FIG Banking Explained: Financial Institutions Group

Key takeaways

FIG covers banks, insurers, asset managers, exchanges, fintech, and financial processors — it is far broader than most candidates assume
In bank M&A, the balance sheet drives the P&L — the opposite of every other sector you have studied
Net Interest Income (NII) makes up 50-75% of bank revenues and is the first metric you need to understand
FIG is a niche that can pigeonhole you — but GS FIG is one of the strongest platforms for buy-side exits in any sector group

What FIG Actually Covers

Financial Institutions Group is one of the most misunderstood sector groups in investment banking. Candidates assume it means "banks" and stop there. In practice, FIG is a broad mandate covering virtually every regulated financial entity:

Banks — retail, commercial, investment, and universal banks
Insurance companies — life, P&C, specialty, and reinsurance
Asset managers — traditional and alternative (including PE and hedge fund platforms)
Diversified financials — credit card companies, consumer finance firms, payment processors
Exchanges and market infrastructure — stock exchanges, clearing houses, data providers
Brokers and intermediaries — broker-dealers, wealth management platforms
Fintech — payments, lending, and infrastructure businesses with financial services characteristics

FIG is one of the biggest revenue-generating groups at most bulge bracket banks. The combination of advisory mandates, capital markets activity (bank debt issuance, equity raises, AT1 instruments), and the sheer volume of M&A in the sector makes it a substantial business. This is not a backwater group — it is a core revenue engine.

Why FIG is analytically distinct In virtually every sector, you analyse the income statement and derive an implied balance sheet. In FIG — particularly for banks — you do the opposite. The balance sheet is the business. Loans are assets, deposits are liabilities, and the spread between them is the product. Understanding this inversion is the entry point for all FIG analysis.

Net Interest Income: The Metric That Drives Everything

For banks, Net Interest Income (NII) is the equivalent of gross profit. It represents the difference between what a bank earns on its assets (loans, securities) and what it pays on its liabilities (deposits, wholesale funding). NII typically accounts for 50-75% of a bank's total revenues.

The basic mechanics A bank takes in deposits at a low interest rate — often near zero for retail current accounts. It lends those deposits out at the highest interest rate it can charge while managing default risk. The spread between the two is the Net Interest Margin (NIM). Multiply that margin by the size of the loan book, and you have NII.

What drives NIM? Interest rate environment (rates rising generally helps banks), loan book mix (higher-risk lending = higher rates but more provisions), funding mix (retail deposits are cheap; wholesale funding is expensive and rate-sensitive), and competitive dynamics in local lending markets.

The non-interest income component The remaining 25-50% of bank revenues typically comes from fees: transaction banking, wealth management, investment banking advisory, trading income, and card fees. These lines are more volatile and more similar in nature to revenues in other sectors.

50–75% Share of bank revenues from Net Interest Income — this is why interest rate moves are existential events for bank stocks and why FIG analysts obsess over central bank policy

How Bank M&A Actually Works

Bank M&A is mechanically different from M&A in any other sector, and candidates who walk in treating it like a standard deal will expose themselves immediately. The critical insight: interest expense is the cost of goods sold for a lender.

Standard M&A Logic	Bank M&A Logic
Revenue synergies from cross-selling or market share gains	Cost of capital synergies: if Acquirer funds its loan book at 5% and Target funds at 10%, the blended funding cost drops immediately post-merger
Cost synergies from headcount and real estate rationalisation	Regulatory cost synergies: banks face fixed compliance, reporting, and capital costs that scale poorly with size — merging eliminates duplication of these costs
EPS accretion from revenue growth and margin expansion	Tangible Book Value dilution and earn-back period — the primary metrics bank acquirers and investors use to evaluate deals
P/E or EV/EBITDA multiples drive valuation	Price/Tangible Book Value (P/TBV) is the primary valuation metric — EBITDA is meaningless for banks

Interview framing If asked why bank M&A is driven by regulatory costs, the answer has two parts. First, banks face substantial fixed compliance and reporting costs (Basel capital requirements, stress testing, anti-money laundering infrastructure) that don't scale with size — two banks merging share one set of these costs. Second, a larger combined entity may cross thresholds that unlock better capital treatment, lowering the cost of maintaining regulatory capital buffers.

Why You Cannot Use Standard Valuation Metrics

One of the most commonly tested FIG concepts is why enterprise value and EBITDA are not meaningful for banks. The answer flows directly from the balance sheet-first logic.

For an industrial company, debt is a financing decision — it sits below the operating business and is separable from enterprise value. For a bank, debt (deposits, bonds) is the raw material. You cannot strip it out of the operating business because it is the operating business. Calculating EV by adding debt to equity market cap produces a nonsensical figure for a lending institution.

Instead, FIG analysts use equity-based valuation: Price/Earnings (P/E), Price/Tangible Book Value (P/TBV), and dividend discount models. The focus is on what equity holders receive — because the debt holders (depositors) are already priced into the structure.

Common mistake Mentioning EV/EBITDA in the context of bank valuation in a FIG interview will end the conversation. If you're asked how you value a bank and begin with "I'd look at EV/EBITDA multiples," you have demonstrated a fundamental misunderstanding of the business model. Always anchor on equity value metrics and articulate why.

Exits: Where FIG Bankers Go

FIG is a niche, and that cuts both ways on exit opportunities.

The honest reality: FIG experience does not translate as naturally to generalist PE as coverage in M&A, TMT, or healthcare. The analytical toolkit you build — loan book modelling, regulatory capital analysis, NII forecasting — is specialised. Most generalist buyout funds do not invest in banks or insurers, so the skills feel foreign in a generalist context.

However, there is a robust and growing FIG-specific private equity ecosystem:

Stone Point Capital — one of the most active FIG-focused PE firms
Apollo FIG — Apollo's dedicated financial institutions platform
Warburg Pincus — significant financial services portfolio
H&F (Hellman & Friedman) — large insurance and financial services deals
GTCR, MDP, Genstar — active mid-market FIG investors

The exception to the generalist PE barrier is Goldman Sachs FIG, which is widely considered the strongest FIG platform for buy-side exits. GS FIG alumni have placed into generalist megafunds and UMM funds that other FIG groups cannot access — a function of deal quality, brand, and the calibre of the analyst class.

The promotion dynamic FIG's niche nature creates a counterintuitive internal career benefit: less competition. If you are in a generalist M&A group, you are competing against a large cohort of equally sharp analysts for VP and Director spots. In a FIG group, the talent pool is smaller and the institutional knowledge you accumulate is harder to replace. For those who stay on the banking track, this matters.

FIG rewards analytical curiosity about how financial systems actually work. If you find yourself genuinely interested in central bank policy, regulatory capital frameworks, and the economics of financial intermediation — rather than treating them as obstacles to understand — you will thrive in this group.

Take Your Preparation Further

Use our free Firm Research Tracker to map the key FIG teams at each bank and identify which groups have the strongest deal flow and exit track records. For comprehensive technical interview preparation covering valuation, accounting, and M&A mechanics, see the IB Interview Bible.

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FIG Banking Explained: Why Financial Institutions Is One of the Street's Biggest Groups