AMA: I’m a 2nd-year Associate in Corporate Banking with an online MBA

Rhodium's picture
Rank: Senior Baboon | 229

Hello WSO,

This AMA is a follow-up thread to one I wrote a few years ago while in an online MBA program (AMA - 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 AMA regarding online MBA programs, I thought I would make a refreshed thread.

AMA.

Comments (33)

Dec 28, 2017

Guess I'll start it off. What's a typical day like for you? **

Best Response
Dec 29, 2017

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.

"Apparently there is nothing that cannot happen today."
-Twain

    • 3
Jan 3, 2018

Hi Rhodium,
First of all, great thread. From my experience (1st yr associate corporate banking) all the info is pretty much bang on.

Could you share your opinion on the difference between the role of 'origination' and 'credit portfolio management' or perhaps put in a different way 'structure & syndication' and 'credit port mgmt'.

While I understand what each role entails in the day-to-day, I'd like to have your opinion on how careers evolve in each of those branches. Would you say that one generally attracts brighter people? Which side would you pick and why? To which side do you see the rockstars in corporate banking gravitating?

I have been giving it a lot of thought but was not yet able to come up with a coherent answer. When I have an opinion worthy of sharing I will do so!

Rhodium:

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.

Dec 29, 2017

Appreciate you giving back to the community! Generic questions for an online MBA as I've been looking at these recently. I read your previous article but hoping you can elaborate:

-How much do you feel the online MBA contributed to your CV overall?
-Have you learned anything that would change your decision on UNC vs. Kelley?
-With your 720 GMAT were you able to secure solid reductions in tuition from places you were interested in? I'm scared the 100k+ online mba from UNC is unreasonable.

Thanks again for the AMA!

    • 2
Dec 29, 2017

Thanks for the questions.

I think now that I'm out of b-school a couple years, it has definitely enhanced my CV. I came into finance straight from B-School with no relevant experience and within 2 years I was promoted 2x to a role that normally requires ~4-6 Years of industry experience.

I would still go to Kelley, because it is more recognized in my geography, but if I were planning to be in the Southeast, I'd probably bite the bullet and do the more expensive UNC program.

I received a fair tuition reduction, but it was still a big slug. IIRC my reduction was ~15%; enrollment numbers have gone way up though, so I imagine reductions are more competitive now.

"Apparently there is nothing that cannot happen today."
-Twain

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Dec 29, 2017

Can you comment on your bank's credit policy? BB&T is well known as very conservative as is US Bank, whereas Citizens and Regions are both known to be aggressive and SunTrust more down the middle.

What leverage point will you go to? 3.0x total? 7.0x?

Cash flow lending mostly or ABL or otherwise non-EV collateral backed?

Are you organized by industry coverage or regional coverage?

    • 2
Dec 29, 2017

We have a bit of an odd-ball credit appetite where some things that are pretty low risk are heavily scrutinized (example would be tech hardware companies - we don't like them, and there's a constant struggle to get these deals done; I think it's because we have a lot of old people running the credit department). On the flip side, we do some deals that are probably higher risk than we are accounting for. Generally speaking, I'd say we tend to fall slightly on the side of conservative.

I'm in a cash flow / EV group. We do secured deals sometimes, but we don't really rely on collateral much; we have separate groups for ABL, equipment, and real estate notes.

Regarding leverage, if cash flow leverage is > 4.00x we struggle to swallow, unless it's a collateral reliant deal, or a midstream energy company. I've seen as high as 6.00x get done on a cash flow deal (one that we actually ran left on), but we had a hard time selling it in the pro rata market.

If there's a sizable slug of mezz with PIK or converts, we have a bit more flexibility in doing >4.00x total leverage, as long as senior debt is reasonable and we get paid well on the deal. We also can place TLBs and 2nd lien debt through our fixed income sales desk, so we have a solution for most corporate borrowing needs, but it's going to cost most if funded leverage is >3.0x.

Edit: almost forgot, I'm in a geographic group in "diversified industrials." TMT, oil & gas, etc. have industry alignment rather than geographic. Anything that doesn't fall in a specific sector coverage team is aligned by geography.

