In the spirit of sharing, I figured I would set up one of these to help out those interested in learning more about Commercial Banking. As there is no separate sub forum, it is hard to find up to date/current info. Commercial Baking isn’t super sexy like IB, but it’s a good W/L balance gig that pays well.
A bit about myself:
I am a SVP with a top 20 Bank (both deposits and assets). I’ve been with the bank for 10+ years and manage an underwriting team. I have experience in specialty lending as well as core C&I (i.e. Middle Market). I am also one of our business line approvers with a $30MM+ pen.
I took the traditional route to get where I am, formal credit training program, analyst, Portfolio Manager, Senior PM, Team Leader.
I also frequently sit on our super day committees for the incoming analyst class (in addition to interviewing).
Feel free to ask anything.
Depends on the group but you are primarily responsible for underwriting new and existing transactions (in conjunction with a PM), maintaining the credit files (electronic),quarterly file updates, and all the other non transferable systems admin crap.
The amount of underwriting you do is depending on the group. Some are more busy than others (CRE or ABL vs middle market for instance). IT also depends on your specific PM pairing. Some only give out sections of an approval package to work on (background industry, etc). I used to have you tackle the whole thing and edit. I felt you learned more that way. Different groups are more model dependent than others. While its great if you know how to build one from scratch, We have canned ones that don't let you tinker with the formulas.
Not mentioned above but something to think about is the level of customer contact you get is going to be dictated by how busy your group is. the busier the group, the less you get out. Also, some of our groups are national so you will see customers less. Groups like Middle Market see customers a ton. I used to go on calls alone as a PM when i was in that group.
I think it's bank specific. Typically it's used to separate smaller deals (MM regional banking) vs large Corp. It's pretty interchangeable in our shop and I would assume it's the same in most regionalized banks vs BB. Sometimes it's used separate commercial smaller deals from leverage, structured finance, sometimes REIT CRE, and very industry specific groups.
The rule of thumb is corporate banking comp is better.
I'm a SVP Market Manager on the sales side at a large community Bank. Our Bank deals with clients typically up to $250MM revenue and/or credit needs up to $40MM. Our sweet spot is deal sized $2MM-$10MM.
As op mentioned - money is on the sales side. Make no mistake - you only need baseline accounting and finance skills. The guys crushing it pay no mind to the details and our purely out there making sales calls.
My all-in cash comp is roughly $250K in a very low col city (albeit it in California - nothing is really cheap here). Stock and retirement adds another $55K.
What was your career path? Also, does your bank have any former BB guys that have transitioned over?
My President / CEO and most of the executives he brought with him came from BofA's middle market group about 20 years ago. They were tired of the beaucracy and were tired of not being able to properly service the clients. Community and Regional Banking is a much different world than Corparate Banking but make no mistake - there is still plenty of money to be made and exciting deals to get into. I just wouldn't go to a Bank lower than $2B in assets. Those less are getting eaten up by compliance and this prolonged low interest rate cycle. Not to mentioned they are capped on legal lending limits. Pay can also suffer at the really small shops.
Started as a Credit Analyst doing spreads and then moving to low complexity renewals. We had a formal training program that rotated you around different departments but most of my time was spent as a Analyst before progressing to a Jr RM.
Exit opps from a commercial banking rotation program at a BB?
So this is going to come off harsh but hear me out.
Your only exit op coming out of a rotation program is/should be the LOB that they put you in. You literally know nothing and haven't even given the bank that selected you a year of productivity. Give it a few years see if you even like the job before scheming to leave.
I don't mind talking exit ops with people who have experience but there is way to much focus from young people on where they can get to next without actually spending any time in their current role. It's distasteful.
Feel free to send some MS my way.
You want to go to DCM? You should be networking like mad or get in front of these groups prior to their hiring cycle. Do you expect a return offer from your current internship? If not (due to them not taking anyone, not performance) see if you can get some of the guys there to connect you with DCM folks at bigger banks. Everyone knows each other.
