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  1. 1. Presentation to the ASU Financial Management Association : Investment Banking Overview Sebastian Szendzielorz Class of 1998 February 19 th , 2004
  2. 2. Agenda <ul><li>Introduction </li></ul><ul><li>A Dichotomy of Banking </li></ul><ul><li>Investment Banking Overview </li></ul><ul><ul><li>Job Details </li></ul></ul><ul><li>Getting Inside: </li></ul><ul><ul><li>The Front Door </li></ul></ul><ul><ul><li>The Back Doors </li></ul></ul><ul><ul><li>The Interview </li></ul></ul><ul><li>The Investment Banking Experience: Fact vs. Fiction </li></ul><ul><li>Notable Experiences </li></ul><ul><li>Summary & Conclusion </li></ul><ul><li>Appendix </li></ul><ul><li>Q&A </li></ul>
  3. 3. Introduction <ul><li>Background: </li></ul><ul><ul><li>ASU – BS Finance ’98, AGSIM – Global MBA ’00 </li></ul></ul><ul><ul><li>2+ years with J.P. Morgan’s Syndicated & Leveraged Finance Group in New York City </li></ul></ul><ul><ul><li>Currently in Financial Management with Chase Cardmember Services here in Tempe </li></ul></ul><ul><li>Goals of this presentation: </li></ul><ul><ul><li>Help educate the audience about banking in general, and investment banking in particular </li></ul></ul><ul><ul><li>Inform interested parties about ways into the business, especially the overlooked “back doors” </li></ul></ul><ul><ul><li>Hopefully answer your questions and address any preconceived notions regarding the industry </li></ul></ul><ul><li>Disclaimer </li></ul>
  4. 4. A Dichotomy of Banking <ul><li>The banking industry can be divided in several ways, commonly beginning with wholesale vs. retail banking </li></ul><ul><li>Retail, or commercial banks, provide various services to individuals and families: </li></ul><ul><ul><li>Depository services such as checking and savings accounts and CDs </li></ul></ul><ul><ul><li>Financing in the form of credit cards, auto loans, student loans, and home mortgages </li></ul></ul><ul><ul><li>Less common services like currency exchange and merchant banking </li></ul></ul><ul><li>Most individuals deal with commercial banks their whole lives </li></ul><ul><li>These banks are well-known brands like Bank One, Wells Fargo, Bank of America, and Citibank </li></ul>
  5. 5. A Dichotomy of Banking <ul><li>Wholesale, or investment banks, provide similar but expanded services to corporate and institutional clients: </li></ul><ul><ul><li>Capital raising in the form of syndicated loans, public and private issues of debt and equity, and various permutations of the above </li></ul></ul><ul><ul><li>Specialized services such as merger & acquisition and ratings advisory, industry and competitive analyses, and market-making in complex instruments </li></ul></ul><ul><ul><li>Sales, trading, and research of publicly traded issues and currencies </li></ul></ul><ul><li>Lower transaction volumes, but on a larger scale; increased complexity begets higher returns </li></ul><ul><li>The average person has never heard of pure investment banks like Bear Stearns, Goldman Sachs, or Lazard </li></ul>
  6. 6. <ul><li>Recent regulatory changes have blurred the distinction between retail and investment banks </li></ul><ul><ul><li>Amidst ongoing merger activity, today’s large banks are posturing to be “one-stop shops” for their clients, offering a wide spectrum of services: </li></ul></ul><ul><ul><ul><li>Retail: savings & checking, home, auto, and education finance, insurance, retirement planning and brokerage </li></ul></ul></ul><ul><ul><ul><li>Wholesale: Lending, acquisition advisory & finance, risk management, cash & pension management, capital markets, trust and custodial services, private equity, and sales/research/trading </li></ul></ul></ul><ul><li>Shifting focus from transactional models (making large, one-time fees) to relationship-driven models (recurring, long-term view of steady income) </li></ul>A Dichotomy of Banking
