Every profession has its own language, and the banking industry is no different. From calculation terms to catchphrases, there are a lot of words and expressions that are exclusive to the field.
While it might be difficult to figure out at first, it’s important for graduates hoping to hatch a career in investment banking to adopt this new language before entering the industry. It will help you keep up with the experienced professionals around you and better adapt to your new environment. In short, using the appropriate industry jargon will show banking industry insiders that you belong.
If you’re a student looking to expand your investment banking vocabulary, here are some common phrases to help you get started!
Below the bar
All companies have a minimum financial requirement they must meet when working out a deal with a client to ensure that the firm actually benefits. This minimum is referred to as “the bar.” If a deal is working out to be below the bar, the firm usually won’t accept it.
Blue chip stock
This term refers to the stock of a large company, generally one that is well-established and financially stable. Additionally, blue chip stock is typically highly priced because of the company’s long record of consistent and reliable earnings. The name “blue chip” comes from poker, where blue chips are the most valuable and most expensive chips.
Dead cat bounce
A short-lived recovery of stock in a falling market is known as the “dead cat bounce.” While this slight lift in the declining trend (which represents the “bounce”), might appear to indicate that the stock is on the rise, it usually continues its declining trend soon after.
“Face time” refers to how late you stay at the office – even when you don’t have any work left – to show that you’re a dedicated worker. Different companies have different ideas of what constitutes enough face time, so the best thing to do is to take note of how late your peers stay at the office and act accordingly.
This term comes up a lot in the investment banking world. It refers to a situation where a presentation or report needs to be finished, usually for a client, within a very short deadline. Usually fire drill situations are given to entry-level workers, so being able to complete tasks quickly and under pressure is important for young banking professionals.
Rule of 72
The ”Rule of 72” is used to determine the approximate time it will take for an investment to double in size. To calculate this time period, simply take the number 72 and divide it by the expected annual compound rate (i.e. interest rate) of the investment.