Actually it was a bit cheeky of me to put that question mark in the title. Of course it affects IIM Calcutta, a campus supposedly famous for being a “fin campus” and where undoubtedly a lot of people are interested in careers in Investment Banking in specific and finance in general.
But before I describe what people feel here at the moment – I’d like to give some background to people who might be on unfamiliar territory.
“Disclaimer: This article is currently under review and as such may have factual inaccuracies.”
What is Investment Banking? – Investment banking is different from normal banking in the sense that they deal with mostly commercial entities(other banks, companies and trusts) and high net-worth individuals (HNIs). There are a few banks which have commercial banking counterparts apart from Investment Banking divisions (like the Citigroup or HSBC) and there are the pure Investment banks like Goldman Sachs, Morgan Stanley and until recently, Lehman Brothers. Investment banking companies earn money offering a variety of standard and customised products to their clients. They manage risk for institutional investors (by various market-driven means) and they also make money for the bank and their clients (who they assure returns) by trading on a variety of markets (equity, currency, commodities, fixed income etc). This would roughly be called the “markets” side of Investment Banking. On the “IBD” side (Investment Banking Division) the banks mainly advise companies in Mergers and Acquisitions(M&A) where they help companies raise funds through various means (IPOs, Private Equity, private investors etc). Therefore there is the “buy” side which will deal with the people who have the money (Institutional investors, HNIs) and there is the “sell” side which will deal with people who need the money. The banks make money via commissions and through the “markets” division already described above.
What do IIM grads do at investment banks?
MBA grads form a major component of any I-Bank’s intake. Freshly recruited candidates work across all the different verticals described above. They might work on the trading desk, research divisions or sales on the market side. Their work depends in the kinds of roles they are performing – with trading being a high-intensity shorter-duration job, while research would typically involve longer hours and sales would mean a lot client interactions and presentations. On the IBD side, many new joinees work on making “Pitch Books” which a bank sends while bidding for a particular opening. A pitch book would detail the bank’s offer and the deal it is offering to a particular future client. There is also the “Structuring” team which works on the modalities of offering a particular deal and structuring the quote that you are about to offer. While Sales would prefer to quote high rates to an investor, those trading on the markets want to minimise their burden. The structuring team would work out a deal suitable to both. A lot of IIM grads also work as structurers making financial excel models.
What times are we living in?
I often get a sense that these few years will be recorded in the history of the century as major years which affected our generation. I can almost see a news paper in 2050 equating the late 2000s with the great depression of the late 1920s. As you might know already, Lehman Brothers, the third largest American investment bank has sunk. Merill Lynch is on the route to be acquired by Bank of America. And there are serious issues with the world’s largest insurer AIG. It’s awe-inspiring, even when viewed from such a distance that a 158 year old firm could vanish with debts to the tune of a staggering $600+ billion.
What effect?
Many people are confused, maybe even a bit apprehensive. A lot of our friends did work at Lehman which was a major recruiter especially at the IITs for the analyst level positions. They are most probably going to lose their jobs. There would be those who just joined after college (a couple of months back?) with no jobs. There are those who interned at LB in May-June and have offers from the company which now are highly uncertain. At least they have another chance come final placement season in March. And then there is our batch which will have its summers in November. The mood is in generally pretty OK, people believe that the market will always find enough high quality jobs for the most of us. Of course, there is no way for me to quantify or even accurately confirm these observations of mine, and you must live with the disclaimer that I might be viewing with coloured or indeed defective lenses.
In conclusion, life here goes on as normal, with maybe people working a bit harder towards their summer placements. Seniors try and get the first year students to work hard anyways, and this is one very persuasive reason they have – true or not that remains to be seen.
September 17th, 2008
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