  7. 7. <ul><li>Investment banks are divided by “Chinese Walls” between the public and private sides: </li></ul><ul><ul><li>The public side includes sales, trading, and research, which [should] operate on only publicly available information such as SEC filings, financial statements, and press releases </li></ul></ul><ul><ul><li>The private side includes advisory and structuring groups, which work directly with client companies’ upper management and have access to insider information </li></ul></ul>Investment Banking Overview
  8. 8. <ul><li>The private side is further divided into product and industry elements: </li></ul><ul><ul><li>Product groups specialize in a certain service or instrument, such as M&A, bonds, common and preferred stock, etc. – these groups run transactions </li></ul></ul><ul><ul><li>Industry groups cover all client firms which operate in a certain field, like mining, health care, or telecommunications – they are relationship managers and assist management with multiple needs </li></ul></ul><ul><li>Lastly, the industry is broadly segmented into “buy side” and “sell side:” </li></ul><ul><ul><li>The sell side of banking includes any firm which structures transactions or issues instruments </li></ul></ul><ul><ul><li>The buy side describes the firms which buy (i.e. invest in) such issues, like insurance companies, pension funds, and other asset managers all the way down to retail brokers </li></ul></ul>Investment Banking Overview
  9. 9. Investment Banking Overview - Job Details <ul><li>The most senior people, called Managing Directors, are in charge of industry/product groups and handle the majority of interaction with clients; 10-20 years experience </li></ul><ul><li>Vice Presidents are the next tier down; they oversee the everyday details of transactions and make sure deals go smoothly; 5+ years experience </li></ul><ul><li>Associates are the upper level of the junior tier; they finalize and proof most of the documents and models necessary to execute transactions; most Associates are either new MBAs from top business schools or analysts promoted after 2-4 years of high performance </li></ul><ul><li>Analysts are the junior-most level, usually fresh graduates from top schools around the nation; they perform the majority of the grunt work, or the “heavy lifting” </li></ul>
  10. 10. <ul><li>So what do investment banking analysts do all day? </li></ul><ul><li>Preparation of all documents and memos, from pitch books that go to prospective clients to offering memoranda for potential investors </li></ul><ul><li>Building and running financial models that track transaction viability and predict possible outcomes </li></ul><ul><li>Updating all internal databases and systems (i.e. data entry, proof-reading) </li></ul><ul><li>General administrative chores like setting up conference calls, copying, filing, sending faxes, arranging deliveries, and most importantly… </li></ul><ul><li>Guaranteeing senior people never look stupid during calls or meetings – having all the answers </li></ul>Investment Banking Overview - Job Details
  11. 11. <ul><li>What kind of a lifestyle / work environment can I expect? </li></ul><ul><li>12-15 hour days, usually some weekend work as well </li></ul><ul><li>Very high stress: constant pressure to perform, competitive environment, and demanding superiors </li></ul><ul><li>Multi-tasking: running with 6 projects at once, minimal tolerance for errors </li></ul><ul><li>Lots of menial grunt work and micromanagement before you’re trusted to operate without oversight </li></ul><ul><li>Meetings and conference calls throughout the day, catching up with your real work after 5PM </li></ul><ul><li>It’s expected that you’ll sacrifice your personal life and health for this career - not for the faint of heart </li></ul><ul><ul><li>3 meals/day in front of the computer </li></ul></ul><ul><ul><li>Very common to be forced to cancel vacations and miss holidays/birthdays when needs arise </li></ul></ul>Investment Banking Overview - Job Details
