A Guide to Investment Banking Analyst Salaries

Written by CFI Team

Read Time 6 minutes

What Does an Investment Banking Analyst Career Entail?

Investment banking is a key part of the financial services industry. Investment banking involves facilitating and raising capital for companies, governments, and other institutions. Investment banks essentially act as liaisons between businesses seeking funding and investors seeking to fund new, lucrative opportunities. Investment bankers also advise companies on mergers and acquisitions (M&A). An analyst is considered the entry-level investment banking role.

The job of an investment banker typically includes:

Conducting research and reviewing financial information and market trends
Creating and implementing financial valuation models to review deals and determine profitability and return expectations
Preparing financial documents and analyses related to transactions
Creating presentation materials, such as pitchbooks, market updates, and confidential information memorandums (CIMs)
Pitching and overseeing mergers and acquisitions
Supervising initial public offerings (IPOs), as well as follow-on offerings and secondary offerings
Providing financial advice, identifying potential investors, and helping prepare legal and financial records to complete mergers and acquisitions and other complex financial transactions on behalf of corporate clients

While entry-level analysts focus primarily on pitchbooks, financial modeling, and other tasks, senior investment bankers spend most of their time developing ideas and pitching them to company management teams and institutional investors. As a result, investment banking analysts must keep up with client demands, which usually results in fast-changing and last-minute deadlines.

What is the Typical Investment Banking Analyst Compensation?

A first-year investment banking analyst’s salary can vary greatly and is largely dependent on the analyst’s work performance and the overall success of the bank. The base salary for a first-year investment banking analyst can range from around $70,000 to $100,000.

In addition to the base pay, an investment banking analyst’s total compensation usually includes a fairly large bonus. The bonus is usually anywhere from 50% to 100% of an analyst’s base pay. This means a first-year analyst’s total compensation may range from $100,000 to $200,000, depending on certain factors.

Investment Banking Analyst Salary Breakdown

Several unique factors will determine an investment banking analyst’s salary. These factors include:

Location

The geographic location of the investment banking analyst will significantly impact their salary. Major financial hubs like New York City and London typically offer higher compensation packages than smaller cities and regional offices. This difference reflects the higher cost of living in these metropolitan areas and the concentration of top-tier financial institutions.

As an example, a first-year analyst in New York City may see a total compensation of $190,000 compared to $110,000 in Atlanta.

Firm Prestige

The reputation and prestige of the investment bank will also play a crucial role in determining an investment banking analyst’s salary. Bulge bracket banks and premier boutique firms generally offer higher compensation packages to ensure they attract and retain top talent. These institutions also typically deal with larger clients and more significant transactions, which usually translates into higher total compensation.

Big-name institutions like Goldman Sachs, Morgan Stanley, or J.P. Morgan are more likely to offer higher base salaries and bonuses of up to nearly $200,000. In contrast, mid-tier institutions will offer less.

Experience Level

As investment banking analysts advance to their second (or third) year, their compensation will also naturally increase. The typical investment banking analyst program lasts two to three years, during which analysts see sizable bumps in their base salaries and bonuses.

Depending on the bank, second-year analysts’ base salaries could increase to around $100,000. Third-year analysts (in programs that extend to three years) often see their salaries increase to $110,000. Bonus levels for top performers will also increase.

Academic Background and Relevant Certifications

An investment banking analyst’s earning potential will also be influenced by their educational background and additional certifications. Finance graduates from top-tier universities may see higher starting salaries than those without. Occasionally, investment banks may hire inexperienced analysts with advanced degrees, such as an MBA or a Master’s in Finance. However, the pay will not likely be much different from that of analysts without advanced degrees.

Relevant certifications like the Chartered Financial Analyst (CFA) designation or the Certified Public Accountant (CPA) certification can potentially enhance an analyst’s value and possibly lead to higher compensation, especially as they progress in their careers.

Deal Flow and Performance of the Bank

The volume and size of deals an investment bank handles directly impact its analysts’ bonuses and overall compensation. Firms that consistently close large, high-profile deals are more likely to offer generous bonuses to their staff.

