Credit Analyst interview questions

Hello,

I just found out I have a rather long in person interview for a corporate credit analyst position at an international IB. what kind of technical questions might I expect to get? The position is in lending, not research or S&T.

18 Comments
 
Best Response

-Walk me through a DCF -Why Credit / Banking? -What would you use to determine leverage? -Walk me through the three financial statements and tell me how they relate -What are the three types of valuation techniques and when would you use each -Know how you might be able to mitigate particular risks

....I highly doubt they would expect you to know all of these, but just in case, these are the most difficult I could think of. You can find great answers to these on here and on the web. Good luck, hope you do well!

 

Ok thanks! Just to be clear, this is for a lending position, not a research/s&t position. Does that change anything?

"There's nothing you can do if you're too scared to try." - Nickel Creek
 

Do you mean credit analysis looking at underwritings/loans? Depending on your coverage, you'd want to know the key risks (qualitatively speaking) for companies in a specific sector and what could cause gaps in earnings/cash flow/liquidity. Moody's/S&P reports are a great reference. How to do a DCF is less frequently asked because sector team will be building those, but more importantly, you should know what to look for in a DCF/comp model (ie. cash flows, covenant headroom, loan amortization payments, revenue driver and cost assumptions etc). Also, which variables could you run sensitivity analysis on (ex. interest rates, key assumptions). Know how to identify structural subordination on the debt side and what covenants might be useful in mitigating those. Regulatory risk is also important to know if you'll be covering EM jurisdictions (for collateral enforcement), but this comes with experience and is harder to just read about imo.

 

Thanks! Yeah this is for underwriting/loans. I just pm'd you with some questions.

"There's nothing you can do if you're too scared to try." - Nickel Creek
 
"Aquitaine"

Do you mean credit analysis looking at underwritings/loans? Depending on your coverage, you'd want to know the key risks (qualitatively speaking) for companies in a specific sector and what could cause gaps in earnings/cash flow/liquidity. Moody's/S&P reports are a great reference. How to do a DCFs less frequently asked because sector team will be building those, but more importantly, you should know what to look for in a DCF/comp model (ie. cash flows, covenant headroom, loan amortization payments, revenue driver and cost assumptions etc). Also, which variables could you run sensitivity analysis on (ex. interest rates, key assumptions). Know how to identify structural subordination on the debt side and what covenants might be useful in mitigating those. Regulatory risk is also important to know if you'll be covering EM jurisdictions (for collateral enforcement), but this comes with experience and is harder to just read about imo.

"JuicyJuice"

-Walk me through a DCF-Why Credit / Banking?
-What would you use to determine leverage?
-Walk me through the three financial statements and tell me how they relate
-What are the three types of valuation techniques and when would you use each
-Know how you might be able to mitigate particular risks

....I highly doubt they would expect you to know all of these, but just in case, these are the most difficult I could think of. You can find great answers to these on here and on the web. Good luck, hope you do well!

So would typical IB prep guides work since they'll be asking about valuation models?

This is for commercial loans.

**How is my grammar? Drop me a note with any errors you see!**
 

Know your Accounting Basics, and all that accounting stuff you'd find on the IB prep packs. Once you know that just chill out, and make them love you.

**How is my grammar? Drop me a note with any errors you see!**
 

A few thoughts off hand: - Why credit vs equities? - Thoughts on markets (default rates, Treasuries, etc) - Companies/ Sectors you follow and what you like/dislike - Might ask you your thoughts on a company with xyz traits and what key factors you would want to analyze

Good luck.

 

crazyb, thanks a lot for the response. Regarding your fourth point (knowing key factors that drive credit prices), any suggestions on how to prepare? (I'm already planning to go through Fabozzi's Handbook of FI Securities this weekend.) It's an entry-level rotational program, so I don't think it'll go that in-depth, but I'd rather err on the side of caution. Thanks again.

 

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