explain i-banks to me.. (1 Viewer)

[Frigid]

having read the other i-bank thread and the macq bank thread... could someone answer the following general i-bank questions for me? please?

- what do i-banks do?

- why are they so profitable?

- why do their graduates earn so much?

- why do their graduates work so much?

- how do i get myself a job in i-bank?

 

[ND]

Why do you want to get int o the industry when you don't know anything about it?

 

[MAICHI]

I think they do business financing deals, like if Rio Tinto wants $100 million to finance their new project you as an i-banker would go and discuss the terms with them, i.e. how deals are to be structured, the risk of the underlying project, method of financing etc. It's not an easy job, there are a huge amount of money involved in the deals that they do, so they are looking for the top people academically and interpersonally.

 

[Frigid]

Why do you want to get int o the industry when you don't know anything about it?

i think i would need to know a bit more about it before considering getting it, don't you think?

 

[§eraphim]

frigid, don't do IB. it's missing all the old school prestige of being a professional.

 

[ND]

- how do i get myself a job in i-bank?[/B]

Doesn't that question suggest that you wanna get into it?

frigid, don't do IB. it's missing all the old school prestige of being a professional.

What do you mean? IB and MC are the most prestigious jobs in the world.

 

[§eraphim]

Doesn't that question suggest that you wanna get into it?



What do you mean? IB and MC are the most prestigious jobs in the world.

hey us quant-types don't need more competition from budding lawyers

 

[ND]

Hahah, but com/law ppl can only get into corp fin, and sif do corp fin.

 

[Soma]

Investment banks are merely those banks who make their income away from the traditional norms of retail banking i.e. personal banking, unsecuritised mortgages etc.

Different IB's have different investment focusses. A lot of IB's play a mainly advisory role. MBL for instance is heavily invested in infrastructure. They own Sydney Airport as well as many other airports all around the world. Another typical Macq investment is tollways. MBL actually owns very little assets itself, rather they make a purchase sell it as securities on the market and then charge managing fees. These management fees are often massive. So far this business model has worked to much success. It is not unknown for Macquarie to list a new investment vehicle and have the market invest many millions of dollars in it before Macq even discloses (or knows?) what they want to do with the funds.

The secret to the massive wealth of Bankers is probably due to their ability to charge performance fees. As a budding lawyer you will know that the ways in which lawyers can charge clients is heavily regulated. Every massive deal will involve bankers, lawyers and accountants but it is only the bankers who are allowed to charge their fees on terms such as % of profit e.t.c. The same goes for individual salaries, IB's use profit share systems based on performance and it is standard for bonuses to far exceed base salaries. From memory Alan Moss's base salary was around 700k and his bonus 18mill.

 

[Frigid]

Doesn't that question suggest that you wanna get into it?

so if i ask what are the steps to becoming, say, for example's sake, a vet, does that mean i automatically imply to become a vet?

i just wanted to know some general information (because corporate websites usually offer marketing bullshit), but it looks like there's some suspicion of my motives from those in the know as well. thanks for your help, ND.

 

[ND]

You didn't say "what are the steps to becoming an IB", you asked "how do i get myself a job in IB".

What do you want us to say? Go and apply for a position on the website? Isn't it obvious? (then again, you've gotta be pretty clueless to not know what an IB does after 2 years of uni in a commerce degree)

 

[§eraphim]

You didn't say "what are the steps to becoming an IB", you asked "how do i get myself a job in IB".

What do you want us to say? Go and apply for a position on the website? Isn't it obvious? (then again, you've gotta be pretty clueless to not know what an IB does after 2 years of uni in a commerce degree)

Well, if you hadn't noticed, Frigid wants to be a lawyer (refer to siggy and active law posts). Also, like most Chinese, I think he's just doing the Commerce degree for a job; Law is his true passion...so he should just stick with it.

 

[Frigid]

What do you want us to say? Go and apply for a position on the website? Isn't it obvious? (then again, you've gotta be pretty clueless to not know what an IB does after 2 years of uni in a commerce degree)

i would have thought there was more than that. besides, ND, i've just finished my core commerce subjects as a result of my transfer, so yes, i am pretty clueless about ibanking. on the other hand i'm about halfway through third-year law. regardless of my situation, what does it matter to you about my motives for asking anyway? if you don't want to answer my questions, you're welcome not to. but please kindly do not pass your value judgments upon me.

seraphim: actually i think a lot of asians do com/law to get a commerce job and have law as the backup. but yes, i do prefer law (and i have done more of it).

on the other hand, i am open to other things as well; that was the purpose of my asking.

 

[ND]

Look mate, i wasn't ripping you off i was just asking why someone would ask about how to get a job in an industry they know nothing about.

 

[Frigid]

why someone would ask about how to get a job in an industry they know nothing about.

because the very same person is about to start his finance major and would to explore the options. does that answer your question?

 

[santaslayer]

wtf is wrong with ND?????

