Hello WSO, This Q&A is a follow-up thread to one I wrote a few years ago while in an online MBA program (Q&A - I'm an online MBA/MSF Candidate at Kelley). My plans changed and I ended up in Corporate Banking at a super-regional (think BB&T, Citizens, STRH, Regions Securities, etc.), which is within the IB group (e.g. not commercial banking) at my firm, but we have separate product groups for M&A and DCM/ECM. As I have continued to receive PMs on my original Q&A regarding online MBA programs, I thought I would make a refreshed thread. Q&A.
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If I’m staffed on a new balance sheet deal (where we’re providing financing for a transaction), I’m the lead person on financial modeling, negotiating legal docs with out counsel/the client/the clients counsel, as well as being involved in preparing internal docs to get our credit department on board with loaning to the entity. If a deal is highly complex, the modeling/legal docs take the most amount of work, but on average I would say new deals are probably ~40% modeling, 30% internal pitching to get credit to sign off, 20% legal docs, and 10% going on calls and talking to clients and prospects.
Second scenario for a typical day is working on a joint deal with our capital markets or M&A teams. On these deals, I work in coordination with CM/M&A on the models, they make the pitch book, and I handle getting our credit department to underwrite our piece of any debt financing that is to be used. The sr. Level VPs and higher in my department are generally the primary business development people, and we bring in CM/M&A primarily for execution.
On days that I’m not staffed on a new deal or a prospective new deal (pretty rare for me right now because we are a lean team), I could be doing anything from reading news/10Ks & 10Qs on our portfolio (~80 some odd companies) to doing one-off favors for MDs such as putting together reports on all the companies in a certain industry and region over a certain revenue size.
Right now, As an associate, my role is kind of a hybrid between origination and credit portfolio management. My next promotion point (12-18 months of my MDs continue to be happy with my performance), I will be placed on one side or the other.
There are other threads about compensation in my type of role that are fairly accurate, but to summarize: salary is roughly in line with true IB at my level, and at least through VP (I think director+ falls a little below IB). Bonuses are generally lower here, but there are outliers who make rain. I heard rumor about director in Corporate Banking at my company that pulled 250% bonus for 2016; which would be somewhere around $1MM. Also, cost of most of the cities we’re in is drastically lower than NY/SF/London - like housing costs are ~50% cheaper or more.
Also, hours are much lower in my world than in IB or even DCM/ECM. On an average week, I probably put in 70 hours and this generally goes down for VP+. My most senior MD probably puts in ~50 hours most week, including time out on calls.
Thanks for the question. At my bank, we have sort of a “hunter & skinner” model. “Hunter” is the originations side and “skinner” is, for lack of a better word without giving away my institution, the “portfolio manager.”
Origination side required skill set is pretty similar to IB. Successful originators are generating good deal flow both from existing clients and new prospects. Advantages of origination are that bonuses can be drastically higher, and it is generally very meritocratic — rainmakers get promoted fast, average to good originators rise somewhat slowly, and shit-shows will end up “resigning” or getting basically no bonus. Well-connected people generally do very well, and you usually find more extroverts and charismatic types on this side. On average, comp is better on this side (partially driven by survive bias, I.e. under performers leave so average comp of those who stay is pretty good). Also on average, people seem to advance faster — pretty in line with IB advancement.
Portfolio management / deal structuring / credit risk side: base salaries are comparable to sometimes slightly higher than the comparable experience tier on the originations side, at least in the beginning. However, bonuses are much lower - generally ~50-60% salary for senior (VP+) high performers; little lower for average performers, probably in the ~30-40% range. Also, advancement can take a lot longer because (a) people tend to stay longer because o fewer exit ops, (b) it’s harder to bemeritocratic in a non-revenue-generating role, (c) there’s often a perception that years experience = better pm, so high performers often either get slowed down by the advancement rates of more senior but lower-performing people or they just leave (usually to go to originations).
You find bright people on both sides, but on the PM side you usually find more of your stereotypical introverted finance nerds. Interestingly, though, some of the absolute best originators I’ve met spent 5-7 years working either in a true credit Analyst/Associate/Officer path, or in a PM/deal structuring role. I think this is driven by their ability to know what sort of deals they can reasonably expect to get done in the current credit climate, which allows them to focus on those with a high likelihood of success. By not spending time on overly exotic or complicated structures, they can churn out more volume (assuming they are still adept at finding deals and pulling leads...