Investment Banking Interview Questions - A Comprehensive Guide

It's been a while since I posted, so I thought I'd write, especially since we're in the midst of investment banking interview season.

I was in your shoes about five or six years ago. I worked as an investment banking analyst at a Moelis/Houlihan/Evercore type firm in restructuring, got an offer for direct promotion to associate, passed on that to go to grad school in Europe, and have recently returned to take my associate perch in the same group. Take my word for whatever you will.

I drill my analyst interview candidates hard on technicals. Not obscure things, I just test how well they know the basics, how they think about things, and if they can apply and think on their feet a bit.

Here are a few observations from the latest superdays I had the pleasure of participating in:

investment banking interview - The First Impression

1. The biggest thing I am looking for is humble confidence - someone I would like to have a beer with.

2. Don't come on too strong/overenthusiastic or I'll think I will be annoyed with you the first week on the job. Sit up in your chair. Don't wear weird socks. Fake smiles/laughs are a no-no. A quick joke is a gamble - it could be a plus, or I could just think you're silly.

3. A simple "Nice to meet you. Thank you guys for taking the time," is a great hello.

4. Don't flub the handshake. Stay standing until I sit down.

5. Be punchy, brief, and learn how to end a sentence. I can't tell you how many times people have gotten into trouble by rambling off into some ass-backward irrelevant tangent. Learn to be comfortable with a little silence here and there while we absorb your answer.

6. Walk through the resume in one minute or less. I know you've had an interesting life, but I don't need to hear about it all now. Maybe we come back to it at the end of the interview.

7. Listen, listen, listen!!! So many mistakes come from just not listening carefully and not being in the moment.

The "Why Investment Banking" Question?

Here's a complete guide to answering the "why investment banking" question. The reality is you need to tailor the question to yourself. It varies with your background, how substantive you want to get, and what follow-up questions you want the interviewer to ask. No matter what, the answer here should be well rehearsed as well as the scenarios that could follow.

Example answer: @WallStreetPlayboys "I want to work in investment banking because I understand it has a steep learning curve and will allow me to establish a strong foundation for valuation, Excel modeling skills, and understanding the XXX sector (or you can use the group such as M&A transactions). I know the hours will be long, but the time spent understanding and learning about XXX space (again or XXX type of transactions) would give me the opportunity to remain in finance over the longer term."

Investment Banking Fit Questions

You've reached the interview. This means that the firm believes you are smart enough for the job. At this point, the little things matter. Fit questions are a major part of the investment banking analyst interview. A great chunk of the interview will revolve around how you fit with the firm, so these questions play a big role in determining whether you get the job or not. The focus of fit questions is to get in your head, to see how you think and how you explain those thoughts. It's to see who you are and how you would fit into the firm's culture.

Fitting into a firm's culture is often outside of your control (personality differences, athlete vs non-athlete, etc.), but you should still prepare for the questions for obvious reasons. Expect questions asking about your prior experience (internships, jobs, ECs, study abroad), your university/GPA/major, strengths/weaknesses, your long-term plans, and more personal questions (sports, hobbies, etc.). Prepare to answer questions on what you learned in your previous experiences and why you chose your university/GPA/major.

Take a deep breath and speak deliberately. Don't ramble.
You need to explain your thoughts and try to tie them into why that makes you a good candidate for the job.
Be as specific as possible in addressing why you're good for that specific firm/group/culture.

"Pitch Me a Stock"

Many interviewers will ask you in one way or another to pitch a stock if you have any experience with trading, a private wealth management internship, a hedge fund internship, really anything that deals with market transactions. If this is you, spend 30 minutes to a couple of hours finding a stock you like and why. Even if it doesn't, better safe than sorry. Here's a good explanation for this question, courtesy of @BankerC159.

So IMO this question is completely fair game to ask for IBD roles. So yes, you have to follow the market a little bit but I think the underlying concept they are trying to get out of you is if you actually know what drives a business. What are the key drivers of the business (both revenue and cost)? Why is it a good investment? What are the potential opportunities available? What's their competitive advantage? Etc.

