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Presentation to the ASU Financial Management Presentation to the ASU Financial Management AssociationAssociation: :

Investment Banking OverviewInvestment Banking Overview

Sebastian SzendzielorzSebastian Szendzielorz

Class of 1998Class of 1998

February 19February 19thth, 2004, 2004

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AgendaAgenda

Introduction A Dichotomy of Banking Investment Banking Overview

Job Details Getting Inside:

The Front Door The Back Doors The Interview

The Investment Banking Experience: Fact vs. Fiction Notable Experiences Summary & Conclusion Appendix Q&A

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IntroductionIntroduction

Background: ASU – BS Finance ’98, AGSIM – Global MBA ’00 2+ years with J.P. Morgan’s Syndicated & Leveraged Finance

Group in New York City Currently in Financial Management with Chase Cardmember

Services here in Tempe Goals of this presentation:

Help educate the audience about banking in general, and investment banking in particular

Inform interested parties about ways into the business, especially the overlooked “back doors”

Hopefully answer your questions and address any preconceived notions regarding the industry

Disclaimer

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A Dichotomy of BankingA Dichotomy of Banking

The banking industry can be divided in several ways, commonly beginning with wholesale vs. retail banking

Retail, or commercial banks, provide various services to individuals and families: Depository services such as checking and savings

accounts and CDs Financing in the form of credit cards, auto loans, student

loans, and home mortgages Less common services like currency exchange and

merchant banking Most individuals deal with commercial banks their whole lives These banks are well-known brands like Bank One, Wells

Fargo, Bank of America, and Citibank

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A Dichotomy of Banking A Dichotomy of Banking

Wholesale, or investment banks, provide similar but expanded services to corporate and institutional clients: Capital raising in the form of syndicated loans, public and

private issues of debt and equity, and various permutations of the above

Specialized services such as merger & acquisition and ratings advisory, industry and competitive analyses, and market-making in complex instruments

Sales, trading, and research of publicly traded issues and currencies

Lower transaction volumes, but on a larger scale; increased complexity begets higher returns

The average person has never heard of pure investment banks like Bear Stearns, Goldman Sachs, or Lazard

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Recent regulatory changes have blurred the distinction between retail and investment banks Amidst ongoing merger activity, today’s large banks are

posturing to be “one-stop shops” for their clients, offering a wide spectrum of services:

Retail: savings & checking, home, auto, and education finance, insurance, retirement planning and brokerage

Wholesale: Lending, acquisition advisory & finance, risk management, cash & pension management, capital markets, trust and custodial services, private equity, and sales/research/trading

Shifting focus from transactional models (making large, one-time fees) to relationship-driven models (recurring, long-term view of steady income)

A Dichotomy of Banking A Dichotomy of Banking

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Investment banks are divided by “Chinese Walls” between Investment banks are divided by “Chinese Walls” between the public and private sides:the public and private sides: The public side includes sales, trading, and research, The public side includes sales, trading, and research,

which [should] operate on only publicly available which [should] operate on only publicly available information such as SEC filings, financial statements, information such as SEC filings, financial statements, and press releasesand press releases

The private side includes advisory and structuring The private side includes advisory and structuring groups, which work directly with client companies’ groups, which work directly with client companies’ upper management and have access to insider upper management and have access to insider informationinformation


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The private side is further divided into product and industry elements: Product groups specialize in a certain service or instrument, such

as M&A, bonds, common and preferred stock, etc. – these groups run transactions

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

Lastly, the industry is broadly segmented into “buy side” and “sell side:” The sell side of banking includes any firm which structures

transactions or issues instruments 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


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Investment Banking Overview - Investment Banking Overview - Job DetailsJob Details 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

Vice Presidents are the next tier down; they oversee the everyday details of transactions and make sure deals go smoothly; 5+ years experience

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

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”

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So what do investment banking analysts do all day? Preparation of all documents and memos, from pitch books

that go to prospective clients to offering memoranda for potential investors

Building and running financial models that track transaction viability and predict possible outcomes

Updating all internal databases and systems (i.e. data entry, proof-reading)

General administrative chores like setting up conference calls, copying, filing, sending faxes, arranging deliveries, and most importantly…

Guaranteeing senior people never look stupid during calls or meetings – having all the answers

Investment Banking Overview - Investment Banking Overview - Job DetailsJob Details

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What kind of a lifestyle / work environment can I expect? 12-15 hour days, usually some weekend work as well Very high stress: constant pressure to perform, competitive

environment, and demanding superiors Multi-tasking: running with 6 projects at once, minimal tolerance for

errors Lots of menial grunt work and micromanagement before you’re trusted

to operate without oversight Meetings and conference calls throughout the day, catching up with

your real work after 5PM It’s expected that you’ll sacrifice your personal life and health for this

career - not for the faint of heart 3 meals/day in front of the computer Very common to be forced to cancel vacations and miss

holidays/birthdays when needs arise


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Ouch! Why would anyone want a job like that? Great experience, unparalleled industry and market

knowledge: 3 years of experience @ 80 hours/week = 6 years of full-time knowledge

Interaction with senior management from a variety of firms/industries

Feeling of doing something noteworthy: your work “makes the papers”

Experience looks great on the resume, opens doors to more humane jobs


* Estimates, as compensation varies drastically amongst firms, groups, cities, and throughout business cycles.