  12. 12. <ul><li>Ouch! Why would anyone want a job like that? </li></ul><ul><li>Great experience, unparalleled industry and market knowledge: 3 years of experience @ 80 hours/week = 6 years of full-time knowledge </li></ul><ul><li>Interaction with senior management from a variety of firms/industries </li></ul><ul><li>Feeling of doing something noteworthy: your work “makes the papers” </li></ul><ul><li>Experience looks great on the resume, opens doors to more humane jobs </li></ul>Investment Banking Overview - Job Details * Estimates, as compensation varies drastically amongst firms, groups, cities, and throughout business cycles. <ul><li>Show me the money!! </li></ul><ul><ul><li>Entry-level analysts are currently starting at $55K/year base with annual bonuses approaching $30K in most of the larger banks* </li></ul></ul>
  13. 13. Getting Inside: The Front Door <ul><li>OK, I’m interested…how do I become a candidate? </li></ul><ul><li>On-campus recruiting is the most direct way to get into an IB analyst program </li></ul><ul><li>Most banks recruit analysts exclusively from ivy league colleges and select masters programs </li></ul><ul><ul><li>Usually only one recruiting drive per year with very limited intake (recruit in the fall for summer start dates) </li></ul></ul><ul><ul><li>Despite popular belief, “walk-ins” will get you nowhere </li></ul></ul><ul><li>Unless you’re exceptional or have a connection in the business, getting in from ASU will be extremely difficult </li></ul><ul><li>JPMC only recruits for retail positions here, but even those recruiting efforts are currently on hold pending merger integration </li></ul>
  14. 14. <ul><li>So what should I do? </li></ul><ul><li>Try other financial institutions that recruit here </li></ul><ul><ul><li>Prove yourself on the retail side and then maneuver internally </li></ul></ul><ul><li>Consider moving to a banking city and utilizing local resources </li></ul><ul><li>Focus on positions you’re actually qualified for rather than flooding the HR department with resumes </li></ul><ul><li>Patience and persistence will usually pay off… </li></ul><ul><li>…or you may need to try one of the back doors </li></ul>Getting Inside: The Front Door
  15. 15. <ul><li>None of the i-banks recruit here…where do I go? </li></ul><ul><li>Try the smaller institutions and the less-competitive business cities (see appendices) </li></ul><ul><li>Non-IB groups supporting investment banking: </li></ul><ul><ul><li>I-banks also need people for the less “sexy” groups, like trust & custody, IT, credit, and administration </li></ul></ul><ul><ul><li>These groups are less competitive and usually take applicants from beyond the campus recruiting channel </li></ul></ul><ul><li>Transfer in from the retail side of a large bank: </li></ul><ul><ul><li>Captive finance companies, like mortgage, auto finance, and credit card </li></ul></ul><ul><ul><li>Support functions like risk management or treasury /accounting </li></ul></ul>Getting Inside: The Back Doors
  16. 16. <ul><li>Non-bank financial institutions: </li></ul><ul><ul><li>Similar experience/compensation can be gained at large non-bank financial institutions like AIG, G.E. Financial, Transamerica, MBIA, and others </li></ul></ul><ul><ul><li>Key industries like insurance & reinsurance, asset management, and leasing, which also offer a deal atmosphere and high finance experience while being more approachable than the bulge bracket banks </li></ul></ul><ul><li>The financial information industry: </li></ul><ul><ul><li>Banks rely on several outside providers for much of their analysis and information, like Moody’s, S&P, Fitch, Reuters, Factset, Disclosure, KMV, and others </li></ul></ul><ul><li>Performing well in any of these positions can open doors to i-banking, or these fields are great careers on their own </li></ul>Getting Inside: The Back Doors
  17. 17. <ul><li>Headhunters: </li></ul><ul><ul><li>Many recruiting firms specialize in banking and related functions, although headhunters usually concentrate on experienced hires rather than fresh graduates </li></ul></ul><ul><li>Career websites: </li></ul><ul><ul><li>Most are dead ends, although acquaintances have had partial success with specialty sites like Glocap and Jobsinthemoney </li></ul></ul><ul><ul><li>Also usually focus on experienced people rather than new grads </li></ul></ul><ul><li>As a last resort, you may have to go with “Plan B” and try getting in after grad school </li></ul><ul><ul><li>2+ years of solid business experience combined with an MBA from a well-known school is a nearly surefire way to get in as an associate </li></ul></ul>Getting Inside: The Back Doors