Think about a sell-side pitch for a company/investment, not that much different than pitching a stock.

Also, I think it gives the interviewer an idea of how well the candidate knows the industry if applying for a coverage group.

Poking Holes in Your Resume

If there are any weak points on your resume, expect questions on why that is. You should be able to answer these questions in your sleep because of the exorbitant amount of time you spent perfecting your answers. These questions are meant to highlight any potential red flags in your resume and give you an opportunity to explain them. A botched answer will likely get you cut. It's important that you identify any weak points on your resume so you can craft a story that paints you in the best light possible. Here are some examples of commonly questioned weak points as well as excellent answers to each of them:

• Nontarget university, answer courtesy of @WallStreetPlayboys

Sample Answer:


The answer to this question for most people will be the finance courses offered and other general target school answers. This is actually a setup for you to sell yourself if you went to a non-target. The worst thing you can do is say "I did not get into a Target." Again you need to spin your reasoning. Some good examples are 1) financial, 2) location, and 3) family.

"I went to Non-Target as I was fortunate enough to receive a XXX scholarship in XXX for XXX reasons. I saw that the school offered XXX finance courses and felt that I could take XXX courses and network into a Wall Street position. Given the cost savings and curriculum, I felt that it was a good decision for me to make and I have enjoyed my time at Non-Target."

Message: I am not apologizing or complaining about the school that I went to, I do have an understanding of finance, and I have a legitimate reason for making these decisions.

• Weak GPA, answer from user @WallStreetPlayboyshttps://gv142.isrefer.com/go/wso15/wsoasis/" target="_blank">Wall Street Prep"

Sample Answer:


"Frankly, I made some bad decisions as a freshman which I have been able to partially reverse through a lot of hard work over the last few years. My very first semester at Notre Dame I did not manage my time well between extracurricular activities and academics and received a 1.8. After reflecting on my poor performance that semester, I realized that I needed to get my priorities in order and started to focus more of my energy on my academics. Excluding that first semester, my GPA would have been 3.5. In fact, I have continued to improve every year, and over the last year, I have maintained a 3.8 GPA."

• Lack of Finance Experience

This weak point is harder to address and less universal. It varies with what kind of experience you have under your belt (intern at consulting firm vs part-time work at a restaurant) and the reasons you have for your lack of experience (changed your major vs spent your summers partying and working part-time). The goal in addressing this problem is to compensate for your lack of finance experience with something else you've spent your time on and to demonstrate that you are capable of working in a professional environment.

Don't lose all hope if you lack solid work experience. If a firm brings you in for an interview, they are interested in hiring you.

WallStreetOasis user @Cries explained how he got a full-time offer despite his lack of relevant experience. "I only had part-time work, not finance related. I had some bogus and half-made-up internships that I got really good at spinning into something material."

The key here is to spin, spin, spin. Take your experience and craft it into a story that paints a picture as accomplished as possible.

Technicals

1. For an analyst interview we expect a working knowledge of DCF, comps, comp transactions, the CAPM, and the WACC. That's pretty much it. You should nail those.

2. Nailing those means knowing what they actually MEAN, not just being able to recite formulas. Most candidates cannot tell me WHY we look at free cash flow in simple terms.

3. Lay out the broad strokes of your answer from start to end, and then go more detailed and work the problem. Think out loud. Consultants are great at this. Bankers are not.

4. Again, brevity is king. Do not ramble on tangents. Briefly note there is another wrinkle you might want to come back to later, but get to the answer to the question I just asked.

5. Explain things first in kid terms - a favorite of mine is to tell the candidate to pretend I am a client CEO and you are selling my company. I have no college education or finance background. Now explain to me the DCF in five minutes or fewer. I am looking for you to lead with: "Potential buyers will see your company as a stream of future cash flows. We need to project out and then value those future cash flows."

