WHAT IS

INVESTMENT BANKING?
YOU’VE HEARD A LOT ABOUT THE LONG HOURS, THE MULTI-MILLION DOLLAR
DEALS AND THE 21 YEAR OLD WHO MAKES S$ 200,000 A YEAR FRESH OUT OF
SCHOOL. YOU WANT TO BE PART OF THE JET-SETTING, PRADA SUIT WEARING
INVESTMENT BANKER. BUT IS LIFE REALLY AS ROSY FROM THE INSIDE? WHAT IS
INVESTMENT BANKING REALLY ABOUT? By CANDY LIM

WHAT IS INVESTMENT BANKING?

Commercial banks and investment banks perform
primarily different functions. When Mr Tan in Yishun
needed a loan to buy a car, he visited a commercial bank.
When Nokia needed to raise cash to fund an acquisition
or to build more factories, it made a phone call to its
investment bank.

Investment banking is not one specific function or

service but rather an umbrella term for a range of
activities. Investment banks, or I-banks, issue securities
(underwriting), manage portfolios of financial assets,
trade securities (stocks and bonds), help investors
purchase securities and provide financial advice
and support services. I-banks offer these services to
governments, companies, non-profit institutions and
individuals. They also engage in numerous proprietary
activities in the financial markets – activities where they
are their own clients.

The investment banking universe still revolves primarily

around New York City with Hong Kong and Singapore
centering the hub of Asian activities. The leading banks
of today include Merrill Lynch, Morgan Stanley Dean
Witter, Goldman Sachs, Citigroup’s Corporate and
Investment Bank (Salomon Smith Barney till recent),
Credit Suisse First Boston and JPMorgan Chase. These
firms, also known as Bulge Bracket firms, provide a full
range of services to their clients and operate on a global
basis.

This article was first published in the September 2005 issue 7 of Career Central Magazine and is used here with permission. For more information
about Singapore’s only monthly career magazine, please visit http://www.careercentral.com.sg

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Regional i-banks, as the name implies, concentrate their
operations on a particular region. Local banks like DBS
LIFE AFTER INVESTMENT
and UOB have historically had a more South-East Asian BANKING PROVIDES A
focused clientele though plans have been made to reach
markets as far as China and India. Then there are the
WEALTH OF OPPORTUNITIES.
Boutique i-banks that specialize in a particular product BANKERS HAVE BEEN KNOWN
(Mergers & Acquisitions Advisory, Program Trading) TO MAKE THEIR MARK IN THE
or industry (Medical, Media & Telecommunications).
Examples of boutique firms include Toronto-Dominion PRIVATE SECTOR, BECOME
Securities and Enron. Boutiques have much smaller SUCCESSFUL ENTREPRENEURS
operations and possess a wealth of knowledge and
network in their fields of expertise.
OR EVEN ACCOMPLISHED
ACADEMICS – THE WORLD IS
BANKS WITH I-BANKING SERVICES IN SINGAPORE YOUR OYSTER!
ABN AMRO Bank NV JPMorgan Chase
Credit Suisse First Boston Merill Lynch
Citibank NA OCBC Bank
Development Bank of Singapore Standard Chartered
Dresdner Kleinwort Wasserstein UBS Investment Bank
HSBC Holdings United Overseas Bank
Note : This is not a complete list, many other institutions engage in I-Banking
activities in Singapore. Visit www.mas.gov.sg for more information.

“THE ANALYST PROGRAM”

Freshly hired analysts are put through the Analyst
program - a two year employment contract with a
few favored individuals selected to stay on for a third.
Graduates of this program are expected to move on to
other careers or return back to school for an MBA. Most
firms help to ease this transition process by providing
help in the form of reimbursement for GMAT/GRE
preparatory courses and counselling sessions with
human resources.

The program kicks off with 4-8 weeks of classroom

sessions that often takes place at company headquarters
in New York. The best lecturers and trainers are hired
to bring analysts up to speed on subjects varying from
principles of accounting to the fundamentals of team
work. Do pay attention and take notes as these classes
are examined and recruits have been known to be
“fired” for not making the pass mark!

