Investment Banking in Europe and Asia: London vs. Frankfurt vs. Hong Kong

We’ve covered investment banking recruitment in different regions in previous articles, but there’s one problem with that topic: things change over time.

For example, I wrote many regional articles on this site pre-Brexit, pre-pandemic, and pre-“political tensions in Hong Kong.”

While those events do not directly affect interview questions, they do affect the recruiting process and the types of candidates in each region.

And then some trends affect all regions – for example, recruiting worldwide has become increasingly impersonal as banks use HireVue, online tests, and even headhunters to screen candidates.

To get an update on these trends, I recently spoke with a reader who has interviewed in Europe and Asia, completed internships in different cities, and plans to return to Asia for an investment banking internship:

Investment Banking in Europe: Who Applies, and Who Gets In?

Q: Can you tell us about your background and explain how you began recruiting for IB roles?

A: Sure. I’m originally from China, went to university in the U.K., and then moved to Germany to complete a Master’s degree.

I became interested in finance after I had some entrepreneurial experience in China and saw the importance of financing for tech startups.

When I was in Germany, I took a gap year to improve my German language abilities and move up to the “professional” level, and I completed a few off-cycle internships at the same time (in venture capital, private equity, and investment banking).

I’ve been recruiting for investment banking internships in Frankfurt, London, and Hong Kong, and I plan to work in Hong Kong full-time after graduation.

I’ve been a long-time reader of this site, so I wanted to share my experiences and help others going through interviews in these places.

Q: Great, thanks for volunteering.

Can you explain the types of candidates who can realistically win offers in these three cities?

A: In Hong Kong, you pretty much need to be a native Mandarin speaker to have a chance at investment banking.

They conduct many interviews 100% in Chinese, and they’ll give you translation tests as part of the process.

Occasionally, they’ll hire bankers with language skills for other countries in Asia (Japan, Korea, etc.), but these hires are rare as of 2020 since local offices in these countries tend to handle deals there.

London is much more international and diverse, and they expect that most candidates will come from outside the U.K.

There are no “language requirements,” but it helps a lot to know at least one other European language besides English.

Both Hong Kong and London look for similar qualities in candidates: high grades/test scores, brand-name universities, and previous internships.

In Frankfurt, far fewer candidates from outside Germany apply to IB roles, mostly because you need to know German to work there.

There’s very little diversity, and you’ll rarely see foreigners at major banks.

The irony is that many presentations are in English because so many deals are cross-border, so all bankers there know English.

However, they view German language ability as a requirement to prove that you “fit in.”

The language requirements in Hong Kong make more sense because many Chinese companies have no English speakers, so you need the language to interact with them.

There are also many fewer IB roles in Frankfurt than in London or HK, and when you apply there, you’ll be competing against a lot of business and finance students from Germany.

Q: OK, thanks for explaining that.

What about the work experience requirements? Do expectations differ in these regions?

A: The biggest difference is that in regions such as the U.K., Hong Kong, U.S., and Canada, they expect you to complete summer internships.

You don’t necessarily need a lot of summer internships to be competitive; one solid summer internship and a part-time or school-year one might be enough, especially if recruiting starts very early.

The recruiting timeline is more structured in these regions, and you apply a certain number of months or years before the summer internship begins.

In Germany, as in France and other continental European countries, off-cycle internships that last 3-6 months are more common.

Recruiting happens year-round, which is good in some ways (more chances for work experience) and bad in others (unrealistic expectations if you’re not from Germany).

Some students here complete 4-5 M&A internships before they start their full-time roles!

Resumes look more random, and bankers don’t necessarily care about why you did Internship A before Internship B.

Finally, there’s more of a work-experience hierarchy in Germany.

For example, if you have no previous internships, you normally have to intern in a Big 4 Transaction Services group (or something similar) first.

Then, you can move to a regional boutique, followed by an “In-Between-a-Bank” like BNP or Macquarie, and then an elite boutique or bulge bracket bank.

Investment Banking in Europe: The Process, Interviews, and Recent Trends

Q: OK, great. What about the process and timing in each region?

A: In both Hong Kong and London, internship applications might open over the summer (one year in advance) and close by the end of October.

Hong Kong sometimes starts and finishes a bit earlier; the recruiting timeline has moved up, but not to the same (crazy) extent it has in the U.S.

You have an advantage if you apply earlier in both places, but you may have slightly more of an advantage doing so in Hong Kong.

In both HK and London, you will start with online tests, move to a video interview via HireVue if you pass the tests, and then move onto the assessment center.

