Investment Banking in Germany: Save More and Get Better Work Experience Than in London… Without Any Crazy Co-Workers?

If you go into investment banking, do you have to deal with crazy people?

If you’ve watched any finance-related movies or TV shows, the answer seems to be “probably.”

And if you’ve read stories online, in the comments section of this site, or on forums, the answer seems to be “always.”

But that’s not true everywhere.

If you work in the finance industry in Germany, for example, you’ll earn compensation on par with London-based bankers and save a lot more…

…and you won’t even get a printer thrown at you once.

If you know the language and you’re looking for a broader experience than in London or New York, it might just be for you.

Our reader today followed quite a “random” path to win a role at a bulge bracket bank there, which he shares below – along with the full details on recruiting and the job itself:

From Consumer Banking to… Off-Cycle Internship

Q: You followed a pretty “random” path to get into investment banking. Can you tell your story from the beginning?

A: Sure. I studied in a German co-op program where everyone worked for 3 days per week and studied for another 3 days per week.

However, since I only earned mediocre grades in high school, my co-op partner was only a small regional bank where I did consumer banking, which is not exactly the best background for IB roles.

I stayed in that role for 2 years to complete my professional training, but always had in mind the possibility of quitting as soon as an opportunity more relevant for IB popped up.

I finally had the opportunity to join a small corporate finance shop that also provided training to larger banks’ corporate banking and corporate finance teams.

Most people thought I was crazy for quitting my job to work there, but I saw it as the only way to move closer to investment banking roles.

I worked from home most of the time, contributed to a few smaller (c.EUR 1 million) transactions, and helped to develop training materials.

Then I leveraged that experience to get an actual investment banking internship at a large German bank, which turned out to be awful.

The hours were good, but I didn’t like the culture and the job itself was quite repetitive – so I questioned whether or not I really wanted to do banking full-time.

But I figured it might just be that bank, so I applied for other off-cycle internships, won a role at the Frankfurt office of a bulge bracket bank, and then accepted a full-time offer there following my internship.

Q: That’s quite a path, but I’m assuming it’s not what most people do.

What does the “standard” recruiting process look like in Germany, and how is it different from London and other regions?

A: The process is very similar to the one in London: for summer analyst positions there are still assessment centers, 1-on-1 interviews, math tests, group presentations / exercises, and so on.

However, the specifics and the applicant pool both differ.

First off, banks in Frankfurt often run off-cycle internships throughout the year – most offices have at least 1, 2, or even 3 interns at all times.

This does happen in London, but it’s more common here, and it’s certainly a lot more common here than it is in New York.

The applicants here all tend to be business administration or finance majors, and therefore know the technical side better than the average candidate in London.

In fact, a lot of applicants who don’t receive offers here end up applying to London instead!

As a previous interviewee mentioned, interviews here are definitely more technical and you need a higher proficiency level with all the concepts.

Q: So you mean the technical questions are more advanced?

A: Not exactly. Since interviewees have gained access to more and more resources to learn the technicals, we have modified our questions accordingly and now we try to test the interviewees on whether or not they actually understand what they’re talking about.

For example, as opposed to just asking which valuation techniques exist, we would also ask which ones are likely to return higher or lower valuations in certain scenarios.

Many candidates memorize canned responses to technical questions and wouldn’t be able to have an actual discussion about the concepts.

Q: I see. I definitely think fewer and fewer candidates these days really understand the concepts, so that type of question is interesting.

Any other differences to note?

A: Most offices of large banks here cover all industries and all products, so you should expect broader questions.

You need to know more than just M&A and valuation because questions on credit, equity capital markets, and other topics could come up.

Q: And I’m assuming that banks are mostly seeking local candidates for these roles?

A: Yes. There are relatively few foreigners working here because the standard working language is German, so you need to know it to integrate yourself into the team.

However, 99% of the presentations are in English and we work closely with the London office (and sometimes the NY office), so effectively everyone here is fluent in German and English.

The Off-Cycle Application Process

Q: Thanks for clarifying.

So after you had the experience working at the regional bank, the small corporate finance advisory firm, and the large German bank, how did you apply for this off-cycle internship?

A: I just applied online without networking. I had to complete a math and logic test and answer competency questions, but, unlike in London, no one really reads your responses to competency questions here.

Sometimes you may get called on your responses, but it is usually not a factor in the decision-making process.

A VP does the screening in most offices, and you get invited in based on your past experience, grades, and the usual criteria.

For intern positions, you would usually have 4 interviews: 2 with analysts, 1 with an associate, and 1 with a VP. Interview questions start off easy, and then get more difficult depending on how much you know.

For full-time positions you would usually have a second round.

Q: So it seems like networking isn’t required, assuming you have relevant experience.

But is it unusual to network for IB roles there (i.e., is it not part of the work culture)?

A: I had mixed experiences. Alumni were usually responsive, even via cold emails, but you can often get internships or full-time roles without much networking.

Teams in Germany are often looking for interns for some “future date,” but they don’t list specific openings on their websites.

So if you know someone at the bank, you can contact the person directly and get quick results because teams here are fairly small.

Therefore, I think networking could actually be more effective in Germany because:

1. Teams are smaller, so individual bankers have a lot more influence over who gets interviewed and hired.
2. Relatively few people here really network. In fact, we often have a lot of trouble finding good candidates for full-time roles! As you always say, “don’t overestimate the competition.”