Show me the money!! Entry-level analysts are currently starting at $55K/year

base with annual bonuses approaching $30K in most of the larger banks*

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Getting Inside: The Front DoorGetting Inside: The Front Door

OK, I’m interested…how do I become a candidate? On-campus recruiting is the most direct way to get into an IB

analyst program Most banks recruit analysts exclusively from ivy league colleges

and select masters programs Usually only one recruiting drive per year with very limited

intake (recruit in the fall for summer start dates) Despite popular belief, “walk-ins” will get you nowhere

Unless you’re exceptional or have a connection in the business, getting in from ASU will be extremely difficult

JPMC only recruits for retail positions here, but even those recruiting efforts are currently on hold pending merger integration

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So what should I do? Try other financial institutions that recruit here

Prove yourself on the retail side and then maneuver internally

Consider moving to a banking city and utilizing local resources

Focus on positions you’re actually qualified for rather than flooding the HR department with resumes

Patience and persistence will usually pay off… …or you may need to try one of the back doors

Getting Inside: The Front DoorGetting Inside: The Front Door

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None of the i-banks recruit here…where do I go? Try the smaller institutions and the less-competitive business

cities (see appendices) Non-IB groups supporting investment banking:

I-banks also need people for the less “sexy” groups, like trust & custody, IT, credit, and administration

These groups are less competitive and usually take applicants from beyond the campus recruiting channel

Transfer in from the retail side of a large bank: Captive finance companies, like mortgage, auto finance,

and credit card Support functions like risk management or treasury

/accounting

Getting Inside: The Back DoorsGetting Inside: The Back Doors

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Non-bank financial institutions: Similar experience/compensation can be gained at large

non-bank financial institutions like AIG, G.E. Financial, Transamerica, MBIA, and others

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

The financial information industry: 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

Performing well in any of these positions can open doors to i-banking, or these fields are great careers on their own


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Headhunters: Many recruiting firms specialize in banking and related

functions, although headhunters usually concentrate on experienced hires rather than fresh graduates

Career websites: Most are dead ends, although acquaintances have had partial

success with specialty sites like Glocap and Jobsinthemoney Also usually focus on experienced people rather than new

grads As a last resort, you may have to go with “Plan B” and try getting

in after grad school 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


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Usually interviews are held over 1-2 full days and include evening events (dinner/drinks) to test social acumen and fit

Expect between 4 to 8 hours of interviews with a wide gamut of people (from analysts up through MDs)

Interviewers take carte blanche with questions: ranging from the standard technical stuff into complete obscurity

If you get an interview: BE PREPARED - they will try to stump you to see how you think on

your feet Be confident, but not arrogant; tenacious, but not annoying Convey your eagerness to learn and desire to work hard NEVER try to BS your way through a question you can’t answer Try to seem like the kind of person they could be around 12-15

hours a day; adopt the corporate culture they project

Getting Inside: The InterviewGetting Inside: The Interview

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The Investment Banking The Investment Banking Experience: Fact vs. FictionExperience: Fact vs. FictionForget most of the infotainment you’ve seen on TV:Forget most of the infotainment you’ve seen on TV: No appletinis on the yacht – try dinner out of a paper box in front No appletinis on the yacht – try dinner out of a paper box in front

of your computer...6 nights/weekof your computer...6 nights/week No jetsetting – technology & cost-consciousness beget minimal No jetsetting – technology & cost-consciousness beget minimal

traveltravel No VIP parties – minimal interaction with clients until the Vice No VIP parties – minimal interaction with clients until the Vice

President levelPresident level Yes, the hours are just as bad as you’ve heard…but the Yes, the hours are just as bad as you’ve heard…but the

compensation is just as high as you’ve heard, toocompensation is just as high as you’ve heard, too You don’t have to be a genius to be a good i-banker…You don’t have to be a genius to be a good i-banker…

But you do have to be willing to work harder and sacrifice But you do have to be willing to work harder and sacrifice more than the average personmore than the average person

Being a technical whiz helps, but due to the hours involved, Being a technical whiz helps, but due to the hours involved, personality is also a factor personality is also a factor

Like anything else in life, the right connections can provide Like anything else in life, the right connections can provide necessary leveragenecessary leverage

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Notable ExperiencesNotable Experiences

Longest shift worked: From 9AM on a Wednesday morning until 7PM on Thursday (34 hours)

Longest continuous conference call: From 9AM on a Saturday morning until 7PM on Sunday night

