Who is an Investment Banking Analyst?

Responsibilities

source: indeed.co.uk

The key responsibilities of an investment banking analyst include the following: –

  • Provide valuation analysis, including discounted cash flows, relative valuations, asset valuations, comparable compsComparable CompsComparable comps are nothing but identifying relative valuations like an expert to find the firm’s fair value. The comparable comp process starts with identifying the comparable companies, then selecting the right valuation tools, and finally preparing a table that can provide easy inferences about the fair valuation of the industry and the company.read more,  and transaction multiple.Transaction Multiple.Transaction multiples or Acquisition Multiple is a method where we look at the past Merger & Acquisition transactions and value a comparable company using precedents. The method assumes that a company’s value can be estimated by analyzing the price paid by the acquirer company’s incomparable acquisitions.read more.Prepare pitchbook for client meetings, including M&A and LBO pitchbook.Prepare financial models and perform financial analysis of companies relatively quickly.Assist the investment banking associate with the coverage initiatives.Monitoring the industry for current events, valuations, and important financial informationFinancial InformationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity etc.read more.To mentor and supervise the junior analysts.Coordinate with clients for financial data and analysis.Travel for client meetings and industry research.

Skills

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#1 – Financial Modeling

An investment banking analyst helps in developing a financial model from scratch. The economic model has three general objectives that should be in someone’s back of mind before starting writing any Excel formulas or developing any assumptions. These are: –

  • Coming up with an expected value Expected ValueExpected value refers to the anticipation of an investment’s for a future period considering the various probabilities. It is evaluated as the product of probability distribution and outcomes.read more.Assessing the risk of the investment.Developing financial structureFinancial StructureThe financial structure refers to the sources of capital and the proportion of financing that comes from short term liabilities, short term debt, long term debt, and equity to fund the company’s long term and short term working capital requirements.read more.

Effective risk assessment is the centerpiece of valuation and the fundamental reason for creating any financial model.

#2 – Project Financing

Project financing is to finance a project. The lenders provide money to the developers to develop a project by looking into the specific project’s risks and future cash flows.

The raising of on a limited-recourse or non-recourse basis to finance an economically separable capital investment projects in which the fund providers look primarily to the cash flow from the project as the source of funds to service their loans. In addition, provide the return of and a return on their equity investment in the project.

#3 – Merger and Acquisition

An investment banking analyst would help the company in the process of decision-making during the process of merger and acquisition by analyzing the facts: –

  • Know what you are buying – this often occurs within industries or with a target that can leverage an existing business.The buyer is acquiring from a position of strength, not weakness. Strength can be defined as performance, management expertise, systems, culture, market leadership, etc.The worst deals occur in “hot” M&A markets or competitive bid situations (overpayment.A discipline of cash vs. stock.

#4 – Leveraged Buyout (LBO)

Investment bankers are expected to be great at LBO modeling.

Steps to create an LBO model: –

  • Analyze the market value of a company.Deter the equity return through IRR calculation.Determine the cash flow of the company.Determine the debt service limitation of a company.Analyze the risk for the financial buyer.

#5 – Financial Statement Analysis

As an investment banking analyst, one should have the technical skills to analyze the financial statement. The financial statement analysis includes: –

  • Net operating cash flowFinancing expenditureDiscretionary expenditureExternal financingExternal FinancingAn external source of finance is the one where the finance comes from outside the organization and is generally bifurcated into different categories where first is long-term, being shares, debentures, grants, bank loans; second is short term, being leasing, hire purchase; and the short-term, including bank overdraft, debt factoring.read moreNet movements in cashShort-term debtDividend payableDividend PayableDividend payable is that portion of accumulated profits that is declared to be paid as dividend by the company’s board of directors. Until the dividend declared is paid to the concerned shareholders, the amount is recorded as a dividend payable in the head current liability.read moreTax paidBank debtEquity structureDepreciationInterest rate

Qualifications

The qualifications of an investment banking analyst are rigorous. It would help if you had most of the skills listed below: –

  • Strong analytical skillsExcellent in verbal and written communicationProficiency in PowerPoint Excel, Advanced Excel & VBA skillsBachelor’s degree in finance or accounting is preferableAbility to work under extreme pressure and tight deadlines.Passed CFA ExamsCFA ExamsThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. read more (or at least cleared CFA Level 1).

This article is a guide for Investment Banking Analyst. Here we discuss the role of investment banking analyst, responsibilities, skills, and qualifications. You can also have a look at these articles below to learn more about investment banking: –

  • Top Investment Banks in New YorkInvestment Banking Interview Q&AGet Into Investment BankingInvestment Banking ResourcesInvestment Banking Case Studies