How to Prepare for Investment Banking Interviews (Guide 2024)

Breaking into investment banking is the aspiration of countless students and graduates. A career at top firms like Goldman Sachs, JPMorgan Chase, or Morgan Stanley offers consistently fast-paced working environments, the potential for substantial income, and the chance to work on significant financial transactions.

That said, the work needed to land a position in this incredibly competitive field is more than just getting good grades and spell-checking your resume. Interviews in the investment banking space are known for their rigorous, comprehensive, and deeply investigative nature, typically being designed to test technical knowledge as much as company and culture fit.

Good preparation for these interviews can be the difference between being another resume in the pile and actually receiving a job offer. In this guide, we’re going to explore the entire investment banking interview process, so you know not only what to expect, but also how to stand out from the pack. From separating the interview process into manageable stages to mastering the technical questions and creating deeply compelling personal stories, this guide will help you get the knowledge and confidence needed to reach your goal of breaking into investment banking. 🎯

Overview of the Investment Banking Recruiting Process

Let’s start by taking a look at the typical interview process for positions in investment banking. The process is generally broken up into stages, with each one being used to evaluate various aspects of candidacy for the role. Getting to know these stages a little better can give you an edge in preparation while also helping to manage your expectations regarding the process.

Initial Screening

The first step in the formal interview process for positions in the investment banking field is generally an initial screening or evaluation. This is often conducted over the phone or using a video call platform. The initial screening stage is usually handled by a recruiter or potentially a junior banker, and it’s the stage where someone at the company will evaluate your basic qualifications and interest in the role.

You’ll be asked questions about your resume, education, and academic achievements, and about your personal motivation for pursuing a career in the investment banking field. This is your big chance to make a powerful first impression and to demonstrate your enthusiasm and charisma.

First-Round Interviews

Passing the initial screening round, you’ll then move on to the first-round interviews. These are usually much more in-depth and conducted either in person or virtually. The first-round interviews will frequently involve a mix of behavioral and technical questions.

Here, your interviewers will probe your previous experiences, your understanding of key financial concepts, and your ability to handle the demands of the role. You might have several interviews and interviewers at this stage, which can include associates and even vice presidents from the company.

Assessment Center

In some cases, and for some firms, assessment centers are used as part of the interview process. These centers host a series of tests and exercises created specifically to evaluate your cognitive abilities, problem-solving abilities, and even teamwork. The activities included in these assessments include mathematical and numerical reasoning, verbal reasoning tests, group discussions, and presentations.

These assessment centers offer a comprehensive view of the capabilities of a candidate or group of candidates, and they can be used to help single out individuals who have skills critical for investment banking.

Superday

The final stage of the interview process is the “superday”, which is an intensive round of interviews held at the firm’s office. During the superday, you’ll have the chance to meet with senior bankers, managing directors, and partners.

Interviews on the superday are held back-to-back and will generally include case studies, group exercises, and one-on-one interviews. Superday is a comprehensive test of a candidate’s technical skills, analytical talents, general stamina, and ability to perform in a high-stress, high-pressure environment. Staying composed and confident through the challenges and demands of the day is critical.

Final Review & Offer

If you’ve made it this far, your performance during the rest of the interview process will be reviewed by the hiring committee. If they determine your performance to be impressive enough, an official job offer may be extended to you. 🤝 Getting this offer is a wildly significant achievement, but it’s important to review it carefully to make sure it fits your expectations and career goals.

Telling Your Story in the Investment Banking Interview

One of the most important parts of the investment banking interview is your ability to tell your story. Your interviewers want to understand your background, and motivations, and get a clearer picture of what makes you a unique candidate. Crafting a compelling narrative can help set you apart from the flood of other applicants, and highlight your ultimate fit for the role.

First, be sure your story is well-structured. This means following the tried and true three-part structure of an introduction, body, and conclusion. In your intro, you’ll briefly introduce yourself, along with your education and relevant industry experiences.

The body is where you will want to highlight formative experiences that have shaped your interest in investment banking. Talk about anything here, even internships, projects, or coursework that shows off your passion and skills. Finally, your conclusion should tie it all together, while wrapping it all up. Explain why you’re specifically interested in advancing your career in investment banking.

Select Highlights of Your Personal Story

What you’ll want to showcase in your personal story is the key experiences that make you stand out as a candidate for an investment banking role. Instead of just saying you interned at a particular location, give details about what you did. Don’t just say “I interned at Widgets Inc.”, but say something like “During my internship at Widgets Inc., I analyzed financial statements and developed valuation models for potential acquisitions, helping to identify potential investment opportunities.”

Demonstrate Passion

One of the most crucial things you can do when telling your story is show your genuine enthusiasm for the field. Talk about what initially sparked your interest in the field, and what keeps you interested or excited about it. This might be a specific deal you read about, a particular class that has inspired you, or even a mentor who may have impacted your career choice.

