Commercial Banking Question

I recently received an commercial banking offer from one of the BB. It has a great credit training program. However, I'm worried that the lack of exposure to the markets will present problems for me down the line as I try to move into research, am, or something along those lines. I was hoping to get some opinions on the opportunities the commercial banking can present.

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Comments (15)

Best Response
Mar 16, 2013

Depends on the BB you're talking about. These "commercial banking" roles that are so often spat upon by the unemployed college students of WSO can be some of the best seats for junior bankers on Wall Street.

Look, big banks lend to corporate clients for wide variety of reasons (well, really just one reason, to make money, but there are many ways to make money as a lender.) To me, "commercial banking" implies that your P&L is coming from the carry on the facility, you're not throwing a bone so you get kissed on underwriting fees. If that's the case, you're in great seat for research. Research is about understanding companies, and nobody on Wall Street understands companies like the people who do real, intelligent, credit work around them. The best credit work is done by commercial bankers, because that's their whole P&L (iBankers get sloppy on credit because you're scrapping for the banking fees, and sloppy credit work that lets you get aggressive on your client's corporate revolver often means meaty fees on their next acquisition.)

How good of an offer this is depends a lot on the bank (Wells and JPM are best in class) but I'd go out on a limb and say you'll learn a whole lot more about real finance in a BB front office commercial banking role than a BB investment banking role during summer internship. Take it seriously - you're lucky to have this opportunity. It will teach you a real, valuable skill set and keep you from blindly accepting being another pitch book turning replacable cog in the iBanking machine.

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Mar 16, 2013
NYCbandar:

Depends on the BB you're talking about. These "commercial banking" roles that are so often spat upon by the unemployed college students of WSO can be some of the best seats for junior bankers on Wall Street.

Look, big banks lend to corporate clients for wide variety of reasons (well, really just one reason, to make money, but there are many ways to make money as a lender.) To me, "commercial banking" implies that your P&L is coming from the carry on the facility, you're not throwing a bone so you get kissed on underwriting fees. If that's the case, you're in great seat for research. Research is about understanding companies, and nobody on Wall Street understands companies like the people who do real, intelligent, credit work around them. The best credit work is done by commercial bankers, because that's their whole P&L (iBankers get sloppy on credit because you're scrapping for the banking fees, and sloppy credit work that lets you get aggressive on your client's corporate revolver often means meaty fees on their next acquisition.)

How good of an offer this is depends a lot on the bank (Wells and JPM are best in class) but I'd go out on a limb and say you'll learn a whole lot more about real finance in a BB front office commercial banking role than a BB investment banking role during summer internship. Take it seriously - you're lucky to have this opportunity. It will teach you a real, valuable skill set and keep you from blindly accepting being another pitch book turning replacable cog in the iBanking machine.

Not to derail this thread, but I was wondering if, in your opinion, a successful stint in commercial banking can also lead to roles in project finance or "higher risk" lending deals so to speak. To be a bit more specific, I'm really interested in infrastructure and I could see myself potentially doing something down the road that involves assessing various infrastructure projects and determining whether or not it's worth lending/funding them. Aside from infrastructure, I could see myself also doing this for various high-risk, longer-term projects in other sectors as well and I was wondering if this path could be a possibility after doing commercial banking in case I end up pursuing this route. I'm still at the stage where I'm trying to figure out exactly what I want to do with finance, but I wondering if you or any other user had any insight on this.

Thanks!

Mar 16, 2013

Again NYCbandar with a solid post.

To add to one of his points that was critical, even if you go in as a credit analyst, you aren't purely analyzing financials and credit metrics (though that is a large portion). When a bank evaluates a commercial lending opportunity, it challenges assumptions and builds various scenarios given potential downside risks that could occur within a specific vertical that the target operates.

For instance, if you have a private label orange juice manufacturer, the bank needs to understand supplier risk, customer risk, commodity risk, industry trends, etc. along with the company's financial position, asset values, etc.

These are all transferable to the equity side of the capital structure IMO, because you care about the ability of the company to deliver future cash flows, earnings, dividends, etc.

Mar 31, 2013

I think nycbandar is dead-on. The commercial banking role does teach you a significant amount on understanding how businesses work, which is the basis of all entry-level finance roles. However, there are some limitations as to the deal exposure you will receive. Most deals will involve simple products like revolvers, term loans, term loan lines, and fx facilities. So you wont get to see complicated transactions like you would in the corporate bank or ib, but the level of detailed analysis is greater due to the privacy of companies youre working with. Commercial bank = greater risk.

On a similar note, I have a question i'm hoping to get some advice on...

I'm a year out of undergrad. Currently a credit analyst for a BB. Most of the position requires detailed company analysis, financial projections, and risk analysis. Just got out of the three month formal training program mentioned above, which I hear is very valuable. Im hoping to be able to leverage that in order to transfer into ib. I haven't seen much about this particular transition, and was wondering if you could shed some light on it. Is this common? What skills would be transferable? How do ib's view the training program?

Thanks

Nov 18, 2013

To be honest, IB's are likely indifferent to the training program on paper. If you manage to get the interview you can leverage it by discussing what you learned though. IB are typically snotty towards CB. IB is a pretty prestige driven (stuck up) industry as a whole.

That said, I'm going from IB to CB...while I love having the IB on the resume...I want to live and enjoy life.

Nov 18, 2013

No evidence here, but off the top of my head I assume that you may be more eligible for DCM type IB roles. Have you considered those?

Nov 18, 2013

Looks interesting, I will look it up in depth. thanks!

Nov 18, 2013

As I said, just my opinion and not cold hard facts, but look into it. Speculating again, but if your ultimate goal is a different part of IB, perhaps you could break in through DCM to get there. However, that would be time consuming. What are your end goals? IB to stay in IB, or to go somewhere else after?

Nov 18, 2013

Pm me. Made the switch.

Nov 18, 2013

I switched from Corporate Banking to IBD. Feel free to pm me.

Nov 18, 2013

Can be done (Did it from an RE role). Perseverance and timing as they say....

Nov 18, 2013

deleted

Nov 18, 2013

I know a couple people who did. It takes a lot of networking and visibility to make that switch. Both times I believe an analyst left and they needed a spot to fill, and the corporate banking analysts expressed their very strong interest to the IB group.

Nov 18, 2013