Frank was sitting across from Jenny at the Blenz Coffee at Wesbrook Mall. Jenny had finished a summer at the prestigious brokerage Merrill Lynch, Pierce, Fenner and Smith Incorporated due to return the following year as a full-time hire. Frank recently received an offer from BNP Paribas to be a corporate banking analyst in their oil and gas practice (BNP has an outstanding commodities and structuring team I may add).
“So, Frank, what are you doing this year?”
“Jenny, I am really excited – I am going to be working in energy corporate banking for BNP.”
“Oh, what’s that?” Jenny inquired, fully knowing what corporate banking was as she was a voracious reader of our website.
“Well – we look at syndicated loans and try to support the investment banking practice with acquisition finance when it meets our lending hurdles. We also -“
“Oh, that sounds really cool, Frank. Really cool. You know if I weren’t doing banking… I would totally do corporate banking.”
Jenny smirked and Frank’s world crumbled beneath him. He had been in love with Jenny for 5 years and now she represented someone who would yell at him when he couldn’t get credit across the line.
Corporate Banking Salaries
How much investment bankers make is a popular topic and well documented across the internet (with a fair amount of misrepresentation), but there are actually a lot more people who work in corporate banking or who are looking for corporate banking jobs at major banks.
Despite this, there is not a lot of information in terms of what corporate banking is and what you can expect to make.
Fortunately, we cover what corporate banking is here in a fairly extensive article and we are going to elaborate on compensation in this slightly less comprehensive article.
So, what do corporate bankers make?
As our answer usually is, it depends. Or as blowhard senior bankers will often say, “devil is in the details”.
Where Does Corporate Banking Fit in the Investment Bank
At the very basic level, corporate banking is not really distinguishable from commercial banking. You are a lender – so commercial bankers are corporate bankers and vice versa. However, from how investment banks allocate capital and segment divisions, corporate banking is a marketing name within capital markets that is dedicated to being the lender in a full service product suite along with equity capital markets, debt capital markets, securitizations and everything else.
Unlike commercial bankers who make more money for the bank when they grow their loan book – simply because they generate a decent lending-only return on each incremental dollar lended – corporate bankers make very little interest on their loans because 1. they are generally undrawn but committed (which is terrible as you take a full capital charge for the risk of loss as if the company gets in a bad situation they will draw on their loan and you have to give them the money) and 2. since they are more creditworthy than small companies, the fees you can charge them are a lot lower.
Again this is because the function of corporate banking or credit is to anchor the investment banking relationship with liquidity support so that they are front and center when commission based revenue such as ECM and DCM pop up. This does not mean that certain financing pieces, especially M&A related financings such as bridge loans which are outstanding for a short period of time are not lucrative for the corporate bank’s lending returns, but it also means that the line between cost center and revenue generating unit can be sometimes blurred (not a full cost center, banks still make money on these low returning loans, but they do not clear return hurdles to justify being a standalone loan).
This Job Posting Does Not Sound Like Corporate Banking
Full service bulge bracket investment banks will generally use corporate banking only in the context described above. In fact, independent investment banks that do not have a commercial banking arm such as Goldman Sachs or Morgan Stanley could not possibly be referencing anything else.
However, other banks will not necessarily make this distinction, and corporate banking may be commercial banking or large corporates with some small syndicated loans while the large syndicated loan platform is called Institutional Banking or Global Banking and Markets.
Banks will also separate corporate banking into front office and middle office. Front office is focused on the relationship and origination. This client facing function is similar in terms of interaction as investment banking, although the work focuses on loans and returns, interfacing internally to justify a business case for the lending relationship and as you would surmise making plenty of PowerPoints. Front office is always known as Corporate Banking or Relationship Management.
Middle office or portfolio management involves underwriting the credit and justifying why the bank should loan to the internal risk management division or credit risk division. This is far less glamorous and offers less mobility within and across the bank. This also is not “real credit analysis” like you would do at a distressed debt fund and portfolio managers know nothing about looking at loans from an investment perspective beyond plugging in numbers into a risk model that no one understands.
However, some banks will meld the RM and PM functions into one. They pay you the same as if you just did RM, so do not get too excited.
Why Do Corporate Bankers Get Paid Less than Investment Bankers
You may be surprised, but the corporate banking division usually generates more revenue than the investment banking division.
Although still part of the capital markets platform, corporate bankers are seen to have a stickier loan book and are more responsible for execution than origination. If you fired a top corporate banker and someone else was brought in, “we have $200 million dollars for you” is always a compelling pitch. Also, all banks get a chunk of the corporate banking business (it is syndicated), so the competition aspect is soft at best.
Corporate bankers still make a lot of money however. Ok, so after a lot of preamble we are getting to the meat of the question. You make a similar amount in the beginning and the gap widens at the end when compared to investment banking. So if you were going to quit investment banking after two years anyway, you may as well just have done corporate banking and had a better life.
Corporate Banking Analyst Salaries
Corporate banking analysts at banks and programs that we have referenced above will usually pay the same base salary or a slighty discounted salary to that of the investment banking analysts.
So think of an investment banking analyst in the same bank that makes $75-85,000 per year. The corporate banker will make $65-85,000 per year. Again, if you are actually a commercial banker you make $50 or 60.
Corporate banking bonuses are $10-$20,000 per year versus 1x salary for investment bankers.
Corporate Banking Associate Salaries
At the associate level, the same discount applies, so you may expect $85,000-125,000 depending on where you work and a far lower bonus than in investment banking which may be 2x salary. As a corporate banking associate $110-$160,000 all in is a reasonable expected range.
Corporate Banking VP Salaries
At the VP level, again same base depending on where you are $100-$150,000 and $180-$250,000 all in – with $250,000 being on the very very very high end. VPs in investment banking can make $300-800,000 and more if they are actually carrying their weight in client exposures.