You’ve covered assessment centers in detail before, and not much has changed; you’ll still get a mix of individual interviews, group exercises, and exercises like in-tray/e-tray.

The process in Germany is quite different because it takes place year-round, and the industry is much smaller, which can make networking more useful.

People will remember you if you reach out and speak with them, and on-campus events are more useful for winning interviews.

It’s harder to network effectively in London because so many candidates from around the world apply, and standing out in information sessions – or, even worse, in “virtual” information sessions – is almost impossible.

Banks in Germany may run “assessment centers” for internships, but they consist of mostly 1-on-1 interviews rather than group work or other activities.

And the concept of a summer internship doesn’t exist in quite the same way because they’ll usually just post applications and then ask for your ideal period (Jan – Mar, Apr – Jun, Jul – Sep, or Oct – Dec).

HR in the Frankfurt offices (each of which might have only 30-40 bankers) runs the process, screens CVs, and does 1^st round phone interviews.

Q: Are there any differences between Hong Kong and London as far as investment banking assessment centers?

A: Not really – in fact, I did one of my Hong Kong ACs in London because the bankers from the HK office had flown in for the week.

The main difference is that you may get a translation exercise in Hong Kong, especially if you’re not a native Chinese speaker.

Common AC tasks include prioritizing and responding to emails (in-tray/e-tray), 1-on-1 or group interviews, and Excel-based case studies, such as completing a simple LBO model or a simple DCF.

Some banks don’t even conduct traditional group exercises, so don’t forget about the standard 1-on-1 interview questions as well.

Q: Yeah, that is a good point. Sometimes people over-prepare for case study presentations and group exercises and forget about normal interview questions.

On that note, how did the individual interviews differ in each region?

A: Overall, Hong Kong had the most balanced interviews, with a good mix of fit/behavioral and technical questions.

Also, the technical questions were challenging without being obscure or unfair.

London interviews tended to be far more “fit”-focused, which works well for some people – but I found them difficult because I was also recruiting for these other regions at the same time.

It was hard to “switch modes” and go right from a pure technical interview in Frankfurt back to a 100% behavioral interview in London (similar to switching between several languages, even if you’re fluent in all of them).

Sometimes, interviews turned into: “Do you have the same hobbies and interests that I do? Great, then you get an offer.”

I understand the need to test for personal/cultural fit, but in many London-based interviews, bankers seemed not to care about technical skills or knowledge of the job at all.

My interviews in Frankfurt were, by far, the most technical.

Interviewers usually spent the first ~10 minutes asking about my story and personal questions and then jumped into non-stop technical questions.

They think that only business and finance students can apply to IB jobs, and they expect candidates to have multiple internships, so they only care about technical questions.

I prepared 2,000 pages of sample technical questions and answers and still got questions that were not on my list!

Q: Examples?

A: First off, they expect you to know IFRS 16 for operating leases as “baseline knowledge” now – even though there are no universal standards for leases in financial models.

I know you’ve made specific recommendations for lease accounting, and those are good to know.

But be aware that they could ask you about different ways of handling these items (such as whether you should deduct the full lease expense or add it back in calculations).

One specific question they asked me was:

“Companies A and B merge. If you ignore revenue synergies, why might the total revenue after the merger NOT equal Company A Revenue + Company B Revenue?”

Q: My first thought would be a deferred revenue write-down.

A: That’s what I said, but it wasn’t what they wanted.

The actual answer was:

“Company A might own 10% of Company C, and Company B might own 40% of Company C. So, when they merge, the combined entity will own 50% of Company C.  Therefore, the combined company will have to include 100% of Company C’s revenue (and expenses, taxes, assets, liabilities, etc.) due to consolidation accounting.”

Q: That seems very arbitrary.

How often do two companies with minority stakes in the same other company, such that the minority stakes together happen to add up to 50%+, happen to merge?

Moving on, you also mentioned some negative trends you experienced in the recruiting process. Can you elaborate?

A: In London, many boutique investment banks have started outsourcing the recruitment of interns and Analysts to headhunters (such as Dartmouth Partners and Freshminds).

Some recruiters read you a set of questions, hit record, and then forward your answers for grading. It’s like HireVue, but worse.

Besides making the whole process more impersonal, this trend has also made networking in London less effective.

In one case, I had networked with a C-level executive at an elite boutique bank, and he forwarded my CV directly to the in-house HR – but then I was rejected in the CV screening phase because this bank had outsourced the initial interviews to recruiters!