6. Placing these sorts of things into context is more of an associate interview skill - but if you can do it as an analyst (especially important if you have banking internships on your resume), you will stand out

7. To re-emphasize point 3, walk me through every calculation you are doing. I want to hear you think out loud. The process matters far more than your answer and gives you a chance to demonstrate a grip on the concepts. Honestly I wasn't even checking the math in many of these most recent interviews. I sometimes just ask of a simple calculation, "Are you sure?" to put on a little pressure and see how you respond. I am looking here for you to take five seconds, double check your math, and answer with a confident, "Yes, I am sure."

8. On that note, I always like to say "Maybe" doesn't put men on the moon. You need to be sure on your answers, so write clearly, label things, and don't rush. Practice your hand multiplication, addition, subtraction, and division. Don't ever ask ME if your answer is right because I probably don't know. Just check it and know that it is right. That will be your job soon enough if you do well here.

9. When relevant, it's nice to relate the question to something you have done in the past, but don't go on profusely - stick to the question and answer it.

10. If you find yourself getting stuck or panicking, just tell me where you're having trouble. If it's just that you're not remembering a formula, no big deal. I'll probably help you get it. Half the battle is seeing how you handle adversity.

11. Don't be afraid to say, "I don't know" to a tough technical. As an analyst, I expect you to ALWAYS tell me when you don't know something, and never BS an answer.

12. If you give an, "I don't know" follow it with, "But here is what I am thinking. Tell me if I am on the right track." And walk me through your thoughts. This is a great analyst quality because it shows that you'll think about a problem critically before you call me and ask about it, and I know you'll remember it better the next time it comes up.

Researching Before an Interview

Before an interview, you should always do thorough research on the firm you're interviewing with. Try and ask probing and thoughtful questions, questions that can't be answered online. This will demonstrate your interest, preparation, and intelligence. @Greg Marmalard did a great job explaining this simple but effective way to stand out.

He had an interview and got the job later that evening, and he told me his strategy. We had been given some pitchbooks on the bank and an article on the specific group twenty minutes before the interviews started and we all skimmed through them. At least that's what it looked like, but this guy had gone through and picked out minute details about the biggest deals and then asked great questions to the senior bankers. They said in the offer call that it was that interest and intelligence that separated him from everyone else.

A few weeks later, I had a first round with a group that I really wanted to join, so I did so much research that I knew no one would have an advantage over me there. Needless to say, that interview went perfectly, and the senior guy was actually visibly impressed. I did the same thing at the super and really dug into the material they gave us in the few minutes before interviews started. I walked out a few hours later and got an offer within minutes.

So do your research and let that drive your Q&A. But it can't be surface level stuff. It has to be something analytical, or at least thoughtful, and then make it all flow together. If you are personable and can connect with your interviewers, you'll be fine.

Investment Banking Interview - Wrapping Up

1. Before you ask us questions, it's nice to say "I've done lots of research on your firm and talked to a lot of people, so I know your firm pretty well. I really want to hear more about your own personal experiences here."

2. Some good questions to ask your interviewers: 1) Tell me about a recent deal you've worked on that you liked. 2) What are the next steps from here? 3) How have you liked your experience here so far? Anything surprise you, good or bad? 4) Tell me about what you guys do for fun.

3. Some questions to avoid: 1) What are the hours like here? (Get that info later from an insider that you know better.) 2) Anything related to compensation. 3) What are your plans after banking? (We can't answer that, and we'll all say we're planning on staying in the near term...duh...)

4. Don't stand up until I stand up.

Questions, disagreements, comments? Fire away. As always, if you like it, put a banana on it. Silly enough, it actually encourages me to write more. (Bravo, Patrick and Andy. Bravo!)

Get to Work ASAP

The fact of the matter is you won't improve unless you practice. While this guide is a great starting point, you need to get real questions and answer them as a simulation for interviews. The WallStreetOasis investment banking interview course is designed by countless professionals with real world experience, tailored to people aspiring to break into the industry.

IB Interview Course Here