Wednesday, May 10, 2006

Secure a future in investment banking

Investment banking is a hot option for management and accountancy students. The job involves advising companies on capital formation, mergers, acquisitions, investments and management of assets, writes Usha Albuquerque

TODAY, practically every young MBA student or aspirant wants to be an investment banker. A blue shirt, sleeves rolled up, a phone over each ear, dashing from one city to another and working for names like Morgan Stanley or Goldman Sachs. While banks handle wealth, investment banks handle the wealth of companies, corporate houses, organisations, high net-worth individuals and even governments. No wonder, investment bankers earn fat pay cheques with a lifestyle that is the envy of many. Wall Street is filled with high-energy, hardworking young investment bankers who spend hours hunched behind computers, poring over financial statements and churning out spreadsheets by the pound.

Banks are a vital aspect of any economy. Their activities facilitate basic economic processes of production, distribution and consumption. They take care of people’s savings; issue travellers’ cheques; finance projects; act as executors and trustees; and extend loan and credit services.

Count-less choices

Most banks provide a range of financial services from banking services for individual customers to catering to the needs of corporate houses.

Investment management is the primary activity of investment banks. They manage shares and capital formation of a company. They also manage capital market operations on behalf of the company, managing capital issues, portfolio management, underwriting, selling, and trading securities (stocks and bonds); providing financial advisory services, such as mergers and acquisition advice; and managing assets, international financing, public issue management and the buying and selling of shares.

Investment banks offer these services to companies, governments, non-profit institutions, and individuals. As financial markets in India grow, investment bankers watch the stock markets with traders, trying to buy or sell big institutions a piece of a new stock while the markets are in session.

Profile of I-banker

As an investment banker, your work would involve advising companies on capital formation, mergers, acquisitions, investments and managing capital assets. You will have to liaison with businesses, governments, non-profit institutions and individuals.

You will look into the financial aspects like advising a company or a client on financial transaction, selling and trading the securities, researching the company’s background and the market before making any investments, etc. You also have to analyse and make recommendations to the company, based on the market and competitors.

Initially, you may start as an analyst and be responsible for writing reports, maintaining spreadsheets, trading stock options, research, etc. You will need to involve yourself in an intensive study to find out opportunities to invest in profitable shares, debentures and other financial instruments. You need to have in- depth knowledge of money markets, the state of the economy and business and industry in general. Moreover, you will need to continuously involve yourself in extensive research on these subjects, and be up-to-date with the latest information. . Often, bankers specialise in a particular industry and follow its fortunes over the years.

Some investment bankers handle the investment and control of a portfolio of shares, deciding which shares to buy and which to sell to gain maximum returns for their clients. In such jobs you have to be accurate in terms of business information as the investor will totally depends on your reports. It is for this reason that investment bankers are often shown as having sleepless nights and 24x7 work schedules.

Wanted, B-school graduates

This is a high-risk job, as your decisions can involve millions, and form the basis of many commercial decisions.

Most foreign banks and financial institutions prefer management graduates from the premier management schools, or professionals in accountancy, (chartered accountants and cost accountants), finance experts and economists with postgraduate qualifications in finance, economics, financial planning, capital markets and so on. A Ph. D in Economics and relevant experience in the industry can also get you a good job.

A preliminary on-campus interview assesses personality; aptitude, and academic merit. Those meeting the set stipulations must clear a final interview before appointment in a foreign bank.

It is also possible to take banking as a special subject at some institutions, prior to applying for a position in a bank. There are also a few institutions that offer a BA in Banking, or a post-graduate certificate or diploma course in banking.

Foreign postings

Job opportunities for investment bankers, as the term suggests, is with investment banks, broking firms, mutual funds, financial services companies and other financial institutions. Although the action in investment banking is still largely centered in New York City and a few other money centres around the world, some of the leading investment banking companies, such as Merrill Lynch, Goldman Sachs, Morgan Stanley, etc, have offices in India, where transactions are conducted.

Money matters

Investment banking is among the most sought-after jobs because of the high salaries offered to those qualified. Those with MBA degrees from well-known institutes can expect to start on an average around Rs 9-2 lakh per annum. Many are also offereddollar salaries. With 5-6 years experience, you could earn Rs 12 lakh-1 crore pa., depending on the organisation and the position you would be working in.

Skills set

But everyone cannot become an investment banker You need to have the right abilities and aptitude to be successful in this job. Therefore to get into this field you need to have strong analytical and mathematical skills, be comfortable with handling numbers and have a tolerance for taking risks. The ability to take initiative, good networking skills and the ability to keep calm and work under pressure are other qualities that mark out a successful investment banker. You also need to have good inter-personal skills, and be able to work with others, as you will have to work in a team with people of different temperaments

You must enjoy the fast-paced, deal-oriented work, and be prepared to put your personal life on hold, if necessary for the sake of your job. You also need to have a good knowledge of the business world and the latest market developments. Your success, therefore, will mainly depend upon your ability to communicate, willingness to travel, hard work and the number of profitable deals you clinch for the company.

The impact of the economic reforms over the last decade has been most significant on the investment banking industry. Economic growth and liberalisation has opened up considerably large number of opportunities in various organisati ons like mutual funds, investment consultancy, broker firms, insurance companies, merchant banks, pension funds and other financial institutions.

Moreover, the entry of foreign investment banks like Morgan Stanley, Merrill Lynch, Goldman Sachs, Jardine Flemming, and others has widened business avenues in banking and job opportunities have grown significantly.

Training talk

The pay and lifestyle offered by foreign banks can be matched by few other sectors, and there is tremendous prestige and glamour associated with them.

Some of these institutions offering a one-year post-graduate diploma in banking:

  • SNDT Women’s University, Marine Lines, Mumbai.

  • PVDT College, Mumbai.

Other courses in banking and finance are offered at :

  • Indian Merchants’ Chambers, Churchgate, Mumbai.

  • National School of Banking, Pune.

  • Indian Institute of Bankers, University of Bombay.

  • Institute of Bankers, London.

The writer is a noted career expert