How to break into banking

Considering a career in banking? Not sure which paths are out there? If so, you’ve turned to the right page. With Easter holiday schemes, summer internships and graduate opportunities all available in the banking world, you could be forgiven for feeling a little confused about which road to venture down. However keep reading and you may find the ideal one for you.

Investment banking can be broken down into five main areas: mergers & acquisitions (M&A), capital markets, sales & trading (S&T), compliance, risk and regulation, and operations. As we will go onto discover, these divisions differ greatly in terms of how they function, the role that will be demanded of you as a junior professional, the skills that you will need to bring to the table, the key players that you could work for, and last but not least, the salary you could expect to earn.

Lets start by diving into the deep end, with the extremely competitive M&A division. Shakespeare once asked “what’s in a name?” Well for M & A, not a lot really. The name’s pretty self-explanatory; this division advises client companies on mergers (where two companies join together equally) and acquisitions (where a firm partially or completely takes over another).

There’s no hiding the fact that analysts in M&A work long hours, averaging 80-90 a week, sometimes even reaching 100. Due to the stressful and critical nature of the work, M&A is only for the very committed; work must come first.

Junior bankers work into the early hours of the morning on legal documentation for deals. The average pay for a first year analyst is £50k with £15-20k bonuses which can rise to £125-150k base plus a possible £600-700k bonus at the top level. Key players include J.P.Morgan, UBS, Goldman Sachs, Merrill Lynch, Lazard and Rothschild.

Capital Markets is split into Equity Capital Markets (ECM) and Debt Capital Markets (DCM), where essentially the financial products later traded in the secondary market (S&T) are created. ECM bankers help companies raise money through issuing shares and other derivative products. Acting as an underwriter, the bank agrees a fee guaranteeing to sell the issued products at a certain price, failing to means the bank is obliged to buy the products.

DCM, or fixed income, deals with bonds such as government treasury bonds, investment grade company bonds (not too risky) and high-yield bonds (the risky stuff that’s likely to default). Key players in DCM are Barclays Capital, RBS and Deutsche Bank and ECM are Morgan Stanley, Goldman Sachs, and BoA Merrill Lynch.

A junior capital markets banker is tasked with the structuring of financial products. Skills required for capital markets include an interest and understanding of technicalities of company financing, excellent communication skills due to the client based nature, and you must be a team player as it’s not as individually reward focused as S&T. An associate in DCM/ECM (three to five years of experience) averages £65k in pay and £50k in bonuses.

Now for S&T, which is the secondary market I’ve been mentioning. Salespeople advise clients ranging from wealthy individuals to pension funds on what securities to buy and sell. The secondary market is split into two: equities (stocks and shares) and fixed income (corporate credit, government debt, currencies – FX team). A salesperson is usually focused on a particular product and client.

Traders need to track the movements of the market and buy and sell securities based upon this at the touch of a button. A trader is defined by what they trade (commodities, FX, equities etc) and the type of trader they are, such as a flow trader (they buys and sells products on behalf of the bank’s clients), proprietary “prop” traders (elite traders who buy and sell using the bank’s money) and sales traders (who execute trades resulting from recommendations to clients).

To work in S&T you must have a keen sense of risk and reward, be reward-driven, understand the dynamics of the market and what drives it, have an analytical mind, excellent mathematical ability and communication skills. A typical day is from around 6:30am-5:00pm, less time than other divisions. Starting salaries average £35-45k plus a bonus; with experience this grows to around £70k.

Ever heard of middle office? This refers to compliance, risk management and regulation. Risk management ensures the bank isn’t exposed to huge risk that could lead to huge losses. The focus on this area has grown due to the financial crisis where billions were wiped off balance sheet across the banking sector. Compliance ensures the bank is working in accordance to any national regulation set by the FSA in the UK and other EU regulation.

Risk management is split into market risk, credit risk, operational risk with career opportunities in all. Compliance is split into S&T compliance, control room compliance, monitoring and surveillance and anti-money laundering.

Skills required for these roles include the ability to interpret the application of rules to diverse scenarios and business models and an analytical mind; Goldman Sachs also greatly emphasises communication. Despite the increased attention, salaries do not appear to be increasing. Risk managers and compliance officers in S&T receive the highest earnings.

Operations is a back office division, meaning that it does not work with clients to generate revenue; however, work is more sociable and requires shorter hours. As a support team, the main task is clearing trades whereby the bank’s records of a security sale need to be checked against the records of buyer to ensure they match.

The other prime role is settling trades which involves everything from documentation preparation for the sale to ensuring the bank receives its payment after sale. The main role of a junior professional is to intervene when systems fail. Problem solving, accuracy, interpersonal and time management skills are sought after. In terms of pay a junior professional will earn an average of £28-32k, rising to £80k+ at the senior end.

Hopefully this has demystified what can be a very confusing area, particularly for those that have just discovered the banking world. With internship places filling up and graduate jobs hard to come by, it is an extremely difficult career to get into.

However with the motivation to succeed and the highly regarded Warwick student status, there is a desk with your name on; all you have to do is find it.