doesn't repeat itself, but it does rhyme."
 

Also... In addition to what Cruncharoo said

Start looking at deals the priced in the first quarter so far. I have been drowning in my own work so I haven't had a chance to check the broader market, but get familiar with what a credit spread is and how a credit rating affects the spread... Like said before try to understand the difference between GO debt and Revenue debt and which gets better rates.

Depending on the group and how much they expect from you it may get technical or it may just test you to assess your baseline.

GASB and FASB are worlds apart so I wouldn't go bury my head in an accounting book over the differences between expenditures and expenses. Because of that they likely won't try burying you with accounting questions since unless you are an accounting major and took a course on GASB and Government Accounting you won't know.

Bond Buyer is great to assess what is going on in the industry. Don't limit yourself to just news about "pricing $500 million deal" read into some of the bankruptcy stuff going on in different cities, maybe some P3 stuff, or anything that catches your eye really.

If it were me the key things I would really focus on:

Credit Rating Agencies/Credit Spread News in the Muni World (Illinois Pension Bonds, LA suing rating agency, etc) Yield/Coupon and Premium/Discount (if you know the technicals great, if not at least know what they are) GO vs. Revenue MMD/SIFMA/LIBOR

 

If you really wanna blow some minds talk about utilizing matched fixed payor swaps and VRDBs to create synthetic fixed rate debt..

I would actually avoid BABs entirely.. unless they bring them up

 

Depending what group they work in they may talk about BQ and Non-BQ (Bank Qualified)...

It is a tax incentive that banks have to underwrite smaller deals ($10 million or less). Banks don't get to claim the tax exempt interest so when the bank has to take bonds into inventory they have to do the tax equivalent yield calc on the bonds.

there is a portion of the calculation that basically denotes how much of the bond will be converted to taxable.. on BQ bonds they get to claim 20%(I believe) as an exemption and thus the tax equivalent yield is lower(less taxes).

There are IRS stipulations to what percentage of assets banks are allowed to have as BQ bonds.. and for the life of me I don't remember something like 2-5%

And as such BQ bonds get lower yields than Non-BQ bonds all else being the same because the tax equivalent yield is lower

 
streetwannabe:
Hello monkeys,

Through relentless searching and networking, I've managed to gain an interview for a Pub Fin analyst position. Now, I've read all of the M&I stuff on public finance and been doing my own searches on the technical aspects of pub finance.

That being said, I could really use some advice on what I can expect from this interview. This is my first one this year and got it through a contact and friend at the bank; so I don't want to appear stupid or give my contact a bad repute. Again, this is my first interview (and could be only for awhile at the rate things have been going) so any thoughts and sound advice will get some SBs.

Thanks!

Is the bank you're interviewing for BB, MM or boutique?

If its BB (Citi, BarCap, JP, BAML etccc) or MM (RBC, BMO, Jefferi, Piper) I don't believe you will get a lot of technicals, as munis aren't really taught in school other than they are tax-exempt. Boutique you might expect a little bit more techinals.

You might want to know AMT, Non-AMT and Advance Refunding (More than 90 days, and can only be done once. if you decided to advance refund something more than once the second time around it will be taxable)

Current Refunding (less than 90 days and as many times as you want)

why do you we refund? To lower interest cost.

http://www.gkbaum.com/education/swap%20101.pdf

Check out the above link. Also if you have any questions feel free to PM me.

 
TheKid1:
streetwannabe:
Hello monkeys,

Through relentless searching and networking, I've managed to gain an interview for a Pub Fin analyst position. Now, I've read all of the M&I stuff on public finance and been doing my own searches on the technical aspects of pub finance.

That being said, I could really use some advice on what I can expect from this interview. This is my first one this year and got it through a contact and friend at the bank; so I don't want to appear stupid or give my contact a bad repute. Again, this is my first interview (and could be only for awhile at the rate things have been going) so any thoughts and sound advice will get some SBs.

Thanks!

Is the bank you're interviewing for BB, MM or boutique?

If its BB (Citi, BarCap, JP, BAML etccc) or MM (RBC, BMO, Jefferi, Piper) I don't believe you will get a lot of technicals, as munis aren't really taught in school other than they are tax-exempt. Boutique you might expect a little bit more techinals.

You might want to know AMT, Non-AMT and Advance Refunding (More than 90 days, and can only be done once. if you decided to advance refund something more than once the second time around it will be taxable)

Current Refunding (less than 90 days and as many times as you want)

why do you we refund? To lower interest cost.

http://www.gkbaum.com/education/swap%20101.pdf

Check out the above link. Also if you have any questions feel free to PM me.

It is MM; job qualifications are: at least one year of fin service exp/ or combination of educational and fin service exp as determined by HR. They didn't even call me though for a screening, emailed me right after I asked my friend to introduce me and he sent out a referral to a few of the bankers they said that they "appreciated the referral" and ccd HR. They sent me an email inviting me in for a 2hr interview (I believe it is an interview, very ambiguous message).

Sorry for the short handed, unconstructed post. It's my day off with the snow and all.

"History doesn't repeat itself, but it does rhyme."
 

Ask them how they forsee the recent expiration of the BABs program affecting the Muni Market.

Also, mention increased MMD yields (the tax-exempt benchmark for muni deals), and the added difficulty to perform "refundings" of currently outstanding bond issues.

State budget defficits have come under increased scrutiny recently as well...

 

Odio at sit voluptas aut aliquam. Aut est itaque aut unde eos. Magni assumenda repellendus itaque voluptatem blanditiis. Sint voluptatum impedit sapiente distinctio rerum deserunt hic omnis.

Sit rerum velit perspiciatis molestiae. Ea facilis doloremque ab harum. Omnis rerum qui libero. Totam nam sed molestiae.

Cupiditate est minima aut quidem nisi. Quia et exercitationem rerum aut. Tenetur et sed sunt commodi omnis fuga.

Ducimus facere harum voluptatem. Et aut omnis pariatur quis ut itaque quibusdam.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
kanon's picture
kanon
98.9
6
dosk17's picture
dosk17
98.9
7
GameTheory's picture
GameTheory
98.9
8
CompBanker's picture
CompBanker
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”