"Apparently there is nothing that cannot happen today."
-Twain

    • 1
Dec 29, 2017

And I thought the shop I was at was conservative when we struggle to get to 4.5/6.5 (senior/total) with a solid sponsor in a solely EV reliant group. I'd say a good ~50% of what we underwrite is TLB or bridges. The rest being vanilla TLA and R/C. Mind if I PM?

    • 1
Dec 30, 2017

Thanks for doing this AMA.

I just graduated with a BSc and zero banking experience, however, I'm studying for the CFA L1 and doing some reading to learn the basics of corporate banking.
Recently, I applied for a corporate banking analyst role with a group focused on oil&gas and I think I might have a good chance of getting an interview there - since I got some oil&gas internships as a geophysicist-.

Based on your personal experience getting your job, do you have any suggestions on what I should study -or focus more- for this interview? Thanks!

"Drill, Baby, Drill" - Sarah Palin

Dec 29, 2017

Do you know what group within oil & gas? There's quite a bit of variance between what's important to know for, say, an exploration and production company vs a midstream. If you don't know the group, I would say focus on knowing how various segments of oil & gas industry fit together, what acceptable leverage ratios in each sector are, and generally how to make a basic 3 statement financial model.

"Apparently there is nothing that cannot happen today."
-Twain

    • 1
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Jan 1, 2018

Thanks for doing this- I think it is great seeing more corporate banking information on this site.

What do you think the biggest differences are, in terms of skill set/daily role, between a corporate banking analyst/associate and a middle market commercial banking associate? My end goal is to work in corporate banking either on the credit or sales side. Right now I am hoping to secure a job at a $25B bank as a middle market associate in commercial banking.

What do you see being the biggest hurdles in moving from a middle market associate to a corporate banking associate?

Thanks again,

Dec 29, 2017

Hi OverCompensatedTeller,

Middle Market / Commercial is a very broad area. Large middle market lending takes on a lot of similarities to Corporate, with the major difference between borrowers in this sector and corporates being access to capital markets. For someone in this sector, in my view the hardest hurdle to cross will be competition: there's a lot more employment in middle market lending because the transaction volume is quite a bit larger (dollar volume is comparable on a macro level, but there are so many more smaller deals in commercial, so there is more human resource requirements generally speaking). At some level, fundamental credit analysis is scale agnostic, with the exception that refinance risk is much different between a small borrower and a large one with access to institutional investors and shadow bank markets.

Small commercial lending (often called "business banking" at BB and super-regionals) would probably require a step to larger middle market before transitioning to corporate. Business banking is more closely tied to consumer lending in terms of skill set because its generally score-card based (and usually requires a personal guarantee from the business owner). Given the massive amount of data on default rates of small businesses, it is much more statistics-oriented/computer-automated decisions and requires less fundamental credit knowledge.

Easiest transition to corporate, in my opinion would be a lateral transfer at the same bank from large MM to corporate. Networking and following the markets would both be key o differentiate yourself from all the other MM associates that want to chase the bigger dollars and "sexier" deals.

Hope this helps!

"Apparently there is nothing that cannot happen today."
-Twain

Jan 1, 2018
Rhodium:

Hi OverCompensatedTeller,

Middle Market / Commercial is a very broad area. Large middle market lending takes on a lot of similarities to Corporate, with the major difference between borrowers in this sector and corporates being access to capital markets. For someone in this sector, in my view the hardest hurdle to cross will be competition: there's a lot more employment in middle market lending because the transaction volume is quite a bit larger (dollar volume is comparable on a macro level, but there are so many more smaller deals in commercial, so there is more human resource requirements generally speaking). At some level, fundamental credit analysis is scale agnostic, with the exception that refinance risk is much different between a small borrower and a large one with access to institutional investors and shadow bank markets.

Small commercial lending (often called "business banking" at BB and super-regionals) would probably require a step to larger middle market before transitioning to corporate. Business banking is more closely tied to consumer lending in terms of skill set because its generally score-card based (and usually requires a personal guarantee from the business owner). Given the massive amount of data on default rates of small businesses, it is much more statistics-oriented/computer-automated decisions and requires less fundamental credit knowledge.

