Introduction to investment banking

Introduction to Investment BankingGUTIC Board

17th October 2013

Contents

• Introduction to investment banking• Financial news update• Intern’s story at UBS.

Introduction to Investment Banking

Yassine Essadiq

• Financial institutions assist: Individuals, corporations, and government.

• Raising capital by issuing securities.• Assist companies involved in mergers and acquisitions.• Provide ancillary services: market making, trading of

derivatives, and equity securities.

Introduction to Investment BankingWhat is investment banking?

• Front Office: - Investment Banking - Sales and Trading - Research• Front Office/Middle Office: - Risk Management• Middle office: - Treasury management, and internal control.• Back Office: - Operations - Technology - Other businesses

Introduction to Investment BankingWhat is investment banking?

• Investment banking: Industry coverage:

- Healthcare, public finance ( government), industrials . - Maintain corporate relationships with corporations.

Products coverage: - Mergers and Acquisitions. - Leveraged finance, asset finance and leasing.

Introduction to Investment BankingFront Office:

• Sales and Trading: Traders buy and sell financial products with the goal of

making money. Sales calls high-net-worth investors to suggest trading

ideas. Then they transfer orders to the traders. Structuring: create new complex financial products such as

derivatives. Strategist advise external and internal clients on the

strategies that can be adopted into a various market.

Introduction to Investment BankingFront Office

• Research: Reviews about companies with “buy” or “sell” ratings. Sell-Side and Buy-Side analysts which cover various

industries. Give advices to outside clients. Resources used by traders and sales.

Introduction to Investment BankingFront Office

• Risk Management: Analyze the market and credit risk. Taken into consideration on their balance sheet. Focus on bonds, restructuring and leveraged finance. Reviews of sales and trading activities Provide hedge funds solutions to portfolio managers.

Introduction to Investment BankingFront Office/Middle office

• Corporate treasury Investment bank’s funding Capital structure management Liquidity risk monitoring.

• Financial control Analyze capital flows of the division Controlling the firm’s global risk exposure and profitability.

Introduction to Investment BankingMiddle office

• Operations: Data checking trades that have been conducted. Ensuring that they are not erroneous Transacting the required transfers

• Technology: Creation of in-house software by Technology

team. Technical support for the firm. Trades are electronically made.

Introduction to Investment BankingBack office

• Global Transaction Banking: Provides cash management, custody services, lending

and securities brokerage. Investment management: management of various

securities and other assets. Private wealth management and private client services.

• Merchant banking: Provide to startups firms possibility of offering private

equities to investors.

Introduction to Investment Banking Back office

Financial News Investment Banking Edition

Osborne Welcomes China Chancellor Osborne strikes

groundbreaking deal to allow Chinese banks to open UK branches in London

"The deal will make London the first overseas territory from which investment can be made directly into China. Investors will have the right to buy up to RNB80bn (£8bn) of stocks, bonds and money market instruments. Currently all deals must be routed through Hong Kong." (Aldrick 2013)

Tuesday, yuan rose to 6.1007/USD, likely to continue rise as trading expands

More liquidity and higher yields available in onshore markets vs Hong Kong (Bloomberg 2013)

• Sources:• http://www.bloomberg.com/news/2013-10-15/chin

a-u-k-agree-on-yuan-pound-direct-trading-investment-quota.html

• http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10381311/Osborne-aims-to-make-London-renminbi-hub.html

Woodford Leaves Invesco• Sources • http://www.ft.com/cms/s/0/405f7ed6-35a0-11e3-b

539-00144feab7de.html#axzz2hw2BEpoE• http://www.telegraph.co.uk/finance/personalfinanc

e/investing/10380415/Neil-Woodford-leaves-Invesco-sell-Invesco-Perpetual-Income-and-High-Income.html

Famed British fund manager Neil Woodford will leave Invesco Perpetual

Woodford believes in a long term investment approach and will open his own fund management house after 6 months notice

Invesco shares dropped 5% and the outlook for the company is grim as customers are expected to follow Woodford out

Woodford currently has £33bn under management and one of the best return records

Tobacco and pharmaceutical stocks feature heavily in portfolio, including GlaxoSmithKline, AstraZenica, Roche and British American Tobacco

Advice: Watch his funds but don't panic! Investors will be waiting to see how things are sorted out over the next 6 months – 1 year