Connecting the Dots

Make sure that your story has a logical flow, and that it draws a link between the experiences of your past and the goals you hope to reach in the future. Detail how each step in your journey has helped prepare you for a future career in investment banking. If you have experience in engineering, perhaps explain how analytical skills and attention to detail are critical when it comes to modeling and analyzes.

Practice Makes Perfect

Even the best, most well-crafted personal story can be reduced to rambling gibberish if it isn’t delivered naturally and confidently. Practice telling your story out loud while you focus on clear enunciation and genuine enthusiasm. Try to avoid rote memorization, and try to hit a more conversational tone that allows you to be flexible, based on the interviewer’s questions.

Answering Personal Fit & Behavioral Questions in Your Interview

Questions about your fit or behavior are staples of interviews in the investment banking space. These types of questions help your interviewer evaluate whether you have the right work ethic, attitude, and ultimately, cultural fit, for the investment firm. Knowing ahead of time what might be asked can be a tremendous help in creating structured and efficient answers.

The most common questions about personal fit will be things like “Tell me about yourself”, “what are your strengths and weaknesses”, “How do you handle high stress and tight deadlines”, or having you describe a situation or time when you were up against a substantial challenge and how you handled it.

The most effective way to structure your responses to these questions is by using the STAR format.

STAR stands for Situation, Task, Action, and Result, and it’s a powerful tool for creating behavioral question responses.

Start by laying out the background or context of the situation. Then, explain the task you were given, and what actions you took to address the task. Finally, share the outcome or results, and quantify the results whenever possible.

👉 To practice answering personal fit and behavioral questions under pressure, take a look at our stress question tool

Examples of Technical Questions in Investment Banking

Being able to answer technical questions about the role can give you a critical boost to your chances of landing a job offer in investment banking. Let’s look at five common questions that will help you get a feel for the types of questions you’ll need to prepare for:

Example 1: Walk me through a DCF analysis.

A discounted cash flow or DCF analysis is used to give valuation to a company, based on its projected future cash flow. Here’s the general overview that you can expand on or condense, based on what your interview calls concerning detail or specificity.

Step 1: Project Free Cash Flows

The first step will be projecting the cash flows for the company for a specified period, typically between five and ten years. Free cash flow is calculated as EBIT x (1-t) plus depreciation and amortization, minus changes in working capital, and minus capital expenditures, where ‘t’ is the tax rate.

Step 2: Calculate Terminal Value

Now, using the Gordon Growth Model, estimate the company’s terminal value. This is the value of the company’s cash flows beyond the period of projection.

Step 3: Discount the Cash Flows

Next, find the weighted average cost of capital, which will be the discount rate. Discount the free cash flows and the terminal value back to their present value, dividing the cash flow by one plus the discount rate.

Step 4: Include Present Values

Add up the present values for projected free cash flows and the terminal value. This becomes the total enterprise value of the organization.

Step 5: Adjust for Debt and Equity

Finally, to find the equity value if any, use the enterprise value less the current net debt.

Example 2: What are the three financial statements?

The three financial statements are the income statement, balance statement, and cash flow statement. The income statement details the revenues, expenses, and profits for a specified period. The balance sheet is a snapshot of the overall financial position of a company at a specific point in time. The cash flow statement focuses on cash inflows and outflows, in the context of operation, investing, and financing.

Example 3: How do you value a company?

There are several ways to answer this question, depending on the situation. A DCF analysis projects future cash flows and converts them to present value. You could also compare it to similar companies based on valuation multiples like P/E, EV/EBITDA, or even EV/Sales.

For publicly traded companies you can quickly find the market capitalization by multiplying the share price by the total outstanding shares. You could also analyze past transactions of comparable organizations to find a ballpark valuation range. You could even do an asset-based valuation, adding all assets minus liabilities.

Example 4: Explain the difference between enterprise value and equity value.

The difference between enterprise value and equity value can be best illustrated by defining each one. The enterprise value is the total value of a company, including debt and equity. Equity value or market capitalization, on the other hand, is the value of a company’s equity currently available to shareholders.

Example 5: What is EBITDA and why is it important?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, and it is one of the most comprehensive metrics for a company’s operational performance.

It is a critically important measurement because it removes non-operating effects like interest, taxes, and amortization. It facilitates a much more even-footed comparison between companies while giving an approximation of cash flow from operations.

Final Thoughts on the Investment Banking Interview

Preparing to enter the field of investment banking requires a comprehensive approach. From crafting your personal story to mastering technical questions, and even staying informed about market trends, expert preparation is key. Stick to the insights and strategies we’ve discussed here, and you’ll be in a much better position to do well in upcoming interviews.

💡 Remember that the investment banking interview process isn’t just about showing off technical skills, it’s about highlighting your passion for investment and finance, your ability to handle the demands of the job, and ultimately, your fit for the role.