 

[seremify007]

Chill guys, ND definitely has a point in that frigid seemed overly eager in finding out about getting jobs at IBs with little knowledge and that IB is one of the more competitive industries out there, but then by the same token, this is an internet forum and you can ask people questions without fear of getting some doctored-up-PR-propoganda response which serves little purpose apart from glorifying the company/firm/bank.

Anyhow I feel like answering your original Q's (to the best of my knowledge);

- what do i-banks do?
Invest money. Their soul purpose is to make more money with the money they have. Sure normal banks do that too, but IBs tend to get their supply of funds from people interested in investing rather than people just saving up their money, and IBs invest in properties, commodities, businesses, shares, etc... to make a return whereas normal banks make money by charging interest on loans to other people/businesses. Maybe they should rename them to "Investment firms" to reduce the confusion.

- why are they so profitable?
Everyone has a speciality- theirs would be investing.

- why do their graduates earn so much?
Tough job, and as they say, "You have to sell your soul to work at Macquarie Bank."

- why do their graduates work so much?
Well, my cousins aren't exactly IB people, but they are forex dealers and commodity traders so they are constantly 'on the ball' keeping up with prices of various things from around the world at all times... I'd imagine that IBs are similar to that in the sense they need to always know whats going on, and as such, there's always things which can be done, calculations to be made, etc..

- how do i get myself a job in i-bank?
From what I've heard it's ultra competitive to get into any of the nice name IBs, so you have to do something which makes you better than the other candidates... apart from the degree, maybe extra curricular or work experience, or even personal experience might help you land a spot. The actual applications I think are done online like many other jobs nowadays.

(EDIT)
Maybe you might want to check out the wikipedia article- http://en.wikipedia.org/wiki/Investment_bank

... btw whilst I may be in the Finance industry, I don't work in any of the IBs nor have I studied Finance.

 

[ND]

wtf is wrong with ND?????

??

- what do i-banks do?
Invest money. Their soul purpose is to make more money with the money they have. Sure normal banks do that too, but IBs tend to get their supply of funds from people interested in investing rather than people just saving up their money, and IBs invest in properties, commodities, businesses, shares, etc... to make a return whereas normal banks make money by charging interest on loans to other people/businesses. Maybe they should rename them to "Investment firms" to reduce the confusion.

The investment management department of IBs is not really investment banking (as it's commonly known). Investment banking is about advising on M&A (as Soma said), and about raising capital. An IB works as an intermediary, issuing either stock or bonds to the public on behalf of the company.

Generally, an investment bank comprises:

Equity Capital Markets (issuing new capital)
Debt Capital Markets (issuing new bonds)
M&A
Fixed Income and Equity: Trading, Sales and Research

The various other activities performed by an investment bank aren't really known as investment banking.

 

[treason]

Commercial Banks (ANZ, CBA, NAB, Westpac) make money by taking monetary deposits and lending out that money at a higher rate. Not hard to imagine when you consider most deposit accounts only provide you with 1% interest (excluding them new fancy ING 5% internet accounts) while loans these day are around the 8% mark. That's a 7% spread.

An investment bank has no inventory of cash deposits.

However fundamentally, the function of an IB is the same as a commercial bank. An investment bank is an intermediary which matches buyers (savings surplus units - depositors) with sellers (saving deficit units - people seeking loans). Companies thus use IB towards the same end as they use commercial banks, that is to raise money.

I-Banks are intermediaries. Brokers. This is what their core business is.

They are profitable because there is a demand for their service. They offer forms of fund raising commercial banks cannot do/undertake, and which companies cannot do themselves.

Their graduates only make money in a bull market, and only in certain areas like Corporate Finance/Advisory & Sales & Trading (never heard of support people getting fat bonuses). It's a competitive industry to get into (which according to economics should eat away at the above average wage), however you have to temper the high wage with the fact that they work long hours and these are some seriously smart people who know how to make money. Given that there are companies and other ibanks who would kill for these very few people, the wage is bidded up. Look at it like this, why does Marat Safin or Roger Federer earn more than other tennis players? Because they have the talent to win. Similarly there are people out there who have the talent to make money, structure deals, predict forex movements.

Gradates started working long hours in the 90's. In the 80's, bankers actually finished at 10 pm at the latest, not the 1 am you hear and see these days. You could argue that the long hours were brought about by a combination of the markets being more integrated via the internet, and maturing as efficient economic vehicles with which to raise capital (also to an extent the dotcom boom where IPO's sky rocketed). Also, couple that it's an industry where there are many players who can all do the same thing with the fact that it’s also a service industry (hence customer always right and get what they want), and it's not hard to see why analysts have to work long hours.

To get a job in i-bank, work out which department you want to head into and work towards that. Sales & Trading is entirely different from M&A. Start speaking with people who work in the industry to work out where you want to go. Start reading the business section of newspapers, WSJ, The Deal, etc.

 

[Frigid]

i read the wikipedia article, and went to about 10 of the IB websites yesterday.. although i find the terminology a little difficult. but thanks everyone.