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Interview with: Corporate Banking Associate

What are some good resources to read up on if you are interested in corporate banking?

This site has some good stuff – the corporate banking posts are representative and accurate. Leveraged loan by S&P is also good, although that is more levfin it dives into a lot of similar concepts. For really boring people they may be inclined to read a credit agreement.

How did you get into corporate banking?

I did an MBA at a target school and entered the recruiting process. I hit it off with the team and am a decent golfer with good grades, so not a difficult time.

What is the corporate banking interview process like?

It is almost entirely fit and behavioral questions as to understanding what the corporate bank does.

As far as technical questions go, the technical interview is far easier than investment banking. You need to know about EBITDA and simple credit ratios such as leverage and coverage but as far as credit analysis goes it barely scratches the surface. Don’t expect corporate bankers to be joining distressed debt funds any time soon.

Since corporate banking is not technically rigorous, a lot more goes into how much the team likes you. Grades are not as important and are not necessarily a barrier for lateral hires, so for anyone who is looking to join off-cycle networking is key.

What is going on in the corporate banking space right now?

All the groups are telling me that it is pretty busy right now with amendments, extensions and upsizes, new deals and pitches.

The market is frothy and banks are looking to lend money – syndicated loan volumes are jumping while banks are fighting for lead roles in revolvers. Firmly risk-on in the bank market, with increased competition making loans more aggressive in terms of pricing as well as structure (more relaxed covenants, making lawyers and risk management divisions nervous).

Exciting for us though, because the loan book is growing and accordingly so is profit.

Philosophy has changed from lending for the right returns to winning business using our balance sheets as bank CEOs are eager to boost earnings.

The other cool thing is that there has been a lot of M&A activity, which means large bridge loans that need to be underwritten and then taken out by debt and equity.

What are borrowers looking to do in 2018?

Despite a booming global economy, trade war jitters and uncertainty around the business environment have made it opportunistic to lock in good pricing on loans and long tenor (up to 5 years) while banks are willing and able. So clients can get a syndicate together pretty easily and are looking to do that.

They are also taking advantage of aggressive banks who are willing to undercut their historical relationships by saying “we can do this for x bps instead and without these restrictions.”

The banks bicker amongst themselves and then the agent bank (lead relationship) agrees to match to keep their place.

Also, it seems like oil and gas is coming back in a very big way as many indebted companies in the US have restructured their high yield obligations and have seen positive redeterminations in their borrowing bases as oil prices have ticked up and shale drilling technology has advanced.

Also have seen some financing packages for weed stocks, which I have certainly never seen before.

What sort of client interaction do you get in corporate banking?

You will usually be brought to meetings with treasury professionals and for bigger transactions possibly the treasurer or CFO. I have seen the CEO maybe once in all the meetings that I have gone to, and that was part of a broader strategic mandate involving various other groups within the investment bank.

Since treasury professionals are not necessarily as polished/important or senior as the treasurer or CFO, you are brought along more readily.

As an associate, you sometimes will entertain the treasury analysts and managers at drinking events hosted by the bank.

At more formal meetings and client lunches as a corporate banking standalone, there is usually a bank market update and comparison of loans telling them what they can do. Occasionally, you will be accompanied by DCM or another group walking through some of the options available to the treasury to save costs or gain flexibility.

What are the hours like in corporate banking?

On average, they are pretty soft compared to investment banking, I would say 9-8 on an average team while people will take off early for beers on Fridays (and even Thursdays). If there is a live deal that is credit intensive, expect blowups where you stay until possibly 2AM for most days and full days on weekends but nothing like investment banking. I have also never heard of anyone needing to cancel their vacation.

I do know of teams that work late until 11PM or 12AM every day doing non-deal stuff, writing annual reviews and other non-time sensitive things. If you are in one of those groups, you should leave – you are not being compensated enough for what you are doing.

Peeking over at the investment bankers, they are usually in before I come in and they are still there when I leave. Sometimes they are wearing the same clothes. It’s kind of funny but kind of sad.

That said, when working together, the investment bankers and corporate bankers will have different work streams, so it could be that corporate banking is still working away on credit and internal memorandums while investment bankers are pencils down as they have already given all the data that the client needs while corporate bankers still need to satisfy their “client”, which is the bank itself.

What is compensation like in corporate banking?

Corporate banking salaries are in line with the article on this site from the last time I have checked. 70k to 100k all in as a new analyst and 100k to 160k as a new associate. As you can see the band is quite wide – some banks will pay corporate bankers the same base as investment bankers and somewhat lower bonuses – usually the Bulge Bracket adheres to this structure – while some banks will pay corporate bankers materially less. If you are in a group that pays materially less, it can make sense to switch as you are doing the same work at any corporate bank.

What designations are helpful for entering corporate banking?