There will also be presentations made by the various

departments in the bank and this is a great opportunity
to learn more about the organization. This training
period is an invaluable time for analysts to socialize and
bond with peers from all over the world as well as get a
feel of the organization as an entity.

Apart from the classroom training, recruits will be

expected to aggressively learn on-the-job as well.
Analysts will be required to study for and obtain
licenses to practice as determined by the local governing
authorities – the MAS in Singapore.
 SUMMARY OF CORE INVESTMENT BANK
DEPARTMENTS
DEPARTMENT BRIEF FUNCTION
Corporate Finance Assists corporate clients to raise
capital to finance their operations
and expansionary plans. Teams
evaluate the needs of the clients
and assess the inclination of
various capital markets for
new securities and structure an
appropriate financing package
for clients. A critical i-banking
business to banks.
Derivatives Work with large clients who
are exposed to risk of price
fluctuations in certain markets
to structure products in order to
ease these risks. Offers specialized
jobs to engineers, scientists,
financial economists and academic
mathematicians.
Mergers & Acquisitions One of the most revered
(M&A) departments in I-banking. M&A
provides advisory to companies
in varying industries who wish to
acquire other companies or divest
current assets.
Private Client Services Also known as Wealth
(PCS) Management. PCS builds
relationships and networks
with high net-worth individuals
and helps clients manage their
financial portfolios.
Public Finance Mainly deals with securities issued
by governments. These securities
often have unique features and
structured tax implications and
require substantial legal and
public administration cooperation.
Retail Purchases and sells stocks, bonds,
derivatives and other financial
instruments on behalf of small,
individual clients.
Sales & Trading Make trades in securities for the
primary and secondary markets
for currencies, stocks, bonds,
derivatives, futures, commodities,
asset-backed treasuries etc on
behalf of institutional clients
(mutual and pension funds),
individual investors and for the
banks themselves.
Sales & Trading Specializes in creating securities
Structured Finance based on other assets to
redistribute cash flows and
diversify portfolio risks of clients.
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GETTING HIRED
Generally, banks operate on a fall/spring recruitment
season, with the fall semester concentrating on analyst
recruitment and spring on internships. This coincides
with Semester 1 for the former and Semester 2 for the
latter in Singapore. If you are an undergraduate, it is
highly advisable to try to get an internship as this is the
best way to secure an offer for a permanent position
eventually.
Investment banks, especially bulge bracket firms,
generally favor a high grade point average, a superior
academic reputation and an outstanding extra curricular
activity record. It doesn’t hurt to graduate from the Ivy-
Leagues or top junior colleges either. A consistent track
record is advantageous, else be prepared to explain the
B grade that you got in O Levels. A business related
degree is helpful but more banks have recently taken to
graduates from fields like engineering and the arts to
better appeal to an expanding clientele base.
Recruiters from prestigious investment banks are
sent around during recruiting season to pick the best
students. Do note however, that smaller, specialized
boutiques often don’t, hence it is advisable to discern
the type of bank that you are best suited and conduct
your own independent research.
If recruiters have not been beating down your door
yet, you will need to spend extra effort to research
and network your way into an interview. Approach
your school’s alumni and tap on your relatives and
acquaintances to get in touch with someone from an
i-bank that you are interested in. If you are a good
student with a genuine interest, it is worth the shot.
Candidates can expect multiple rounds of gruelling
interviews with the entire team from Analysts right up
to the Managing Directors. One banker attests to having
gone through 12 simultaneous rounds in one day! This
is a good opportunity for the team to get a feel of you
and also for you to meet the people who you may be
spending the next 2 years with.
There may also be wine-and-dine meals at fancy
restaurants. Don’t let your guard down here as
interviewers are actually taking this opportunity to
observe a candidate’s ability to socialize and make