Moreover, the firm’s overall financial performance plays a crucial role in determining bonus pools. In years when a bank performs exceptionally well, analysts can expect larger bonuses.

Overall Market Conditions

The state of the global economy and financial markets significantly influences investment banking analyst salaries. In bull markets or during periods of high mergers and acquisitions (M&A) activity, compensation tends to rise as banks compete for talent and deal flow increases.

Conversely, during economic downturns or periods of market volatility, banks may become more conservative with their compensation packages. However, top performers often continue to be well-rewarded even in challenging times.

The Career Path of Investment Banking Analysts

Becoming an investment banking analyst begins long before securing that coveted first position. It involves careful planning, rigorous academic preparation, and the development of a specific skill set.

The key components for a career in investment banking include:

Education

The educational background of an investment banking analyst is crucial, serving as the foundation for their career. While there’s no single “best” degree, certain fields of study are particularly advantageous:

Finance: Finance is the most relevant major for aspiring investment bankers. A finance degree provides a solid understanding of financial markets, valuation techniques, and corporate finance principles.
Business Administration: A broader business degree can also be beneficial, especially if it includes a concentration in finance or economics.
Economics: An economics major offers insight into market dynamics, economic theories, and quantitative analysis, all of which are valuable in investment banking.
Mathematics: A math degree demonstrates strong analytical and problem-solving skills, which are highly prized in investment banking.
Engineering or Computer Science: These two majors are increasingly valued for their rigorous quantitative training and technical skills, which are becoming more critical in the modern finance world.

While a bachelor’s degree is the minimum requirement, many analysts may eventually pursue graduate degrees such as an MBA or a Master’s in Finance to enhance their credentials and future earning potential.

Skills

Investment banking analysts need to possess a diverse set of skills to excel in their roles:

Analytical Skills: Strong mathematical and quantitative analysis abilities are essential for financial modeling, valuation, and data interpretation.
Attention to Detail: Detail and precision are crucial in financial analysis and deal documentation.
Financial Modeling: Proficiency in building complex financial models using Excel and other specialized software is also a core requirement in investment banking.
Communication Skills: Analysts must be able to articulate complex financial concepts clearly, both in writing and verbally.
Interpersonal Skills: Building relationships with managers and clients, as well as working effectively in teams, are vital aspects of the job.
Time Management: The ability to juggle multiple projects and meet tight deadlines is crucial in the fast-paced investment banking environment.
Industry Knowledge: Understanding financial markets, economic indicators, and current events affecting various industries is also essential.
Technical Skills: Proficiency in financial software and databases, such as Bloomberg, Capital IQ, and FactSet, is often required.
Adaptability: The finance industry is constantly evolving, so analysts must be quick learners and adaptable to new technologies and breakthroughs.

Image from CFI’s 3-Statement Modeling course

Experience

Building relevant experience is another critical aspect of landing an analyst position in investment banking:

Internships: Internships at investment banks are often the primary pathway to full-time analyst positions. Many banks and firms extend full-time offers to their top-performing interns.
Finance-related Part-time Jobs: Working part-time in finance-related roles while in school, such as at a university investment fund or a local financial advisory firm, can provide valuable experience and networking opportunities.
Case Competitions: Participating in finance-focused case competitions can demonstrate practical skills and problem-solving abilities to potential employers.
Student Organizations: Active involvement in finance or business clubs on campus can provide networking opportunities and practical experience.
Research Assistantships: Students who work with professors on finance-related research projects can develop analytical skills while deepening their interest in the field.
Entry-level Positions: Some analysts may start in related fields like corporate finance, consulting, or accounting before transitioning to investment banking.
Certifications: While not typically required for entry-level positions, pursuing advanced designations can demonstrate commitment and enhance long-term career prospects.

Key Takeaways

The path to becoming an investment banking analyst is competitive and demanding. It requires a combination of strong academic performance, relevant skills, practical experience, and the ability to perform under extreme pressure. Those who successfully navigate this path often find themselves in a challenging but potentially highly rewarding career, with opportunities for rapid advancement and substantial financial compensation.

If you’re working towards a career in investment banking analysis, sign up for CFI’s Financial Modeling & Valuation Analyst (FMVA®) certification today!