You're going to be targeting BB banks and the larger regionals (PNC, sun trust, CFG, etc.). They get 100s of applicants who have been IB interns and come from semi targets. You're biggest challenge is even getting in the door.
You've got a tough road ahead, Good Luck.
YMMV, but I know that our DCM group doesn't do fit interviews. They pound modeling (three statement, DC, etc.) Make sure you know this stuff backward and forward.
CB SVP my sincere thanks for doing this, prior to this AMA we did not have this type of content from someone at a senior level.
Couple of questions / observations:
Whats kept you at your bank all of these years as opposed to lateraling around.
Am I correct in assuming you are in your low 30s (assume this as you worked your way up out of undergrad). If so, congrats on the rapid career progression, feels that most folks are at the PM / Senior PM level 10 years in if they stay on the credit path as opposed to being a TL.
Who writes the credit memo in your group? This seems to be the biggest difference between CIB and Cb. In CIB you can get out of memo writing as early as the Associate level and review Analyst work & direct their traffic. PM is getting the memo only after Analyst wrote it and Assocoate scrubbed it and all the numbers are correct. Some CB shops have a Underwriter position where folks can spend years writing the memo until they get promoted out of PM. Other shops are more flat and have only Analysts & PM and PMs are still doing memos and have no way to promote out of it. I'm not a big fan of the latter structure as there is no career development in writing memos beyond doing it for a few years. There is development in seeing, structuring, and working on different transactions over the years, just not in the memo component, IMO.
How does your group interface with RM / coverage. Are you viewed as the credit products partner and own the process (similar to how a DCM/ECM banker owns the process and RM/coverage know it's their show and stay out of the way) or do the RMs get more involved in credit and think they run the process? I've been at shops where coverage just brought in business and credit handled whole process soup to nuts without coverage involvement and also at a shop where rMs think they own the credit process and view PM as an underwriting resources (inspite of PM being much more knowledgeable than the RMs).
Technicals: Is your your group big on doing your own quantitative analysis and having your own view around EBITDA and financial ratios, FCF, etc or are people relying on covenants to analyze the company. I've seen some groups regurgitating company provided ratios, EBITDA instead of doing all work. Covenants will be doctTed by market convention (I.e. Dropping a covenant or watering it down) and will be calculated differently for each client, so this was something I had a big issue with. For internal memos (for own analysis, not covenants) are you guys using top down or bottom up EBITDA
I noticed that outside of a structured role, career progression on the commercial side as compared to the corporate side (meaning corporate credit / coverage that rolls up to CIB) is much more haphazard. Typically folks can spend different amounts of time as a junior banker prior to getting promoted to more senior roles where they are running the transaction process and managing analyst workload. Comp tends to vary a lot as well, with mostly inflation adjusted raises and a random larger increase of 10-20% every few years or during a promotion. In contrast CIB credit/coverage has a predetermined career progression An1-3, As1-2, VP with a predetermined base salary and bonus range for each level.
-Seems that the best way to advance quickly on the commercial side is to move around and get promoted and a sizable comp step up each time. For instance, I know plenty of folks who have 8-10 years of industry experience and make low 100s all in due to being at the same employer for a while, spending too much time with annual reviews and analyst tasks, and lots of 2% pay raises YoY.