conversation with clients as many deals are negotiated
over meals.
Recruiters are looking for high-energy, hardworking
and bright candidates who are willing to commit the
time and effort to the job. An outstanding personality
and the ability to work independently and in teams are
critical.
SAMPLE INTERVIEW QUESTIONS
If you have any problems answering questions
like these, it is highly advisable to do some serious
research before heading for an interview.
Why M&A/Corporate Finance/Sales& Trading?
Talk me through a Balance Sheet/Income Statement/
Cash Flow Statement.
What is the difference between pooling and
purchasing accounting?
What is DCF (Discounted Cash Flow) Analysis?
What are the different multiples that can be used to
value a company?
Interview questions can range from the generic ‘why
banking?’ to the specific finance-related questions. Be
prepared to explain and reaffirm your commitment to
this industry.
ON THE JOB
The few privileged ones who make it through can look
forward to an experience of a lifetime and one that no
other careers can provide. The learning curve is unusually
steep and analysts are heaped with responsibilities from
Day One. Be prepared to put a hold on your social life but
off the bat you’ll be given more duties and recognized
more for your work than the average working person.
Work is expected to be immaculate with zero tolerance
levels for errors and the hours are brutally long - think
130 hour weeks. Analysts are expected to be punctual,
diligent and take initiative in all tasks. The upside to
it all is that you’ll get to wine and dine and be on first
name basis with the makers and movers of the industry
and be a part of multi million dollar deals.
Compensations are generous with current first year
analyst annual base salaries ranging from S$ 75,000-
100,000, signing bonuses of S$ 5,000-10,000 and annual
bonuses of anywhere from 30-100% of base salary based
on performance levels. Vacation days are a generous
one month and meal and transportation allowances
are provided as well. Analysts recruited into Singapore
offices are often given choices to receive compensation
in either US$ or SG$ at a fixed rate. The SG$ package
will include CPF on top of the standard benefits. Local
banks tend to be more cautious paymasters but provide
invaluable banking experiences as well.
LIFE AFTER …
In general, the investment banking career is a chance of
a lifetime. Investment bankers are highly respected and
well-looked upon as having gone through a rigorous
and challenging career and emerging with valuable
analytical and formidable business knowledge.
Life after investment banking provides a wealth of
opportunities. Bankers have been known to make
their mark in the private sector, become successful
entrepreneurs or even accomplished academics – the
world is your oyster!
QUOTES FROM BANKERS
“A professor said that it is one of the toughest jobs to
land right out of school. So I thought to give it a try.
And it has turned out to be a great experience! As a
21 year old, I got to meet with CEO and CFOs of MNCs
and private firms, no where else can my opinion as a
fresh graduate be heard and taken so seriously…” – An
Ex- Banker
“I did my math, no where else can I earn as much as I
can in Investment Banking,, and no where else except
in Investment Banking I can make my first million
before I’m 30…My eventual goal is to retire at 35 as a
wine trader and this is a means to the end” – A Senior
Associate in M&A
Previously published as “Demystifying Investment Banking” in Career
Central Issue #2.
Editor’s note: This article uses terms and context based primarily on
the investment banking industry in the US with certain adaptations to
local conditions. Terminology, definition and processes may differ from
country to country and from company to company.
Candy studied both locally and overseas and has paid her dues in the
Big Apple before returning back to Asia. She is currently living in China
with her better half where she continues to pursue her love for good
food and tries to make her mark in a population of 1.8 billion. She will
love to hear from your comments/feedback at florissa@hotmail.com.
INTERESTING READS
Monkey Business: Swinging through
the Wall Street Jungle
by John Rolfe and Peter Troob
- A brutually honest look at
investment banking from the eyes of
an insider.
Working the Street: What You Need to
Know About Life on Wall Street
by Erik Banks
www.thevault.com
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 FROM THE DESK OF A
SECOND YEAR INVESTMENT
BANKING ANALYST
(MERGERS & ACQUISITIONS)
Wednesday X Day, X Month 2005

