Are you interviewing at a major European bank? Do want a set of ready-made awkward questions to ask concerning the strategy and solidity of your prospective institution? You are in luck. Analysts at Deutsche Bank have just thing.
Deutsche's banking team, led by analyst Matt Spick, have assembled a 'question bank' of incisive queries for each of the major European banking players. We've selected the best ones below. Use them judiciously. Bear in mind that banking interviewers don't actually like being asked about the health of the institution they work for. You're much better off asking about a typical day, what the canteen is like, and why they love working for the bank in question.
Spick et al suggest there are several key things senior Barclays executives need to answer. They include:
1. What range of funding cost increases does Barclays see coming from the Independent Commission on Banking’s ring-fencing proposal in relation to non-retail banking operations? What specific changes has this prompted within the investment bank?
2. Barclays is targeting £1.7bn cost reduction with a cost-to-achieve of £2.7bn. What specific examples can the company give of cost reduction measures? Split between technology and personnel?
3. Barclays strategy plan implies a 2015 revenue target of £31.9bn, 10% ahead of the 2012 adj. level of £29bn, and 14% ahead of 2012 revenues if income from businesses to be closed / transitioned is foregone. How does management expect to achieve this revenue growth? What impact is the cost plan expected to have on the revenue performance of ongoing business units?
4. Barclays strategy plan implies a 2015 revenue target of £31.9bn, 10% ahead of the 2012 adj. level of £29bn, and 14% ahead of 2012 revenues if income from businesses to be closed / transitioned is foregone. How does management expect to achieve this revenue growth? What impact is the cost plan expected to have on the revenue performance of ongoing business units?
5. What impact to FICC revenues do you expect from upcoming regulatory change affecting on-exchange and post-trade reporting? (MIFID2 and Dodd Frank)
1. You have announced a cost cutting plan that targets €2bn of gross savings in 2015. You have outperformed expectations in the previous plans you announced (BNL, Fortis, deleveraging), and H1-2013 has started well (above your pro rata targets). Can we expect that you will outperform expectations in this plan again?
2. You have underperformed in Corporate and Investment Bank (CIB) revenue, in both capital markets and corporate banking, for several quarters now, losing market shares. Do you think you will be able to reverse this trend and win market shares over the next couple of years? Why?
3. Can you elaborate on how much CIB revenues you think you’ll lose due to new regulations (EMIR/MiFID2/Dodd-Frank)? How are these going to change your way of doing business? How much do you think you can increase revenues in your securities services business?
1. How does RBS expect the Independent Commission on Banking (ICB) to affect the operational performance of the business? What additional costs and lost revenues will result, and when will greater clarity be had on the new organisational structure?
2. RBS plans to shed £45bn of Basel 3 divisional RWAs by end 2014. How will this reduction in RWAs affect investment bank revenues? On our estimates, RBS appears to have one of the more volatile QoQ top line revenues in the investment banking peer group. Why is this the case? How does management expect this to change as the division is restructured?
3. RBS is particularly concentrated in FICC businesses following the exit of investment banking and equities. What impact on FICC revenues do you expect from upcoming regulatory change affecting on-exchange and post-trade reporting? (MiFID2 and Dodd-Frank)
1. What is the outlook for UBS’s investment banking businesses in 2014? Does UBS expect the equities business to continue to thrive? How about advisory? Why does UBS think the closure of FICC had so little impact on the rest of the business?
2. UBS is attempting to compensate partly by focusing on advisory business. What are profit margins like in more-advisory businesses (M&A, ECM, DCM, cash equities). How has UBS’ market share evolved in 2013 in these advisory products? What hiring does UBS need to do if competitors start expanding in 2014?
3. What changes in capital consumption are likely to be next in the investment bank? Dodd Frank and EMIR will move derivative transactions on-exchange – will this be better or worse for capital requirements and how will it affect UBS’ strategy, especially as a capital-light FICC player?
1. Is Credit Suisse now towards the end of cost saving potential, having arguably done more than peers? In the investment bank in particular, can Credit Suisse cut front office remuneration further, or is the industry reaching the end of what is achievable on a “per company” basis? Is it fair to say that front-office headcount troughed around Q2 2013, and further reductions are unlikely?
2. What changes in capital consumption are likely to be next in the investment bank? Dodd Frank and EMIR will move derivative transactions on-exchange – will this be better or worse for capital requirements, and how will it affect Credit Suisse’s strategy? Could Credit Suisse elaborate on its views on the Rates business?
3. What is the outlook for Credit Suisse’s investment banking businesses in H2 2013 and in 2014? Credit Suisse is already on Basel III whereas many peers (Europe) saw delayed implementation. Is Credit Suisse’s competitive disadvantage in being moved onto a Basel 3 basis early fading? Are Credit and Securitisation revenue streams sustainable?