-I hear you on junior bankers quitting at the Analyst level and not showing commitment. Part of the issue is people settle for jobs due to not being able to get what they want out of undergrad and then jumping if their target industry offers a role. There are people who want IB and couldn't get it so take CB and then jump when they can. I saw a few quit the formal credit training program 6 months in and do something else. Personally, I never wanted IB and targeted CB as I considered it the best comp/WL balance job that lets you do interesting work outside of the elite finance jobs (IB, PE, HF, ER, MBB consulting)
-Having spent time on the both commercial and corporate side, I can reflect that analysts are given more responsibility, challenged more, and paid more on the corporate side that rolls into CIB. For example, on the commercial side, analysts typically do risk ratings, quarterly updates, annual reviews, administrative internal tasks for the most part and work 9-5. Some banks have an Underwriter/Senior Underwriter position that focuses on new deals. Others have Analyst - PM. In CIB analysts have to do all of the above but they also own the credit memo and the underwriting process whether it is a new deal, renewal, or AR. They will take the first shot at putting the entire memo together soup to nuts including running the model. Once that's done, the Associate will review their work, make sure all of the numbers are correct, and then send to the PM for approval. As a consequence, analysts work longer hours on the CIB side as there is more expected of them but they also are paid more. If analysts do not have a good grasp of modeling, memo writing, attention to detail, they won't be promoted to associate or held back (this happened to someone in my group). As a result, CB analysts seem to be more "protected" and actually have better hours than the Underwriters or PMs who are actually writing memos or running transactions.
-From what I've seen there is more analytical rigor at the CIB vs CB credit level. There is a big emphasis on historical FCF analysts and bridging from Adjusted EBITDA to FCF and making sure the #s are right. Modeling is more in depth and closer to what is done on the IB side. As an example, having grown up on the Analyst&Associate ranks and joining a new group with a CB structure, folks in my group were not as familiar with EBITDA-FCF and modeling, whereas I learned to even build a modeling template rather just running numbers through one.
• Mid 30s. grad school 1st. stayed here partially because of the recession when I was younger, then I bought a house, got married, and was given opportunities (see: more money) for growth. Not that I didn’t flirt with a few other places.
• Pretty flat org. Analysts and PMs write memos. PMs typically only write new complex stuff with analyst doing the more mundane. But that’s a team by team thing. And you’re correct. Its not ideal and leads to job stagnation, and disillusion. • The RM/PM interaction is group, team, and individual relationship dependent. As a PM I have worked with RMs who do all the initial modeling so they know it cold and I have worked with RMs who don’t even call into to loan approval committee. Is an individual case by case process. Ideally, it should be pretty hands off on the RM side unless they are working with a Jr guy. As you progress, you 100% want the second guy. The 1st guy tends to want to drive the process (see the memo/make comments etc.) • Internal memos, top down EBITDA. But covenants are almost always written bottom up. Its stupid but I think defining operating CF is troublesome in loan docs. We do our own CF analysis. No reusing their ratios. But they should foot (or be close). • We are trying to get better at that (at least at the jr level) with predetermined progression. Once you hit Sr associate its not guaranteed to VP. The term haphazard is a pretty good one and described what it was like when I was coming up. • Moving around is always the best way to make more money whether you are a banker or engineer. Just a word of caution, it’s a small world and if you are in a secondary city, an even smaller one. No one begrudges you moving for a promotion but to lateral for $10k isn’t a great idea. • I’m ok if people don’t want to do CB and leave the industry after 18 months. No reason to do something you don’t want to. I blame the interviewers for someone leaving a rotation program in progress. You did a shitty job screening. But focusing on exit ops before you even finish a program is crappy. You don’t even know if you don’t like the job yet. Give it a chance. • The true analyst, associate, vp structure is superior. Its also more costly. Id love to do it here (some groups are better about it than others) but we have too many VP level C+ PMs that need to be culled.
• To me Commercial and corporate are interchangeable unless you are in DCM/Lev/or some very specific specially. Those groups are almost always looking at EBITDA multiples hence the focus on true EBITDA and CF. lower end MM is focused
CB Analyst here.
I think Analyst level work (annual reviews / credit memos and general portfolio management task like risk grading, ancillary product grading, etc.) can be mastered in two years. I'm a couple of months into Year 2 and I'm definitely still learning. My bank does not promote Analysts to Associates until after 3 years (no exceptions) and a lot of people (80%) move elsewhere after two years so turnover is high.
I make somewhere in the neighborhood of $68-$72K base. I've flirted with a few opportunities and ultimately declined because I felt like the brand name and deal flow at my bank would pay off more in the long run, but it seems like unless I move to another bank, it'll be a couple of years before I even hit $80K base.
