How Investment Bankers Can Use ChatGPT to Automate Tasks
Investment bankers are always seeking new ways to improve efficiency, reduce manual work, and stay ahead of the competition. With the rise of artificial intelligence, particularly generative AI models like ChatGPT, financial professionals can automate tasks, streamline workflows, and improve decision-making processes. But how can this technology be applied to real-world investment banking tasks? Let’s explore how ChatGPT can enhance financial analysis using a practical example from The GenAI Toolkit for Investment Bankers.
What Is ChatGPT and How Can It Be Used in?Finance?
ChatGPT is an advanced language model developed by OpenAI. It can generate human-like text and automate repetitive tasks by interpreting natural language prompts. In the context of investment banking, ChatGPT can perform a wide range of tasks, from generating financial models and analysing market trends to drafting client reports and presentations.
By feeding the model well-structured prompts, you can automate complex calculations, perform scenario analysis, and generate comprehensive financial reports?—?all in a fraction of the time it would normally take.
Example: Financial Analysis Using?ChatGPT
Let’s take a real example of how an investment banker can use ChatGPT for financial analysis. Suppose you’re working on a Discounted Cash Flow (DCF) analysis for a client considering investing in a tech startup. The startup has provided financial projections, and your goal is to calculate the Net Present Value (NPV) of the future cash flows, factoring in different growth scenarios and discount rates.
Normally, this would involve manually building a DCF model in Excel and adjusting variables like revenue growth and discount rates to see how different scenarios impact the valuation. However, using ChatGPT, this process can be streamlined.
Step 1: Prompting ChatGPT for a DCF?Model
You begin by prompting ChatGPT to generate a 5-year DCF model for the tech startup.
Prompt Example:
“Generate a 5-year Discounted Cash Flow (DCF) model for a SaaS company with the following assumptions: 10% annual revenue growth, $2 million in initial revenue, $500,000 in annual operating expenses, a discount rate of 8%, and a terminal growth rate of 3%. Calculate the NPV.”
Step 2: ChatGPT Generates the Financial Model
Within seconds, ChatGPT responds with a detailed cash flow forecast and the corresponding NPV calculation. Here’s a simplified version of what it might generate:
ChatGPT Output:
ChatGPT will apply the discount rate to calculate the present value of each year’s cash flow. Finally, ChatGPT will calculate the terminal value using the perpetuity growth formula and add it to the NPV of the forecasted cash flows.
Step 3: Adjusting Scenarios for Sensitivity Analysis
Suppose the client wants to evaluate how sensitive the NPV is to changes in the discount rate or revenue growth. Instead of manually rebuilding the entire model, you can adjust your prompt.
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Prompt Example:
“Generate a sensitivity analysis for the above DCF model, using discount rates of 6%, 8%, and 10%.”
ChatGPT will then calculate how the NPV changes across these different discount rates, giving you a clear picture of the impact of rate fluctuations on the investment’s value. This saves you from manually recalculating each scenario and provides your client with quick, data-driven insights.
Step 4: Using ChatGPT to Create a Client?Report
Once the analysis is complete, you can use ChatGPT to help draft a summary report for your client.
Prompt Example:
“Generate a client report summarising the DCF analysis of the tech startup, including the NPV calculation and sensitivity analysis, and provide recommendations based on the results.”
ChatGPT Output:
This client-ready summary is generated instantly, allowing you to quickly deliver a polished report without the need for extensive manual drafting.
We can also ask ChatGPT to visualise graphs for the report.
Why Investment Bankers Should Leverage?ChatGPT
The example above demonstrates how ChatGPT can simplify complex financial analysis, saving time while providing accurate and actionable insights. But the potential of generative AI goes beyond DCF analysis?—?it can be used to:
ChatGPT is a game-changing tool for investment bankers that enhances productivity, reduces manual work, and ensures better, data-driven decision-making. If you want to explore more prompts and learn how to integrate AI into your investment banking processes, check out The GenAI Toolkit for Investment Bankers, where you’ll find the Top 10 AI Prompts, guides, and real-world examples tailored specifically to the challenges of modern investment banking.
Get the GenAI Toolkit for Investment Bankers
Ready to unlock AI’s full potentialin your financial analysis? The GenAI Toolkit for Investment Bankers provides step-by-step guides and curated AI prompts to automate financial models, deal evaluations, client presentations, and more. Streamline your workflows, reduce errors, and deliver faster results to your clients.