  18. 18. <ul><li>Usually interviews are held over 1-2 full days and include evening events (dinner/drinks) to test social acumen and fit </li></ul><ul><li>Expect between 4 to 8 hours of interviews with a wide gamut of people (from analysts up through MDs) </li></ul><ul><li>Interviewers take carte blanche with questions: ranging from the standard technical stuff into complete obscurity </li></ul><ul><li>If you get an interview: </li></ul><ul><ul><li>BE PREPARED - they will try to stump you to see how you think on your feet </li></ul></ul><ul><ul><li>Be confident, but not arrogant; tenacious, but not annoying </li></ul></ul><ul><ul><li>Convey your eagerness to learn and desire to work hard </li></ul></ul><ul><ul><li>NEVER try to BS your way through a question you can’t answer </li></ul></ul><ul><ul><li>Try to seem like the kind of person they could be around 12-15 hours a day; adopt the corporate culture they project </li></ul></ul>Getting Inside: The Interview
  19. 19. The Investment Banking Experience: Fact vs. Fiction <ul><li>Forget most of the infotainment you’ve seen on TV: </li></ul><ul><li>No appletinis on the yacht – try dinner out of a paper box in front of your computer...6 nights/week </li></ul><ul><li>No jetsetting – technology & cost-consciousness beget minimal travel </li></ul><ul><li>No VIP parties – minimal interaction with clients until the Vice President level </li></ul><ul><li>Yes, the hours are just as bad as you’ve heard…but the compensation is just as high as you’ve heard, too </li></ul><ul><li>You don’t have to be a genius to be a good i-banker… </li></ul><ul><ul><li>But you do have to be willing to work harder and sacrifice more than the average person </li></ul></ul><ul><ul><li>Being a technical whiz helps, but due to the hours involved, personality is also a factor </li></ul></ul><ul><li>Like anything else in life, the right connections can provide necessary leverage </li></ul>
  20. 20. Notable Experiences <ul><li>Longest shift worked: From 9AM on a Wednesday morning until 7PM on Thursday (34 hours) </li></ul><ul><li>Longest continuous conference call: From 9AM on a Saturday morning until 7PM on Sunday night </li></ul><ul><li>Best cancellation: no-showing to the 2002 CFA Level 3 exam because I was working </li></ul><ul><li>Notable meetings: meeting the senior management teams (CEO and/or CFO + others) of Del Monte, Heinz, HomeSide Lending, Oaktree Capital, H&R Block, and assorted others </li></ul><ul><li>Farthest traveled on business: 7th Avenue (about 4 blocks) </li></ul><ul><li>Best feeling: paying off all my student loans after only 18 months of working </li></ul><ul><li>Most bittersweet feeling: buying your life back requires a 30% pay cut </li></ul>
  21. 21. Summary <ul><li>Investment banking is an intense, life-absorbing career path that’s not for everyone </li></ul><ul><li>However, you can and will become wealthy in the business provided you can last </li></ul><ul><li>The potential rewards attract the brightest and most competitive individuals from the strongest backgrounds, so getting in is difficult </li></ul><ul><ul><li>Utilize all available methods, especially the overlooked back doors </li></ul></ul><ul><ul><li>Be willing to make certain sacrifices (moving, initially working the imperfect job, etc.) </li></ul></ul><ul><li>Bottom line: despite some unpleasant experiences, it’s definitely worth doing if you get the chance, even if only for a few years </li></ul>
  22. 22. Conclusion <ul><li>Do some soul searching first and decide if this is something that fits you: </li></ul><ul><ul><li>Work/life balance </li></ul></ul><ul><ul><li>Limited geography </li></ul></ul><ul><ul><li>Family vs. career </li></ul></ul><ul><li>If you really want it, patience and persistance almost always pay off…. </li></ul><ul><li>But even if they don’t, realize that it’s a big world full of opportunities, and life will go on even if you don’t land that Wall Street job! </li></ul>
