26 difficult banking interview questions (and how to answer them)

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Kym Freedman
Kym Freedman
Team GradAustralia
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Upon graduating from your course, you will enter an ever-increasing competitive job market. With approximately 9,500 students graduating from Australian Universities each year in the finance disciplines and banking sector alone, standing out in the graduate job market is more important than ever.

Although resumes may be the first hurdle in landing your first job, interviews are what employers use to sort the ideal candidates from those who fall short.

So how do you prepare for an interview for a banking or investment banking job?

By preparing your answers to common, yet difficult, interview questions. This will ensure you enter the interview with the confidence and knowledge needed to be hired.

From personal questions, to the more technical questions about banking, here’s 26 difficult banking interview questions and how to answer them.

Personal and behavioural questions

Why do you want the job?  Why do you want to work for our company?

This is the most common question asked, and to answer it well you must thoroughly research the company prior to the interview. Research work that the company has done, their culture, and what distinguishes it from other firms. Decide what it is that interests you and what makes you want to work there. Be prepared to talk about specific examples. Even though banks can seem similar, being able to talk about why the firm is different and why it interests you will impress the interviewer. Alongside this, use examples of the skills you have to show them that you are suited for the position.

Why are you suitable for the job?

By asking this question, the employer is giving you the perfect chance to talk about your skills and qualities, and how they will make you the perfect candidate for the position. Prior to your interview, think of strong examples that highlight the qualities they are looking for, such as teamwork and analytical skills.

The employer may also be asking this question to see how much you know about the day to day operations of banking. For this reason, it is vital to research the role you are applying for, and show how your skills suit the various responsibilities of the role.

If this question is asked at the very end of the interview, it is the perfect opportunity for you to add any extra experience or qualities you haven’t yet mentioned.

If you could be head of our company for a day, what would you change?

This is another question that has the purpose of showing the interviewer how much you know about the company and its business model. If you’ve done your research, this question can be a great way for you to demonstrate your entrepreneurial qualities. The only rule is to keep your answer positive and inoffensive.

What is the most striking thing you’ve read recently in The Australian Financial Review?

It is important that you stay on top of all financial and business issues both around Australia and internationally. Read the AFR or other business news sources regularly and reflect on how recent happenings are relevant to the role you’re applying for.

Walk me through your resume

Questions about ‘your story’ are most likely to occur at the start of the interview. Your first few answers are the most important of all. According to The Australian Business Insider, ‘bankers often judge you 90% on what you say in the first few minutes.’

When it comes to talking about your resume, it’s important to highlight your greatest achievements, qualities and positions that are most relevant to the job at hand. Despite the fact that the interviewer has already read your resume, this gives you a chance to extend on and highlight your most relevant skills and experience.

What is your biggest weakness?

This question can arise in every job interview; so how exactly do you talk about your weaknesses whilst ensuring the interviewer knows you are perfect for the job? They key is to talk about a weakness and then talk about how you use your own initiative to solve it.

A great example of this would be: “My biggest weakness is public speaking as I am naturally introverted. However I am currently taking a class where I speak in front of a group weekly. This ensures that my public speaking skills will improve.”

Although this will inform the employer of your weaknesses, it will also show them that you are willing and motivated to improve yourself; two key characteristics that they will be looking for in their ideal candidate.

Despite some weaknesses being more of a problem than others, it's important to be honest and not invent a weakness that you think the interviewer will take lightly.

What is one concern you have about working in banking?

Much like the age-old ‘biggest weakness’ question, this one should be answered with caution. Try and take a concern you have about working in investment banking and following it up with a positive.

An example of this would be: “My biggest concern is about the work-life balance, as I like to spend as much time with my family as possible. This is why working for your company, who are based in Sydney, would be perfect for me”.

Describe the typical day of a banking analyst

This question may sound bizarre, but the employer is interested to know how much you know about the day to day duties of the job. Therefore, research is a must. Researching both the company itself and overall information about the job role should give you more insight into what would be expected of you if you were successful.

If you have undertaken internships during your degree, contact someone who was in a similar role at that firm and ask them to talk you through their typical day.

Don’t forget to check out the banking graduate job reviews at gradaustralia.com.au

Give me an example of where you’ve successfully used analytical skills

Before your interview, take a minute to think of a strong example where you’ve successfully used analytical skills. As you have just completed your degree, you should be able to draw on examples from experiences with group assignments, individual assignments or work experience.

Give me an example of a time when you’ve worked successfully in a team

Much like the previous question, the employer is asking you to recall a specific example to highlight how well you work in a team. It’s important to use an example that is relevant or transferable to a banking environment.

Alongside this, impress the interviewer by highlighting how your teamwork example demonstrates your other key skills. For example, you could talk about empathising with team members or supporting those more reserved team members by asking them to express their ideas.

What motivates you?

For this question, it’s important to answer with something that isn’t one hundred percent easy or obvious. For example, everyone would be motivated by money or success.

Instead, show your potential employer how hard you like to work. State that you are motivated by challenge, or by competition. This will show them that you are motivated to work hard and will strive to get results.

