AU Small Finance Bank Investment Analyst Interview: Rounds, Questions and Preparation

What the job involves

An Investment Analyst in banking, finance, and insurance supports investment decisions by researching markets, analysing financial statements, and building financial models. Day to day, they monitor portfolios, prepare reports, and evaluate risks for clients or the institution. At a bank like AU Small Finance Bank, this could involve assessing credit investments, treasury operations, or retail investment products.

Role and Technical Knowledge

1. 1

   What are the key financial statements an investment analyst uses, and how do they interlink?

   Cover balance sheet, income statement, and cash flow statement, and explain how net income flows to retained earnings and cash flow.

2. 2

   How would you value a bank like AU Small Finance Bank?

   Discuss using price-to-book ratio, dividend discount model, and residual income model, noting that banks have unique capital structures.

3. 3

   What are the major risks an investment analyst should consider when evaluating a bank's investment portfolio?

   Mention credit risk, market risk, liquidity risk, and interest rate risk, and how these affect asset quality.

4. 4

   Explain the concept of net interest margin and why it is important for a bank.

   Define NIM as net interest income divided by average earning assets, and discuss its role in profitability.

Practical Scenarios

1. 5

   If a company's debt-to-equity ratio is increasing while its interest coverage ratio is falling, what would you infer?

   Indicate rising financial risk and potential difficulty in meeting debt obligations, suggesting a need for further analysis.

2. 6

   You are asked to analyse a potential investment in a small finance bank. What factors would you examine?

   Consider asset quality, capital adequacy, profitability, growth prospects, regulatory environment, and management quality.

3. 7

   How would you use Excel to build a simple financial model for a company?

   Describe projecting revenues, costs, and cash flows, and using functions like NPV and IRR for valuation.

4. 8

   If the RBI increases repo rate, how might that affect a bank's investment decisions?

   Discuss impact on borrowing costs, lending rates, bond prices, and overall portfolio strategy.

Behavioural and HR

1. 9

   Why do you want to work as an investment analyst in the banking sector?

   Show passion for financial markets, analytical work, and contributing to sound investment decisions.

2. 10

   Describe a time when you had to analyse a lot of data to make a decision.

   Use STAR method to highlight analytical skills, attention to detail, and outcome.

3. 11

   How do you handle tight deadlines when working on multiple reports?

   Emphasise prioritisation, time management, and staying calm under pressure.

4. 12

   Where do you see yourself in five years in this role?

   Express a desire to grow into a senior analyst or portfolio manager role, gaining deeper expertise.

Company and Sector Awareness

1. 13

   What do you know about AU Small Finance Bank and its business model?

   Mention it is a small finance bank focused on retail and MSME lending, with a strong presence in underserved markets.

2. 14

   What are the current trends in the Indian banking and finance sector?

   Discuss digitalisation, fintech partnerships, regulatory changes, and focus on financial inclusion.

3. 15

   How does a small finance bank differ from a universal bank in terms of investment analysis?

   Highlight differences in customer base, priority sector lending, and risk profiles that affect analysis.

4. 16

   Why is risk management particularly important for a small finance bank?

   Emphasise higher exposure to unsecured loans and the need for robust credit assessment and provisioning.