Easiest transition to corporate, in my opinion would be a lateral transfer at the same bank from large MM to corporate. Networking and following the markets would both be key o differentiate yourself from all the other MM associates that want to chase the bigger dollars and "sexier" deals.

Hope this helps!

Thanks for the response. Do you have any idea what the comp structure looks like for associates at the middle market commercial level in a low COL city?

Jan 1, 2018

Rhodium,
Thank you for sharing your experience. It means a lot. I remember reading your first post when you're trying to break in the industry and is kind of amazing to me everything that happened since then. I'd like to share some info about myself and get an opinion about real chances of break in investment banking. I'm 32, finishing my MSF (also from Kelley, online) and recently, working for one of the big four banks in retail (as a "preferred" client banker). I used to be an unvestment consultant for a brokerage company (I have my series 7, 63 and 66), but I moved to NYC (4 months ago) and couldnt find a similar job so I took the above-mentioned one. I'm a foreigner and have been living in the US for only three years, which makes my previous experience in accounting of no help. I'm also a CFA Level II candidate (planing to take it next June). I don't know what approach to take. It seems like I'm too old to be an analyst, but my working experience is not enough to apply for an aaaociate position (or at least that's how it looks when I see position's requirements). Do you (or any of the readers) have any advice? Should I aim for internal opportunities in this big bank, or apply for those positions in smaller institutions? Or even more, do you all think I still have chances or I'm losing my time? Thanks in advance. Appreciate all the inputs

Dec 29, 2017

The hard truth from my personal experience is that you will have an exceptionally hard time trying to get into IB at your age unless you have directly related experience and get get an associate role. Pretty much only way I can see would be to network like hell, continue learning everything you can about the industry, use the alumni network and any resources available to you at your current bank. Even with all that, the odds seem slim to me. Crazy things do happen though.

"Apparently there is nothing that cannot happen today."
-Twain

Jan 1, 2018

Rhodium, what kind of modeling do you do? I do not have a lot of experience modeling however am looking to take some courses that would provide be the skillset necessary for corporate banking.

Thanks again!

Dec 29, 2017

General 3-statement financial projections models. Usually we have a less optimistic view in CB on these than you see in ER or IB because we're primarily concerned about downside risk (at least, on balance sheet deals--this is because we have no upside, either we get paid back principal + our spread, or we lose money).

We also have internal models for estimating probability of default and loss given default, from which you get expected loss -- this helps us decide where to price the spread. We don't actually create those models in Corporate Banking, but we use them, so a fair understanding of statistics / regression is helpful but not necessary.

Often do some ad-hoc analysis too - equity comps, dcf, high-level market stuff, etc. These things are mostly learned on the job (except, definitely know how to do a dcf; you will probably be asked about it in interviews even though we don't use that often [at least, not outside of estimating Enterprise Value on private conps] but the interviewer will probably use a proxy to seeing if you know how to model).

Edited for spelling.

"Apparently there is nothing that cannot happen today."
-Twain

    • 1
Jan 5, 2018

Any idea if you're going to be a credit/portfolio lifer or try and make the sales jump? This tends to be the make or break decision as far as CorpB and CommB are concerned.

Dec 29, 2017

I plan to jump over to RM/BD at some point, but my role is kind of a hybrid position now. I'm client facing, but my tasks are primarily credit oriented and primarily around existing clients or new prospects only when there is an active credit request. At my bank, pretty much all Analysts and Associates do PM first, then either become senior loan underwriters, credit officers (at like 7+ years experience), or jump to full business development / RM roles (or leave the bank).

For me, if it came down to being a "lifer" in credit on the corporate banking side or going into BD on the commercial side, I would choose corporate credit. I just don't have much interest in the small companies. Plus, at least at my bank and a few peers that I've looked at, corporate Banking PMs have similar salaries to RM/BD and decent bonus structures. While RM definitely has more bonus potential, I'd still take corporate PM over commercial RM.

"Apparently there is nothing that cannot happen today."
-Twain