CFA. Having level 1 helps a little and having level 2 helps a lot in terms of showing initiative for a lateral hire. Not a lot of what corporate bankers actually do shows up in the curriculum, but there certainly is overlap with almost every chapter of the CFA program when corporate bankers deal with other groups.

It is recommended for corporate bankers to get their CFAs – similar to sales under S&T, corporate banking is seen as more relationship heavy and less technically rigorous so it certainly helps to have the letters after your name. Most of the clients that corporate bankers interact with in treasury and other finance divisions will have CFAs, so it helps to get on the same level in terms of understanding certain corporate finance topics.

The hours are light compared to investment banking, so there is no excuse for failing at any level. People will assume that you are undisciplined or stupid. Each year a bunch of corporate banking analysts go “ohh, I’ll be lucky if I pass, I haven’t studied at all,” to hedge bets. Whatever, you are going to be seen as a moron if you do not make the cut.

CPAs are also looked at favorably and depending on how high an accountant has climbed the Big 4 ladder there may be room to come in as an associate. This demonstrates that you at least know what EBITDA is and that you can see clients.

What are some good corporate banking exits?

The attrition rate in corporate banking seems to be a lot lower than investment banking. To my understanding the whole point of investment banking is to exit, regardless of how prudent the exit actually is.

In my experience, people usually leave for other jobs within capital markets. The best fit is to a group that corporate banking works closely with already. Usually these are product groups that rely heavily on the credit extended by corporate banking – so debt capital markets, interest rate derivatives, equity capital markets, loan syndications and leveraged finance.

More often, corporate bankers will go on rotation to those groups with an option to stay, but a lot of them come back owing to the lifestyle and pace.

Outside of investment banking, there are usually credit funds and private debt funds that have pretty light underwriting and credit analysis that will hire corporate bankers. I would say an ideal external exit would be asset management at a pension fund or in an asset management division, but I am not sure that they pay more than corporate banking.

Do corporate bankers switch over to investment banking?

They do, but the switch is not as common as you might think because the coverage team in investment banking will only work with corporate banking when they need to fund a transaction – so this is usually buy side M&A or sell side M&A with staple financing. I would say this is 10-20% of the time – you are spending far more time bogged down with extensions and joint pitches with teams on the trading floor.

For those determined to switch over to investment banking, analyst to analyst is the easiest direct line. If you are in the same coverage group, have worked in a deal together and get along with the IB team, this can be done fairly easily. They will rarely give you the same credit for time worked, but you might be able to get 1 year of experience for 2 in corporate banking.

Associate to associate is much harder – the pay gap is a lot wider while the analysts on the team will be reluctant to be “under” someone who has not worked the equivalent of 10 years in 3. However, it still happens at some banks, although again you will need to give up some seniority.

At the VP level and above, have barely ever seen it happen unless the sector is very niche and you are being groomed for management in the bank in which case it is a temporary switch so that you can learn the ropes.

What do corporate banks cover that investment banks do not?

As with anything on the debt side, you have a lot of borrowers that are not traditional corporates, public or private. So this entails, whenever we are not speaking about asset sales and acquisitions, government entities such as states, municipalities and supranationals – as well as financial institutions and their ilk. Captive finance vehicles and other finance companies can be large issuers of debt and require credit but will rarely do business with the coverage teams because there is nothing to buy.

It is pretty incredible how much is covered in corporate banking and the trading floor that falls outside the jurisdiction of a coverage team as there will be solutions to tackle pensions, asset managers and the needs of various other organizations.

There are also a lot of private companies that operate in a specific niche that will not be buying competitors that they think would dilute their brand, and obviously they will not issue equity. However these guys still have needs from cash management and trading product perspectives and corporate banking will play quarterback on these ones. Examples could include Cactus Club Cafe.

Interview SeriesInterview With A Mergers & Acquisitions Investment Banker – Part II · Interview with a Mergers & Acquisitions Investment Banker – Part I · Interview with Sales & Trading Associate in Hong Kong · Interview with an Oil & Gas Investment Banker: Part III · Interview with an Oil & Gas Investment Banker: Part II · Interview with an Oil & Gas Investment Banker: Part I · Interview with: Loan Syndications Associate in Hong Kong · Interview with: Investment Banking Summer Analyst · Interview with: Corporate Banking Associate · Interview with: Big 4 Corporate Finance VP · Interview with: Real Estate Commercial Banking VP · Interview with: Transfer Pricing VP · Interview with: Private Debt Analyst · Interview with: Treasury Analyst · Interview with: Big 4 Transaction Advisory VP · Interview with: Wealth Management Associate · Interview with: Foreign Exchange Trader · Interview with: Renewables Investment Banker · Interview with: Credit Rating Agency Analyst · Interview with: Equity Research Associate ·
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