TIME ACTIVITY
8:30 AM Get in, flash security badge. Greet MD who’s already here. Juice up computer and head to pantry to grab Milo. Check
voicemail, message from Canada asking for updated Cable Comps to be emailed over.
8:45 AM Glance to see which emails need immediate attention. Read the Straits Times and Wall Street Journal online. Browse through
the Financial sections to see if any Media & Telecom news turned up overnight. These are the industries that my team
covers.
9:00 AM Official start time. Greet blurry-eyed colleagues who straggle in from a late night. Get roped into conference call in MD’s
office with the CEO and CFO of a Telco firm for the sale of a few properties we are helping to negotiate. VP and Associate
join in with orange juice and bagels in one hand and notepad and pens in the other.
10:00 AM Complete call. Back to computer, secretary leaves message chasing for expense reports. Head to David’s cubicle, an associate
whom I’m working with on a cable deal, to discuss a financial model that I’ve been working the night before.
10:30 AM Get changes and sit down to rework model. Check in with interning analyst to see if he has problems with the company
research report he has been assigned to do. Check that dial-in number for afternoon call has been set up and emailed to
participating parties.
11:30 AM Conference call with deal team and CFSB team we are co-leading the deal with for discussions. Discuss presentation and work
is split up with a CSFB analyst and I assigned as the key persons to follow up on some loose ends.
12:15 PM Dial-in management team to give quick update on processes and prep them for afternoon call with a potential buyer. They
ask for latest industry information or a Public Information Book (PIB) to be sent to them. MD gives me a look which I return
with a curt nod. There goes my dream of strolling down to the deli across the street to get a salad and to defrost in the sun.
12:45 PM Instant message lunch mate to cancel our “appointment” and start to work on the PIB. Look through online databases to find
the latest industry reports and news articles and print them double sided. Very important. Create a cover sheet and reference
index. Compile the book and buzz for a junior analyst to send PIB down to the printers for 10 copies to be made by 5pm.
1:30 PM Make another cup of Milo while printing off the latest presentation in preparation for the 2 pm. Drop off copies of the
presentations to members of the deal team.
1:55 PM Grab dial in number and gather in MD’s office again. MD dials in with a sandwich (his usual beef and mustard) in one hand.
The call starts with the usual ‘quack’ talk about the weather and proceeds on to serious discussions.
4:00 PM Call ends, MD debriefs and makes his changes on the model assumptions (Not Again!!) as well as makes his comments and
moves pages of the presentation around. He asks for the work to be done and faxed to his home tonight. Looks like another
long night for me. I roll my eyes while jotting down notes.
4:30 PM Tell secretary I’m heading down for a quick breather. Stop to chat with some peers and lament about the late nights and catch
up on quick office gossip. Stop by the ma-ma shop downstairs for some chips. Really need to indulge.
5:00 PM Arrive back at desk to see a pile of PIBs on my chair. Bring a copy round to the junior analyst and asked if they’ve been flipped.
Ask for all copies and every page to be flipped to check all the pages are in order and in good condition. Sit down and finally
try to get some work done on the changes to the model and presentation.
7:00 PM Fellow analysts start nightly discussion on dinner orders. Italian wins. Nightly specials are faxed and read diligently. Someone
puts in the orders. MD leaves for the day and stops to chat for a while. Atmosphere relaxes a little. Drop off PIBs to members
of the deal team and send off 3 copies to clients via Fedex. Remind secretary as she leaves to drop of the package.
7:45 PM Food arrives in conference room. Our nightly social gossip and gab session.
8:15 PM Remembers to email comps to Canada. Continue to work on the changes that MD asked for.
9:45 PM Runs through changes with associate on the deal. Fax over the updated presentation and model to MD.
10:15 PM VP, Associate and I call MD at home for a discussion on the updated work.
11:30 PM Finally wrap up call with more changes to follow. MD will be reviewing the work on his train ride into work. Head back to
desk, stop to chat a little with another analyst who’s working to meet a deadline by the early morning flight. Chit-chat with
cleaning lady. Focus on making the discussed changes.
1:00 AM Tired. Pack Up, Wave to a fellow sleepy analyst, Grab a PIB for morning train read. Call for a car and head home.
1:45 AM Reach home, shower, turn on the television, too awake to sleep.
2:15 AM Set alarm for 7 am and turn off lights.

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