Investment Banking in Germany

As a candidate for investment banking, Germany is always a good bet because in Germany, you will get almost similar pay as in London, and at the same time, you would be able to save a lot. Therefore, Germany is for people who would like to grow in investment banking without any craziness of the finance world/colleagues.

However, not all investment banks in Germany are good paymasters. Therefore, you need to choose a bulge bracket investment bank to take full advantage of Germany's market and get hands-on experience as an investment banking intern.

In Germany, one particular thing is different from the rest of the world. In Germany, there's nothing that is called investment banks. Instead, banks act as both commercial and investment banks.

Thus, in Germany, investment banking and commercial banking co-exist. However, some particular services are provided by German banks to be called investment banking service providers. All of these services are related to the capital market.

In Germany, the legal term "finanzdienstleistungen institute" mentions German investment banks. Please have a look at the services to get a good idea about how the investment banking wing of German banks is wowing their customers.

First, let's look at the activities of investment banking in Germany and then we will explain each of them –

source: zew.de

As we can see, investment banking in Germany can be divided into two major activities – first, the activity of financial intermediation, and another is proprietary trading. Additionally, whole activities are based on their research and strategy.

Let’s look at each broad category in detail.

Financial Intermediation

This is the only similarity between investment banking and commercial banking – they both act as financial intermediaries, but the scope and services offered are completely different.

Under financial intermediation activity, there are three sub-categories – financial advisory, primary market, and secondary market.

• Financial Advisory: Under financial advisory, German investment banks mainly provide M&A advisory services where companies have similar intentions to create synergies in M&A. Other than mergers and acquisitions, investment banking in Germany also provides equity capital markets advisory and debt capital markets advisory and show their clients about how to go for equity, bonds, and structured products. Other than these main two, they also provide a gamut of services, including syndicated loans, , risk management advisory, a financial advisory in venture capital and private equity, and rating advisory.
• Primary Market: In the primary market, investment banks provide a boutique of services. These include assistance in IPOs (IPOs can be public or private, and they can also be an initial or secondary issuance of equity), debt issuance, aftermarket activities, construction of indices, securitized products, certificates, derivatives, & hybrid services.
• Secondary Market: Regarding the secondary market, investment banks provide both products and services offerings. In products, they offer spot derivatives, certificate indices on foreign exchange, money market, bonds, equity, etc. They offer dealer activities, brokerage, and market maker activities in services.

Proprietary Trading

Proprietary Trading is another wing of investment banking of German banks. Under this, German investment banks provide two types of trading services – first, trading in the own names of banks; and second, providing trading advisory services. And they also provide products which are traded in the secondary market.

These services may vary depending on the AUM of the banks and the types of clients they serve.

Leaders League surveyed Germany's top investment banks (based on telecommunication, media, and technology) in 2017. They have found out a few investment banks which they have divided under "leading," "excellent," and "highly recommended" ratings.

Let's have a look at the names of the top investment banks under these ratings –

Leading:

According to Leaders League, "leading" investment banks are the topmost performers of 2017 in telecommunication, media, and technology advisory. These names are –

• Crédit Suisse
• EY
• Oakley Advisory

Excellent:

After the "leading" investment banks, there are few banks that come under the "excellent" category by performance –

• BNP Paribas
• M&A International
• Morgan Stanley

Highly recommended:

After "leading" and "excellent" ratings, there are investment banks that come under "highly recommended" by Leaders League in terms of performance in TMT –

• Cf-Mittelstand
• Deutsche Bank
• Nomura Holdings

If you’re planning to get a job in investment banking, try to get recruited or get internships in these investment banks. These are the top-notch investment banks of Germany, and these will push your career to its next level.

The recruitment process in investment banking in Germany is just like London, with few exceptions. Let's have a look at the recruitment process of investment banking candidates in Germany –

The Pool of candidates:

In Germany, the candidates are primarily from business administration or finance. Rarely do people from other backgrounds apply for investment banking. That's why these candidates' technical background and knowledge are much better than the candidates in London. Thus, it has often been seen that people who are not getting shortlisted here end up applying to the investment banks of London.

Types of interviews:

In Germany, when people are interviewed for investment banking, interviews are tougher. There are two reasons for this. First, the technical aspects of the interviews are higher than the personality types of questions because the interviewers here need to know whether the candidates know the basics or not. The second reason for which the interview level is tougher is that instead of asking tough questions, interviewers ask many detailed questions. For example, instead of giving a candidate the  valuation of a company, they ask which valuation method will yield more benefits and which will generate lower returns.

