Feb 04, 2023

Credit Risk at BB

Was looking to get some info on IB corporate credit risk positions (divided by industry groups ie. TMT) compared to doing traditional LevFin or DCM debt facing roles. I know it varies by firm but are the skills still relevant for buy side roles? (Credit memos, underwriting/portfolio management of leveraged companies, being involved on the credit side of deals). Would being in the workout/distressed credit risk group be beneficial for RX/buy side exits? (Being on the creditor side). Any insight on corporate credit risk at BB's and exit ops would be greatly appreciated!

 
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I’ll weigh in as best I can. I’ll be honest, I think the internal bank risk skillset is largely about enforcing compliance with the banks rules and regulations which are largely a result of federal regulation. The senior risk officers are sharp and have a deep understanding of risk assessment but I think it’s a different skillset than being on the side of direct negotiation and marketing of a credit. 
I have deep respect for the risk side and it can be a career, but I don’t think it beats front office in the actual creation and defending of underwriting, modeling, or deal execution. 

 

Can agree, buddy of mine did IB credit and he said he was never involved in the deal process b/c everything is done by IB. Also, minimal learning b/c most IB credits are high rated so your work will the same. 

Better to go corporate banking route to actually be involved in underwriting process and due diligence. 

 

Fully agreed, and the main reason why I moved from IB credit risk to LevFin. It would have been very tempting to stay in a place where I could perform well and be (somewhat) well-paid for relatively low effort on my part, but the policy- and compliance-driven nature of the work meant that it was very repetitive and boring. I fully respect the people in my former group, but it wasn't somewhere I wanted to be long-term.

 

I'm in BB IB corporate credit risk (think GS/MS/JPM) and echo many of the statements above. That being said, YMMV depending on the firm you're at. At my shop we're fairly involved in the deal process, do most of the underwriting memo ourselves, and do some modeling (particularly for portfolio monitoring). We also do mostly NIG deals and see a variety of structures. Most common exits are internal mobility to front office roles (particularly IB coverage and LevFin), but I've seen some exits directly to MM PC funds and know of one guy who exited directly to a distressed/special sits HF. Analysts fresh out of college can lateral to a good IB team (I've seen BB/EB) after a year without too much difficulty (at least prior to the 2022 market slowdown). Our workout team is mostly VPs and above, but the last two juniors they had on the team exited to MM PC. I'm looking to make a move myself because the work gets repetitive over time and I'd like to be more involved in the structuring/execution of deals (whether buyside or sellside). The pay is also quite bad (our total comp is around ~50% of IB coverage while working ~65-75% as many hours). 

Overall, not a bad place to start a career in finance if it's the best opportunity you can find. It's a good way to gain some fundamental corporate finance skills and find out whether you're a "credit" person, and it doesn't require the same commitment as IB given the lower intensity and fewer hours. 

Note that I've heard other BB credit teams do a lot less work (with IB doing almost all the work and credit being a review/challenge function) for better pay than my shop, with the only downside being that they gain a less robust skillset and consequently may have a harder time finding good exits.

 

I have pivoted into IB from Credit Risk Management and can support some of the arguments above. It's a great learning opportunity and the responsibilities/involvement really depend on each bank (I was at a BB at the time when Credit actually owned the modelling, now that has changed). Internal transfers were not very common. On the bright side, getting to do the modelling, risk profile, proposing whether to lend/not lend to a corporate gets you good experience for jobs in Private Credit (have met lots of people at KKR, EQT that have done Credit Risk and then pivoted to PC). On the other side,  I've had my fair share of stigma for starting in Credit and can say that pivoting in any front roles / buy side will be a challenge, although not impossible.  

It really depends on what is your game plan and what is the necessary skillset you need to acquire for the job you want to have in the long term. A job in Credit Risk might be better if you want to do Private Credit, rather than DCM or ECM. RX would be harder to break in from Credit, even though your skillset would be more applicable vs IB (don't hate me for this comment - speaking from my experience here), but they'd still prefer front office experience. If you have a chance to go directly to LevFin - this is of course much better than Credit with better options to exit into Buyside or RX.

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