Opportunities that recruiters have reached out to me about in the past: (I either interviewed and turned these down or declined to interview due to fit)
1) Associate / AVP role in a Commercial Card underwriting group at a regional bank - $80K base 2) Corporate Loan Ops at BB - $75K base (def did not interview) 3) Micro Lending startup Credit Risk role - $70K base 4) Super regional bank(s) Analyst offers ($73-76K base)
For what it's worth, I started at a blue chip BB in a top group and what I learned was absolutely crucial to set me up now. Since then, everywhere I've gone, there has always been a big difference in what I am able to do vs peers that did not have a similar upbringing. We did not pay the best, though comp was decent and we had annual base increases of 10k but started at a base that was below market hence 10k base difference across the Analyst levels and 20k at the Associate level. However, the exposure I got made up for it in spades.
My advice is stick it out until you make Associate or even a bit longer if you can. After that you can always move to a different shop and get a big pay bump. But it's better to do it when you are out of the production role (writing memos, etc) and more of a VP position where you can direct traffic. At least from my experience the quality of work and peers were of higher caliber at my Bb then where I've gone to after. At some point you've learned enough and it's time to get paid, but in the beginning it's crucial and can set you up to leapfrog others. If I could go it all over again, I'd have stayed at the Bb longer but I relocated for personal reasons rather than comp / career dev.
Thanks for your insight, this is really in line with how I feel about the progression as well, having gone through the Analyst ranks.
I think the most important Analyst skills to pick up are financial statement analysis, modeling, and attention to detail. This is a very marketable skill set and opens a lot of doors down the road. A competent analyst will be very good at these things going into their associate year and in great position to coach other analysts (especially 1-2nd years) through this having become very proficient.
A super star analyst in a high volume shop with lots of lead mandates will be ready for Associate after 2 years IMO.
I feel fortunate for having started at a top industry vertical at a BAML/JPM/Wells where I picked up a lot of skills I would not have been able to get at my previous employers and also picked them up much more quickly.
I'm now sitting on the commercial side and what still amazes me are the CIB analysts I previously worked with have much better technical skills 2-3 years out than a lot of the folks that have been here for 5-10 years. Lots of B-C level PMs as CB SVP pointed out that don't really get the technical side of lending that well. To structure and execute these deals, especially sponsor deals, as a left lead, you really need to have a strong grasp of EBITDA & adjustments, modeling, docs, DCF&EV. I see lots of people fumbling through or looking to the MRA spreads for analysis (I don't use the spreads for anything, they just feed into risk rating). It's still a big culture shock to me even though I've been here for a while.
In all honesty, $1BN is a tiny bank. It will be virtually impossible to get to Large Corp or anything like that from there. There is a major big bank small bank bias. It will likely take you two steps to get there. you should be able to get an associate type role in regional bank (MM). I would target that, emphasizing the larger deals you have worked on and the customer interaction you have had. Both during the interview and on your resume.
My concern hiring you would be that you have spent the last three years doing $500K LOC and $2MM CREMs to Joe's pizza shop and Suzie's dry cleaner. not really applicable to anything else. you want to dispell this ASAP.
It can be done. I have a former coworker that has maneuvered himself from a small community bank to a VP DCM role. took some bouncing around and several years, but can be done.
A couple of questions/follow up points: - if you want to stay in that 40-50 hr W/L bucket, DCM and even Large Corp/Lev etc aren't going to be places you want to be. Middle Market would be a good fit, just LT dull. - what have you been doing for the last three years? what are typical deals for you? - do you have a network? that's how 90% of people i see move (and have interviewed) happen. - have you guys participated in larger deals with local banks? do you have contacts there? buy them coffee to see what their day is like? - don't sell yourself short. you are young. staying in credit/portfolio is fine, but see/experience sales. the culture is different at each shop. - DO NOT tell people you want to stay in credit at this stage of your career. you will not get seen as "high potential" etc and get second class tracked.
Hope this helps, feel free to PM me if you have specific questions.