Q: I hope everyone who wants to work in Frankfurt is taking notes.

So how does the “internship to full-time hiring” process work? And what tips do you have for turning an internship into a full-time role?

A: It’s rare to hire people directly for full-time roles; it only happens if we couldn’t find enough qualified interns to accept full-time offers and we’re significantly understaffed.

So as with other regions, unless you get incredibly lucky you really need to do an internship here first.

Summer internships are between 8 and 10 weeks, while off-cycle internships can last anywhere from 2 to 6 months or even longer. These longer stays are typically for candidates who are taking a break between their bachelor’s and master’s studies.

For turning the internship into a full-time offer:

• It really helps if you’re the only intern at the office. That was the case for me during my internship, so I got to work directly with the VP and Director on a deal and they pushed hard for me to get a full-time offer.
• You have to be capable of working independently at a high-level. Teams are smaller than in London or NY (~30 people per office), so you’ll often work directly with senior bankers, with few or no associates in between. So you need to be polished in your communication style, and you need to learn the fundamentals quickly.

On the Job in Frankfurt

Q: Thanks for sharing all that.

So what has the job been like so far?

A: I’m very, very happy in my current role and I plan to stay here for the long-term.

Before I describe the culture and hours, here’s a bit about the IB industry in Germany:

As I mentioned above, there are A LOT of micro-cap deals for between EUR 1 and 10 million here. Large banks don’t work on these, of course, but there are many smaller firms and independent advisers that do.

Next, there is a larger number of “Mittelstand” (middle-market) companies and deals, but these are usually covered by the likes of Commerzbank, Jefferies, and William Blair.

The bulge bracket banks here focus on the blue-chip companies and large-cap deals, and most of them only do deals valued at EUR 1 billion or above.

By contrast, I’ve seen quite a few deals worth less than that from our NY office.

Most large banks here don’t have a huge number of clients – maybe around 30-35 – but they work with those clients on multiple engagements over time.

Q: And I’m assuming all the bulge bracket banks have a presence there?

A: Yes, the large banks all have a presence here but the team size varies greatly.

As far as I know, Credit Suisse only has a few senior bankers (maybe 2-3 VPs and a few Directors and MDs) as of the time of this interview (late 2014), but all the other banks have full-blown teams in Frankfurt who are also running the show on the German transactions.

Then there are incumbents like Rothschild (very strong in Europe) and Deutsche Bank that have the biggest teams. Goldman is also very present and advises on a lot of deals.

Q: Great. Any differences in the technical work and analysis?

A: Not really; depending on availability, the London team might do a lot of the technical work or we might handle it.

There are some minor local differences, e.g. non-tax-deductible pension plan payments, but valuation and modeling are still similar.

Q: I see. So going back to what you brought up in the beginning: what is the culture like?

A: It is pretty relaxed compared to other places. You don’t see people shouting at each other, throwing printers, talking about drugs / prostitutes, etc. here.

It is still very professional and performance-driven, but since the office is only around 30 people, everyone knows each other and you can walk into an MD’s office and ask him for something directly.

You will also have a chance to make a much bigger impact, even at the junior-level. I worked on several transactions where no Associate was involved, so you will regularly have the opportunity to step up and “shine.”

Also, I had significant client exposure early on, which I don’t think you would get as a 1st or 2nd year analyst at a large bank in NY or London.

Q: What are PE and other exit opportunities like?

A: There are quite a few private equity firms here, and large-cap funds such as Apollo regularly recruit Frankfurt-based bankers for their German or London offices.

Most of the funds in Germany are based in Munich or Frankfurt, but some are also in Düsseldorf (e.g., Blackstone) and Hamburg (e.g., BC Partners).

Analysts here are typically expected to stay for the long-term, but many of them will still end up leaving for PE.

Exits to clients’ corporate development or strategy departments are also not unusual.

Parting Words

Q: Thanks for sharing all of that. Any other advice for readers who want to work in Germany?

A: For German-specific technical materials, I recommend “Das Insider-Dossier: Die Finance-Bewerbung 2013/14: Investment Banking, Private Equity, Corporate Finance & Co.”.

It’s shorter than other guides, but it’s very helpful for interview prep.

Also, use the M&I templates for your CV and cover letter. I see a lot of 3-page CVs, which are completely unnecessary and actually hurt your chances here.

Q: Well, thanks for promoting our templates!

So, final thoughts: who should work in Frankfurt? And who should stay in London, New York, or other cities?

A: It depends on what your long-term goal is: advancement to the top of the ladder, or after-tax savings, culture, and more responsibility as a junior banker.

The cost of living in Frankfurt is half the cost of living in London or New York, but junior bankers still earn the same compensation as London-based bankers, so we save a lot more.

The lifestyle is probably on par with London, but better than New York: you won’t see VPs working past midnight here on a regular basis, whereas I often see mid-level bankers sending out emails at 4 AM in NY.

So Frankfurt makes sense if you want to save more, get to know your team well, and get more client exposure in your first few years.

The downside is that you will probably NOT be promoted to Group Head or other, more senior roles beyond Managing Director in the investment banking career path if you work here.

So if you want to reach the very top of the ladder, you’ll probably have to go to London.

Q: Awesome. Thanks for your time!

A: My pleasure.