Make your answer even stronger by stating an example of how a challenge motivated you. An example of this could be a challenge you faced during your degree, during employment or during an internship.

Where do you see yourself professionally in five/ten years?

By asking this question, your potential employer is seeing if you are interested in career advancements, more specifically so, with their company.

The biggest mistake that candidates make in their answer is to name a larger company or different company. Although you may have huge ambitions, ensure you are aiming for a high-flying job in the specific company you are applying for.

For this reason, it is essential to research the company’s structure. This way, you can tell the interviewer exactly how you would like your career to advance. As well as showing your passion for banking as a whole, this will also assure them that you are worth hiring, as you are looking for a long-term career rather than a quick stepping stone.

Technical questions

When it comes to the technical side of banking, you need to demonstrate your extensive and accurate knowledge to your potential employer. Here are some of the more technical questions that you may be asked in your interview.

How do you value a company?

This is one of the most common questions you will face. Although there is inevitably a wide range of answers you may give, it is recommended to talk about the three main ways to value a company: precedent transaction analysis, comparable company analysis and discounted cash flow (DCF) analysis.

By talking about these three methods, especially the pros and cons of each, you are sure to catch the attention of your prospective employer for all the right reasons.

What is a leveraged buyout?

It is possible that your employer will ask you for specific definitions of common banking terms and practices. For this reason, it is important that you know your definitions, and how the actual systems work.

Leverage buyout refers to the use of borrowed money or loans to buy or invest in another company. The ratio of debt to equity can be as high as 90-10.

Tell me ‘the Greeks’ and why they matter

As well as showing the employer your knowledge of ‘the Greeks’, this question also provides a basis on which to talk about complex terms such as option hedging.

Peter Harrison of ‘Harrison Careers’ suggests explaining why delta, gamma etc are so important. An appropriate answer would be something such as: “We know delta is important because we have to get our hedge right. But we also care a lot about gamma because we need to know how fast delta is changing. If gamma is high, I will worry and know I need to frequently readjust my hedge.” (Source: http://news.efinancialcareers.com/uk-en/careers-in-finance/221183/the-toughest-investment-banking-interview-questions-and-how-to-answer-them)

Explain how to use a discounted cash flow model

Learn the equations that underpin DCF analysis. Alongside this, it is important to highlight why you would use a discounted cash flow model. State the DCFs importance to value a company’s future cash flows taking into account the time value of money.

Tell me about specific stocks you like and why

Researching companies that you admire is critical for answering this question. During your research, take note of the latest stock trends, a bit about the company’s history and any comparable competing companies you can bring into your answer.

Find two or three companies and take note of stock you would buy and why. Is it because their financial situation is healthy? Perhaps they have a favourable competitive environment and high barriers to entry? Either way, ensure you know why you admire that specific stock and be prepared to pitch the stock to the interviewer.

What is the current price of gold?

Questions such as this, are the employer’s way of ensuring that you know the latest price of various commodities. Research the most recent prices just before your interview to show your potential employer that you keep up to date with commodity pricing.

What’s the difference between a yield and return rate on a bond?

This question asks for the definition of the terms in relation to each other. A yield on a bond is all about the future; it measures the income earnings of an investment, but it ignores capital gains. The return rate is more about total past earnings and refers to what the investor has already earned over a certain period of time.

Speaking of bonds, explain them to me

Although this question may seem quite simple, it is important to give an in-depth definition of bonds, whilst drawing on examples of investment bonds, government bonds and company bonds.

Bring in market indicator rates such as the Bank Bill Swap Rate and speak confidently about how market interest rates will effect bonds.

Tell me about the different kinds of bonds

Explain various kinds of bonds to the interviewer, drawing on the following definitions.

Firstly, a plain vanilla bond has a fixed maturity and expiry date, as well as when the principal is due and how much interest is paid at what intervals.

Secondly, a convertible bond provides the option to buy stock, this offsets the reason they might issue stock in the first place. A callable bond allows the issuer the option of redeeming the bond before its maturity date.

Explain a fixed interest investment

Fixed interest investments are long-term debt securities that promise a return of all investments at their maturity date, alongside regular coupon payments.

To really show your knowledge here, you could highlight the difference between the risk of fixed interest investments and equities.

What is the AUD/USD exchange rate? What do you think it will be in a year and why?

Once again, the interviewer is testing your knowledge of the current market. It is critical that you enter the interview knowing the current exchange rate of the world’s major currencies, including the American dollar, the Euro, the Japanese Yen and the Chinese Renminbi.

The second part of this question is a bit tougher, as it requires you to have extensive knowledge about the history of exchange rates and where you think they are headed. Do your research and form a valid argument based on facts that consider the current exchange rates, historical events and government changes that have led to significant decreases and increases.

What affects the health of a stock portfolio?

Answer this question by talking about how the health of a stock portfolio depends on its individual parts and the correlation between them. For example, investors can seek stocks that are negatively correlated in order to protect against volatility of the overall portfolio.