The second session of NHC Capital Markets Salon focused on Investment Banking and it was held on Thursday November 15, 2017. The speaker, Vincent Liu has 10-year working experience in capital markets, investment banking and private equity at BMO Capital Markets, Macquarie Capital and DIF.
At first, Vincent briefly introduced the history of the investment banking. It was worth mentioning that the Federal Reserve forced the investment banks and the commercial banks to merge after the 2008 financial crisis. (Since subprime mortgage melt down, the investment banks faced liquidity crisis.) As Vincent pointed out, the primary function of the investment bank is to assist the capital markets in the movement of financial resources from investors to issuers. The functions include financing, merge & acquisition advisory, sales & trading and equity research. In Canada, all the investment banks should have balance sheet support. The six major Canadian banks all have the investment banking division; however, each bank is the top in some specific sectors. For example, BMO is the top in metal and mining in Canada and even in the world. CIBC is one of the top M&A advisors in Canada.
Vincent also addressed the career path: starting as an analyst or associate, moving forwards to Vice President, Director and Managing Director. Investment banks hire 95% of analysts and associate straight out of school. Typically, analysts are undergraduates and associates are MBAs. The analysts and associates prepare pitch book. The Vice Presidents ensure the deals execute smoothly. The Directors and Managing Directors bring the deals in. Investment banking requires both solid technical skills, such as valuation and modelling, and soft skills such as communication and relationship management. Apparently, the higher level you are, the stronger communication skill you need. Even though the investment banking is a highly competitive environment partially due to the “up or out” policy, Vincent thought that the training gained from the investment banking was pretty valuable and led him to get into the private equity. But, there are several differences between these two. For one thing, investment banker focuses on closing the transactions, while private equity focuses on managing the risk in long term. For another, the life style is much better in private equity than in in investment banking.
When some attendees asked about the challenges that investment banks come across, Vincent stated that the investment banks have to adopt the new market environment whether the change is technological or sociological. For instance, Trump’s massive deregulation movement will be a positive development for investment banking.
For those who are interested in pursuing a career path in investment banking, NHC Capital Markets Salon offers you an effective platform to learn from and discuss with the industry leaders.