What do you actually do in "corporate" banking?
I've seen some threads here for "corporate" banking, as opposed to "investment" banking... . what exactly do corporate bankers do? And anyone out there done both corporate and investment banking, and why did you like one more than the other?
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I THINK It's like consumer banking, but on a larger scale. You lend money to big companies, and help them with financing.
Basically IB is advisory (fee for advice) and capital markets (fee for structuring, underwriting, placement).
Corporate banking is generally lending with the banks balance sheet (interest income). Its business loans but for large corporations. Lines of credit, revolvers, working capital facilities, etc. Day to day it is a mix of portfolio management, credit analysis, due diligence, and relationship management. Most products are vanilla but it can become more complex when you are structuring large facilities that the bank will try to syndicate.
There are some grey areas which are usually considered part of IB such as acquisition finance, project finance. Generally depends on the bank how segregated these business units are and whether 'CIB' is a division or if IB is its own division.
Edit: forgot your other question. I spent ~8 months in CB before moving to IB. At a non-US bank where everything was lumped into 'CIB'. I found IB work to be much more stimulating.
Great, thanks for the insight.
Quick question, though -- I'm not clear on raising debt via IB banker vs. corp. banker. In other words, let's say bank client is Pepsi... if, as their corp. banker, you wanna pitch to them that rates are low so they should raise debt, why is corp. banker pitching it as something like a revolver, versus the IB banker pitching it as just a debt issuance? This is what I'm not clear on -- does corp. banker sometimes step on IBanker's turf, and vice versa? How does client know exactly HOW they want to raise the debt, and through which "department" at the bank?
Interested as well.
Interned in CB and petight above hit the nail on the head. To add: think of corporate banker as a point of contact for the overall 'CIB' that manages client relation and takes care of their day to day needs - working capital/treasury/LOCs. A big role of corporate banker is to anticipate other needs and bring in product experts (ECM/DCM/M&A). To your question, why raise debt with CB vs IB, well CB model is to lend to a company in hopes of future capital markets or M&A mandates. CB acts as an anchor. Balance sheet loans are restrictive so clients would want to issue bonds or equity for an acquisition. And corporate banks usually syndicate large facilities, this is where syndications group come in (which is under DCM). A client uses line of credit for liquidity purposes. They might not even tap it. But having your bank as a provider of a revolver gets you close to that next big IB transaction on which the bank actually makes a fat fee.
In short CB products are:
- Treasury services/Trade Finance
- Term Loan A/Revolvers (line of credit)
At major banks, "CIB" is housed together as corporate bank is where most relationships start that evolve into transactions for IB
A healthy company will have both forms of debt. In really basic terms: the cap structure will have both bonds (DCM) and revolvers/term loans (CB). i.e. you’re not going to have a conflict of interest in the way you’re describing.
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Loans.
Any capital raising. Either bank market (revolver, term loan) or capital markets (bonds, equity, preferred, converts, etc). You’re there to help advise on the capital structure and financing solutions and to help connect the client with other ancillary parts of the bank (structured real estate, equipment finance, treasury and deposits, financial risk management, etc. there’s all kinds of products groups). You lead with lending as to get access to most clients capital markets wallet (ie whenever they issue public debt or equity) you typically need to be a lender to the company and be in the bank group for their main credit facility
Thanks. Do you do this work? Or know people who do, and do they like it?
Did Corp banking for 2+ years before moving to IB
Are you saying ECM and DCM are CB not IB?
One of my buddies works in CB, can't say he loves the work but seeing him getting most of his weekend / getting off a couple of hours earlier every weekday def feels pretty nice. He gets paid a similar amount (base is the same but bonus usually takes a cut). CB wins in WLB with good pay but lacks the exit that IB has.
Would you say that when people go into CB they’re looking to stay for a long time, so the “exit ops” might not be as important? I know IB tends to have a culture of paying your dues for two years then jumping to PE (or other coveted exit ops).
Correct. My group people in CB were really happy with their work and wanted to stay on as associates. All MDs started from CB track and and would mostly be on the road meeting clients. Sweet gig with great WLB. Analysts would go home by 6-7pm. You get to work with DCM counterparts quite frequently. As far as exits go, I have seen people exit to corporate finance roles and treasury desks at F500 or even startups.
Can someone please explain what’s the difference between CB Coverage and IB Coverage? Assuming M&A team is not in-house for IB Coverage. If both CB and IB Coverage teams are assisting with capital raises in terms of both debt and equity, how is the work divided between the two?
IB (ECM/DCM) are handing the capital raises. I think that most of the confusion in this thread is around the difference between the debt that CB provides (revolvers/term loans from the bank balance sheet) and “capital raises” (HY/IG bond issuances and ECM activity).
I worked in CB and did ECM/DCM cap raises. Too many bond issuances to count. Talking definitely over $50B in capital raised through bonds/TLBs in my time with the group as an analyst
How things are split will vary bank to bank. Part of the story on how things are split will just depend on who has the better relationship with management. I would say typically how my bank thought about the split was that IB was more M&A/ECM heavy and CB was more DCM heavy. So if a client wasn't very acquisitive, wasn't sponsor backed and there wasn't much of a strategic angle to pitch and win advisor type roles then it was probably a better CB client. If most of your fees from the client are just going to be bond fees then there's not necessarily a need for an IB banker to cover it. If there's no opportunity for a upcoming shareholder exit and it's a large, safe credit then rather having the IB banker wasting his time calling on the company (there's only so many hours in a day and so many clients you can maintain a good relationship with), you can have a CB banker who's a) cheaper (helps with loan profitability if you have bankers that are slightly less costly are covering the company), can put more attention to the client (this will be a more important client to them and will be more attentive to them) and the CB banker will be focused on making the Revolver loan as profitable as possible (ie they are incentivized to be more focused on all of the clients needs, not just the big ticket fee opportunities, so they will be more helpful in connecting the client with the bank's treasury team, SRE, FRM, 401k benefits, insurance, etc., etc.). An IB banker isn't going to be wasting his time helping the treasurer/CFO connect with the treasury team on p card or lockbox products, or deposits, or the sale-leaseback of a corporate office. This is a win win for both sides. The client is happy because they have a banker that values their relationship and is very attentive to their needs and the bank is happy since the client is happy (ie they'll likely to pay us better on those bond deals if we solve more issues for them and they value our relationship). If a client was more acquisitive, sponsor backed (potential to win the sellside mandate on exit or IPO on exit), etc. probably better suited for the IB banker to cover. There's going to be more opportunity for higher fee "advisor" type roles where you're going to want an industry IB banker who's in touch with the industry and can more thoroughly advised on these processes and give advice. At the end of the day there's no hard line in the sand to say what is and isn't a CB or IB client. There were always clients moving back and forth between the groups each year when I was at a bank that had both CB and IB. This was my experience at my previous firm but it could vary from how other banks do things with the CB/IB split
As someone who works in private credit and often interact with corporate banking groups, the work seems pretty boring / unstimulating to me. Many loans / products in CB aren't even analyzed from a returns basis, but a relationship one - if we provide this L+350 revolver at a loss, maybe it will bring in M&A business down the line that will make us money. The amount of risk they are allowed to take is also incredibly low.
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