It also sends a negative signal to candidates because the bank is saying that it doesn’t want to invest in recruiting or training junior talent.

And it’s ironic because the elite boutiques often argue that they “care about you” more than the bulge brackets.

Working in Investment Banking in Europe vs. Asia: How to Decide

Q: Thanks for sharing all that. What are your thoughts on the work culture and salaries in each region?

A: From the internships I completed, I did not like the culture in Frankfurt at all.

Everything was impersonal, people just cared about your work product, and there was a huge separation between work and personal lives.

I don’t think anyone in Frankfurt ever thinks about “the airport test” when conducting interviews.

The other issue with Frankfurt is that pay for off-cycle interns is very low.

It varies by bank, but it’s often in the €1,500 – €2,000 per month range, which is just above the national minimum wage at 40 hours per week.

And you’ll never work only 40 hours per week in investment banking.

Their philosophy is that “you’re there to learn,” so you should accept very low pay.

But this thinking creates two big problems:

1. If you’re from outside Germany, you’ll also have to pay for rent and food – so you might end up spending money to complete the internship.
2. Intern pay in other cities, like New York, London, and Hong Kong, is much higher, so it’s difficult to justify an offer in Frankfurt over one of those.

I still like the German culture outside the workplace, but I don’t think it’s the best place to start a career as a foreigner.

Internship pay in London is much more reasonable, at around £4,000 – £5,000 per month, plus some housing stipend.

Yes, London is more expensive than Frankfurt, but there’s still a big difference between the pay scales in both places.

Most people are from different countries, so the workplace is more diverse, and you can make friends at work more easily.

I have not completed the IB internship in Hong Kong yet, so I can’t comment on the culture, but I can comment on the pay.

They offered me $10,000 USD per month as an intern, as well as a housing allowance for the entire internship period.

Not all banks pay in that range, but the average rate for summer internships seems to be around $7,000 – $10,000 USD per month (paid in HKD).

And since the tax rate in HK is much lower, after-tax income in HK was more than twice as high as after-tax pay in London.

That made it easy for me to accept the internship offer in Hong Kong.

I might still transfer to Europe after 2-3 years of working in HK, as I think the improved lifestyle offsets the other disadvantages at that point.

Q: Thanks for that summary. How can someone else with the ability to work in these different regions decide on the best place?

A: Most people are better served by starting in a major financial center (London or Hong Kong) because they’ll get better experience that way.

Banks in these locations also have industry and product groups, so you can become an expert in something like healthcare, technology, or IPOs.

If you are from China or another part of Asia, and you also speak Mandarin, Hong Kong is arguably the best starting place because it offers the highest after-tax pay as well as housing benefits.

That said, not everyone likes the culture, and let’s just say that “political tensions have divided the city” – so, it’s not the same place it was in 2010 or even 2015.

Other downsides to Hong Kong include less M&A work and more IPOs, fewer private equity exits (as it’s still a developing industry in China), and longer work hours with no weekends off. Even MDs there interviewed me on Saturday and Sunday nights!

I don’t particularly like the work culture in Frankfurt, but some people might – especially if they prefer strict work/personal boundaries.

You’ll start as a generalist there and get more responsibilities because of the smaller team sizes (bulge bracket teams there are often smaller than boutiques in London).

Most deals are domestic or involve a German company and another European company, and once you start working full-time, you could earn more because the GBP fell against the EUR following Brexit.

On the ground, most people in Frankfurt think London is better, so many of them start in London and transfer to Frankfurt later in their careers.

To summarize:

• Hong Kong: Best if you have Asian language skills and cultural knowledge, want the highest starting pay, and don’t mind longer hours and more limited exit opportunities.
• London: Best if you want the broadest networking and exit opportunities, specific product/industry experience, somewhat better hours, and you don’t mind saving less.
• Frankfurt: Best if you are German, you want more responsibilities on deals and separated work and personal lives, and you want to save more than you would in London as a full-timer (with somewhat reduced exit opportunities).

Q: Thanks for that summary and for your time!

A: My pleasure.

And one final thought: during the interview process, I saw that most people did not understand the advantages and disadvantages of different banks.

For example, HSBC is viewed very differently in North America than it is in Asia, and banks such as UBS that are seen as “weak” in Europe and North America are stronger in Asia.

So, if you intern at UBS in Europe or North America, you can use its perceived strength in Asia to boost your recruiting efforts in Asian offices.

The bottom line is you need to know the regional strengths of the firms you’ve worked at to maximize your chances when looking for jobs in other cities.