Type of preparation:

As a candidate, you need to prepare thoroughly. As the technical aspect is much more here in proportion, you need to know what you're talking about during the interview. You can't escape just by scratching the surface and not knowing exactly what you utter. Thus, prepare well. Know your stuff. If you aren't confident about the fundamentals, go through them and hone your skills. Without in-depth technical knowledge, it's almost impossible to break into investment banking in Germany.

Application & Interview Process:

Let's now have a glance at the application and interview process –

• Off-cycle interview: Off-cycle interviews continue throughout the year, which makes things easy for candidates to apply and get recruited as interns/ full-time employees.
• Application process: In Germany, in investment banking, you will get shortlisted by online submission. Suppose you want to apply for a position (intern/full-time employee) in an investment bank in Germany. In that case, all you need to do is go through the online application's competency questions (usually math and logic tests). Then, the VP of the bank would shortlist your candidature depending on your experience, grades, and technical background.
• Interviews with interns: Usually, four interviews are taken to hire the interns. In Germany, investment banks hire up to three interns at one time. The first two rounds would be with analysts. If you go through the first two rounds, you will be sitting with an associate. If you clear that round, the last round would be with the VP.
• Interviews for full-time positions: The interview process is similar to in London for full-time employees. As a candidate for full-time, you need to go through an additional round or two than interns to get selected. You will be going through a usual 1-1 round of interviews until the MD level; there will be an assessment center to judge your knowledge and skills, plus you need to make case presentations.

Networking:

Unlike many other places in Germany, networking isn't an effective tool. But if it can be done, it would create better results within a short period. Here's why –

• First, in investment banking in Germany, the team is much smaller. So an individual banker has more influence on who would get interviewed and who would get hired.
• Second, very few people network in Germany. So networking is still new, and you can tap into networking immediately to get an edge over others.

Language:

For investment banking in Germany, you must know German. Knowing German would help you network better. Usually, 99% of meetings and presentations are done in English; so in that case, you don't need to know German. But, knowing German would benefit you as a candidate.

In Germany, things are much different than other locations like New York and London. In Germany, the team members are much less in an office. In a full office, only 30 people work. As a result, everyone knows each other. And the behavior and culture are very professional. No one screams at each other. People love to work and step up whenever required.

In smaller offices like this, it's easy to shine as well. As an entry-level employee, you can enter any MD's office and ask them questions if you have any. Plus, as the team is smaller, you can contribute to any deal as an individual, and your position will not act as a hindrance in the path of your contribution (if you know what you're doing in the first place).

Moreover, you would get client exposure much earlier in your career. For example, in investment banking in Germany, you would get significant client exposure just after getting recruited, which is not the case in New York or London.

Even the culture overall is very relaxed. As a result, people can concentrate on work and maintain a healthy work-personal-emotional balance.

Also, have a look at Investment Bankers Lifestyle

According to eFinancialCareers.com, Germany's investment banks pay much less than the London-based investment banks.

As per the report of eFinancialCareers.com, the average salary paid by Deka Banks is $127,000 per annum. In comparison, London-based Jupiter Asset Management paid around $251,000 per annum.

Not only DekaBank, Munich-based investment banking wing, HypoVereinsbank is also a poor payer regarding compensation. It pays an average of $232,000 per annum. In contrast, Goldman Sachs pays a lot more, around $399,000 per annum. And Jefferies pays around $466,000 per annum on average.

The main reason behind this is in London. The bonus is much higher than in Germany. In Investment Banking in Germany, the amount of bonus is less. But if you live in Frankfurt, you would save a lot of money upfront.

In New York, people work for 2-3 years in investment banking and then quit to join something else.

However, in Investment Banking in Germany, things are much different. Most of the candidates here come into investment banking for the long term. Rarely do they opt for exit options.

But as there is always an exception for everything, in Germany, few investment bankers also choose to stay in an investment bank for a few years and then move away to find a better career prospect.

Usually, three exit opportunities are most common here.

• The first is private equity. Since many firms are located in Munich and Frankfurt, people don't worry about getting placed. They quit investment banking and try to get into private equity and mostly into top-notch companies like Blackstone, BC Partners, etc.
• The second is corporate development careers. Many investment bankers opt for this profile.
• The third common option is working as a strategic partner in any corporate firm.

German isn’t a bad place to build your career in investment banking. Yes, the pay is lesser, but the learning curve is much better than London and New York since the main emphasis is on the technical aspect in an interview.

If you can build your technical skill at the beginning of your career, it will surely pay a dividend in the long run in your career.

This has been a guide to investment banking in Germany, their services, recruitment process, culture, top investment banks in Germany, salaries, and exit opportunities. You may also look at the following article to learn more about Investment Banking.

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