  23. 23. Appendix: What can I do now? <ul><li>A solid internship with a known firm adds substance to your resume and may result in an offer </li></ul><ul><li>Accreditations/licenses help open doors </li></ul><ul><ul><li>Consider starting the CFA charter, sitting for the CPA license, or, if possible, the Series 7 & 63 </li></ul></ul><ul><li>Reach out to ASU alumni in the business; they were in your shoes and will usually help if they can </li></ul><ul><li>Leverage any and all personal connections you may have (associations like the FMA, honor societies, fraternities/sororities, family friends, etc.) </li></ul><ul><li>There are no shy i-bankers - call people, ask to meet them, ask for their advice and if they have any contacts </li></ul><ul><li>Be willing to jump on a plane to interview and/or relocate – HR/Recruiters usually won’t take you seriously unless you’re on location </li></ul><ul><ul><li>Experienced NYU grads are already there looking for work </li></ul></ul>
  24. 24. Appendix: The Bulge Bracket <ul><li>The traditional investment banks include Goldman Sachs, Merrill Lynch, Morgan Stanley, J.P. Morgan, Bear Stearns, and Lehman Brothers </li></ul><ul><li>Large commercial players like Citibank and Bank of America are also putting their balance sheets in play </li></ul><ul><li>Equity, mergers & acquisitions: Goldman Sachs, Merrill Lynch </li></ul><ul><li>Syndicated lending/financing: JPMorgan, Citibank-SSB, Bank of America </li></ul><ul><li>Bonds/Leveraged Finance: CSFB, Citibank-SSB, Lehman Brothers, Morgan Stanley, JPMorgan </li></ul><ul><li>Trading/Research: Bear Stearns, Morgan Stanley </li></ul><ul><li>One-stop shops: JPMorgan Chase, Bank of America, Morgan Stanley, CSFB, Deutsche Bank, UBS Warburg </li></ul><ul><li>There are also a decreasing amount of “boutiques,” or small firms that specialize in one industry, region, or product </li></ul><ul><ul><li>Most boutiques focus on either research, restructuring, or M&A, and hire only people experienced in larger firms </li></ul></ul>
  25. 25. Appendix: Other Key Players <ul><li>American super-regionals: Wachovia, Comerica, Union Bank of California, Mellon Bank, Key Bank, Wells Fargo, SunTrust, StateStreet, Fifth Third, Northern Trust, PNC, Bank of New York </li></ul><ul><li>The Canadians: Scotia Capital, CIBC, Toronto Dominion, Royal Bank of Canada, Bank of Montreal / Harris </li></ul><ul><li>European players: Lloyds TSB, Barclays, WestLB, NordLB, Banco Santander, HypoVereinsbank, Nordea, Svenska Handelsbanken, Allied Irish, Royal Bank of Scotland, HBOS, BNP Paribas, Credit Lyonnais, ABN Amro, Societe Generale, Credit Agricole, Danske Bank, Den Norske Bank, Standard Chartered, Natexis Banques, HSBC </li></ul><ul><li>Japanese players: Bank of Tokyo-Mitsubishi, Mizuho Group, Sumitomo, Mitsubishi Trust, Norinchukin, UFJ </li></ul><ul><li>From down under: National Australia Bank, ANZ Banking Group, Westpac, Commonwealth </li></ul><ul><li>And assorted others… </li></ul>
  26. 26. Appendix: Other Banking Centers <ul><li>New York City: Definitely the financial nucleus, but with intense competition and the highest professional unemployment </li></ul><ul><li>San Francisco: people will do anything to stay, as competitive as NYC </li></ul><ul><li>Boston & Denver: Large cluster of asset managers are located here </li></ul><ul><li>Midwest: Chicago, Cleveland/Cincinnati, and Detroit are all large banking centers </li></ul><ul><ul><li>Rust belt: Remaining heavy industry supported by banks in Pittsburgh, Philadelphia, and Baltimore </li></ul></ul><ul><li>Texas: State industries supported mostly out of Dallas/Ft. Worth and Houston </li></ul><ul><li>Southeast: Banking presence in Atlanta, Tampa, Orlando, and Miami </li></ul><ul><li>Los Angeles: most large banks have offices here </li></ul>
  27. 27. Questions? Chris Hunkins, Vice President Global Offshoring Group (480) 902-6199 [email_address] Sebastian Szendzielorz, Assistant Treasurer Chase Financial Management (480) 902-6749 [email_address] For additional information, visit our Career Website at: http://careers.jpmorganchase.com/ or contact us directly:

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