Best cancellation: no-showing to the 2002 CFA Level 3 exam because I was working

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

Farthest traveled on business: 7th Avenue (about 4 blocks) Best feeling: paying off all my student loans after only 18 months of

working Most bittersweet feeling: buying your life back requires a 30% pay cut

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SummarySummary

Investment banking is an intense, life-absorbing career path Investment banking is an intense, life-absorbing career path that’s not for everyonethat’s not for everyone

However, you However, you can and willcan and will become wealthy in the business become wealthy in the business provided you can lastprovided you can last

The potential rewards attract the brightest and most competitive The potential rewards attract the brightest and most competitive individuals from the strongest backgrounds, so getting in is individuals from the strongest backgrounds, so getting in is difficultdifficult Utilize all available methods, especially the overlooked back Utilize all available methods, especially the overlooked back

doorsdoors Be willing to make certain sacrifices (moving, initially working Be willing to make certain sacrifices (moving, initially working

the imperfect job, etc.)the imperfect job, etc.) Bottom line: despite some unpleasant experiences, it’s definitely Bottom line: despite some unpleasant experiences, it’s definitely

worth doing if you get the chance, even if only for a few yearsworth doing if you get the chance, even if only for a few years

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ConclusionConclusion

Do some soul searching first and decide if this is Do some soul searching first and decide if this is something that fits you:something that fits you: Work/life balanceWork/life balance Limited geographyLimited geography Family vs. careerFamily vs. career

If you really want it, patience and persistance almost If you really want it, patience and persistance almost always pay off….always pay off….

But even if they don’t, realize that it’s a big world full of 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 opportunities, and life will go on even if you don’t land that Wall Street job!Wall Street job!

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Appendix: What can I do now?Appendix: What can I do now?

A solid internship with a known firm adds substance to your resume and may result in an offer

Accreditations/licenses help open doors Consider starting the CFA charter, sitting for the CPA license, or, if

possible, the Series 7 & 63 Reach out to ASU alumni in the business; they were in your shoes and

will usually help if they can Leverage any and all personal connections you may have (associations

like the FMA, honor societies, fraternities/sororities, family friends, etc.) There are no shy i-bankers - call people, ask to meet them, ask for their

advice and if they have any contacts 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 Experienced NYU grads are already there looking for work

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Appendix: The Bulge BracketAppendix: The Bulge Bracket

The traditional investment banks include Goldman Sachs, Merrill Lynch, Morgan Stanley, J.P. Morgan, Bear Stearns, and Lehman Brothers

Large commercial players like Citibank and Bank of America are also putting their balance sheets in play

Equity, mergers & acquisitions: Goldman Sachs, Merrill Lynch Syndicated lending/financing: JPMorgan, Citibank-SSB, Bank of America Bonds/Leveraged Finance: CSFB, Citibank-SSB, Lehman Brothers,

Morgan Stanley, JPMorgan Trading/Research: Bear Stearns, Morgan Stanley One-stop shops: JPMorgan Chase, Bank of America, Morgan Stanley,

CSFB, Deutsche Bank, UBS Warburg There are also a decreasing amount of “boutiques,” or small firms that

specialize in one industry, region, or product Most boutiques focus on either research, restructuring, or M&A, and

hire only people experienced in larger firms

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Appendix: Other Key PlayersAppendix: Other Key Players

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

The Canadians: Scotia Capital, CIBC, Toronto Dominion, Royal Bank of Canada, Bank of Montreal / Harris

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

Japanese players: Bank of Tokyo-Mitsubishi, Mizuho Group, Sumitomo, Mitsubishi Trust, Norinchukin, UFJ

From down under: National Australia Bank, ANZ Banking Group, Westpac, Commonwealth

And assorted others…

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Appendix: Other Banking Centers Appendix: Other Banking Centers

New York City: Definitely the financial nucleus, but with intense competition and the highest professional unemployment

San Francisco: people will do anything to stay, as competitive as NYC

Boston & Denver: Large cluster of asset managers are located here Midwest: Chicago, Cleveland/Cincinnati, and Detroit are all large

banking centers Rust belt: Remaining heavy industry supported by banks in

Pittsburgh, Philadelphia, and Baltimore Texas: State industries supported mostly out of Dallas/Ft. Worth and

Houston Southeast: Banking presence in Atlanta, Tampa, Orlando, and Miami Los Angeles: most large banks have offices here

Questions?Questions?

Chris Hunkins, Vice PresidentChris Hunkins, Vice PresidentGlobal Offshoring GroupGlobal Offshoring Group(480) 902-6199(480) [email protected]

Sebastian Szendzielorz, Assistant TreasurerSebastian Szendzielorz, Assistant TreasurerChase Financial ManagementChase Financial Management(480) 902-6749(480) [email protected]

For additional information, visit our Career Website at:For additional information, visit our Career Website at:

http://careers.jpmorganchase.com/http://careers.jpmorganchase.com/or contact us directly:or contact us directly:

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