Moody's to Downgrade South Africa

Ongoing labor disputes continue to stifle growth

BMW has canceled expansion plans, other companies likely to follow

South Africa's sovereign up 84 basis points, over triple similarly rated countries

Current rating is Baa1, 3rd lowest grade on par with Russia and Thailand

• Source: http://www.bloomberg.com/news/2013-10-16/moody-s-flags-downgrade-risk-on-bmw-retreat-south-africa-credit.html

The Banks

Citigroup, 3rd biggest US bank, missed profit estimates

RHB will expand into the Philippines, expects impressive growth

Bank of Montreal appoints new COO

JPMorgan Chase & Co continues to face fines and decline over

investigations, has set aside $23 billion in reserves

US Ends Shutdown

US passed law to temporarily fund government and raise debt ceiling through January

World markets and USD rally on news Shutdown cost US economy $24 billion Considered loss for Tea Party, Republicans Fed will not Taper anytime soon, expect continued market

gains in short term

Brian McCarthyUBS Summer Internship

Contents

1. UBS Overview2. Application process3. How we were prepared4. Typical day5. How HR assessed us6. Questions

Basic Overview

• Largest bank in Switzerland; one of the 10 largest banks in the world

• Over 150 years old• 50 offices and over 60,000 employees across

the world• Big global player in wealth management and

investment banking. (Also does retail banking in Switzerland.)

Recent history

• Huge exposure to mortgage securities; heavy losses in financial crisis– Last year announced it would slim line its FICC

business– Share price has grown >50% since

• Rogue trader 2011: £1.5bn loss• LIBOR rigging: £75mn fine + significant

reputational loss

UK Business

• Based in the City, next to Liverpool Street Station

• Two distinct parts: the investment bank and UBS Global Asset Management

• Investment bank split in two:– ICS (Investor Client Services): Sales, trading,

research, operations, IT– CCS (Corporate Client Services): M&A, etc

Internship opportunities

• Spring insight week– One week over Easter – Available to first and second years– Ops, HR, IT, ICS & CCS

• Summer internship– Nine weeks over July & August– For third and fourth years– All areas

Application process

1. Online application2. Online numerical reasoning test3. Telephone interview4. Assessment Centre

Online application

• Basic personal details• Standard awkward questions: “Please

describe why you have chosen to apply to UBS?”

• CV• Useful resources:

TheGatewayOnline.comTargetJobs.co.uk/Employer-hubs/UBSWikiJob.co.uk

CV

• Needs work• Must be tailored to banking, and UBS in

particular• See the seven “core competencies” on their

website• Useful template available on website Mergers

and Inquisitions

Online numeracy test

• Invitation via email a few days after first stage• Practice, practice, practice:

SHL DirecteFinancialCareers student section

Telephone interview

• Called by HR a week in advance to arrange suitable time

• Composed of competency-based and commercial awareness questions

• Preparation essential

Assessment Centre

• Informed by email about 10 days in advance• Bank pays for your travel and hotel• 5-6 hour day consisting of:

– Another numeracy test – Company presentation– One-on-one interviews with Director from

relevant business area– Group discussion

AC Preparation

• Use online resources such as the Gateway, the Student Room and WikiJobs

• Prepare for competency questions • Make sure you’ve been following the news • Have a very convincing answer for why you

want to work in this role• Be able to explain what desk does

Pre-internship prep

• Contract• Background screening• Contact with other interns (clean up your

online presence!)• Online training• Recommended reading• Grad buddy

First week

• Introduction day with markets overview• Lots of networking events with other interns• Day two: markets & compliance training• Day three: “grad buddies” intro & excel

training• Day four: Introduction to Line Manager and

your desk• Day five: Shoreditch Games

My desk

• Operations: cash equities client support– First contact for clients if a trade breaks– Concentrated more on project

• Profile of other interns– All courses and wise variety of unis (from Oxford

to Salford…)– Of 23 Ops interns, 13 guys and 10 girls. More

male-centric in other departments

Average day

• 6.30-8.30 to 17.30-19.00 (varied a lot depending on desk)

• Project work• Shadowing• You have to ask for work!• Other: Mindallign, coffee, lunch, attire• Intern events (weekly class, networking, etc)

Assessment

• Weekly meeting with Line Manager• Mid-way progress report• Exit meeting• Find out if get grad scheme a month later

Questions?