What Do Corporate Bankers Do? - Corporate Banking Definition
It is the corporate banker's job to get secure financing for clients.
You're generally working with a syndicate of lenders arranging revolvers and first lien term loans for large-cap companies. (This can be for M+A deals, new capital raises, or refinancings.) It's pure credit/capital structure analysis.
As an analyst, you won't be the one engaging in securing these funds.
I'm a first year analyst in CB. I'm not sure howstructures their CB department, but as a first year analyst, you'd be focusing more on underwriting transactions and monitoring the debt portfolio rather than schmoozing clients. A first year analyst would have no idea how to approach a client and present a cross-sell idea.
Why Corporate Banking?
This question comes up at every interview. One thing not to do is say you want something similar to investment banking but with a better lifestyle. The two are similar but different, so it demonstrates a lack of knowledge. There are many different ways to go about answering this question. What you want to do is focus on the functions of the job.
Here are two aspects of CB you can incorporate into your answer.
- Underwriting/aspect: Transaction-based while being unique relative to IB in that your firm is assuming the risk. You are interested in lending and actually taking a position rather than just advising companies or syndicating shares with no skin in the game
- Credit mindset: You like to focus more on reducing risk and preventing downside rather than valuing companies based on a wide variety of variables and being upside focused (as IB involves valuation work). You are interested in the wide variety of different loan financing products that are used ranging from revolvers, term loans, etc., and how businesses use them. In many corporate/commercial banks, there is a credit training program that analysts go through so you can emphasize the training, too.
- Scope for a longer term career (less turnover/ no "2 and O" culture).
- Developing an ability to understand businesses fundamentally to foster long-term relationships (not so much transaction focused as IB).
- The ability to have "skin in the game". (Typically, you'll be underwriting loans/credit, so you'll need to be responsible and accountable as it's the bank's money you're committing - maybe speaking to having more responsibility at a young age, etc.)
Ultimately, we believe in avoiding the comparisons to investment banking on this one. Keep the focus on CB, and tie it into one or two of the specific functions of the job mentioned above.
Salary and Hours in Corp Banking
There is no definite compensation range like there is for investment banking. For base pay, analysts earn around what investment banking analysts earn. The variance comes at the bonus, which depends on firm, location, and group performance. The range for analysts is $65-90k all in. Expect those numbers to increase at leastper year, and even more than that after a few years due to increased bonuses at the associate level.
Expect to put in 50 to 65 hours most weeks. During deal weeks, expect more.
Retail vs. Corporate Banking - What's the Difference?
Many get retail banking and CB confused. Retail banking is what you see when you stop by your local bank to make a deposit. It deals with people. CB deals with corporate clientele. Retail banking offer services including mortgages, credit, and checking. It offers services including business loans, commercial real estate, and cash management.
CB Internship Experience
CB is great as an internship. If you're looking to do pursue a career in the field, then this is exactly the internship you need.
If you're looking to do investment banking, then CB is still a good option - as long as it's before your junior year since that's when you need to secure an investment bankingposition. The only internship that beats a CB internship after sophomore year is an investment banking internship, and the only realistic way you're getting that is if you're a diversity candidate or land a position at a boutique.
So how do you go about securing an internship? Most are secured through networking, but you might find some firms recruiting on campus so keep your eyes peeled.
Corporate Banking Careers vs Investment Banking Career Path
Considering CB as an alternative to investment banking? The cons of choosingit are obvious - lower compensation, worse exit opps, less prestige (mostly matters if you're considering b-school). But it has its advantages. The most notable difference is the better lifestyle (fewer hours).
Here @TexasMonkey1868, Private Equity Associate, points out that it's easier to stand out in CB because of the more relaxed culture.
Given that I am not in, I can't directly comment on the difference in work-life balance, but in my group, most people can be out the door two or three days out of the week by six each night, or you can be there till nine or ten at night throughout the week and still have to come in on the weekend. It depends on the group and the deal flow. The upside to the more lax work-life balance is that it is very easy to stand out, and simply outwork some of your co-workers. The general sentiment for 90% of the deals that flow through my group is that "it can wait until tomorrow."
Here are some points from @thedude12r43w. If these sound appealing to you, then it' probably your cup of tea.
- Long term career potential - not much of an "up and out" culture like in IBD. As long as you are competent, you can move into an associate role after your third year in most places. You won't need to go back for an MBA to advance. Also to get from associate to VP in the credit path, you won't need to be able to generate business to move up as you would in IBD.
- Better hours / work-life balance
- You manage risk if that is something you are interested in. The spread on senior bank debt is low, so you need to be careful when making a decision as you will have to originate a huge multiple of your loss in new money just to be able to cover it.
- You develop a solid foundation in cash flow analysis and learn about collateral (depending if it is ABL group or middle market lending vs. large corporate).
- Corp banking is very relationship focused.
- Ability to move from client management/credit/risk, so you can have a very varied career depending on how you position yourself and what your interests are.
- Can be a generalist or cover industry vertical depending on what group you are in.
Here's the one thing that @IBBD believes separates CB from IB.
The one aspect that may make CB more appealing than IB is that you kind of take on a buy-side mindset when you underwrite transactions. Your underwriting credit memo will act as sort of an investment thesis as to why the bank should (or should not) give this company money. And the risk is real. If the company goes under, then the bank loses millions of dollars. But, of course, it's not as risky as private equity since you're usually taking on a senior position in the capital structure, and you normally deal with investment grade rated companies. It's just one interesting argument you can make in your interview. Before the monkey shit comes, I have to say that I'm not saying or endorsing that CB is better than IB; this is just something that's different from IB and could be enticing for someone.
This point is more personal; some find it appealing while it scares others off.
Here's one last thought from @SmartBanker on the culture differences.
Corporate bankers are more involved in the the execution of the debt side of investment banking (Loan Syndications, Private Placements, HY Bonds, High Grade Bonds, Asset-Backed, Asset-based loans and Derivatives) than the actual "investment bankers". I have closed deals in all the categories above being in CB, including all parts of the execution process. I also have been a part of M&A and equity deals, though not as often.
So if you think that's working in a dumpster, maybe you should go back to your dorm room and look at your girly mags.
Yes, I work a lot less hours (average 55-60) and get paid less than my pure IB colleagues (this year ~50% due to such high $ in IB), but my chance of still being around in a few years is about five times higher than my IB brethren who die of burnout.
If you don't think you'll get burned out in investment banking, then think long and hard about that. Investment banking as a career constricts on personal time; it's a tough gig to last in. That's the distinct appeal of CB in opposition. It's nothing like the churn and burn culture of investment banking.
Interview Prep for Corporate Banking
Interview prep for CB is similar to investment banking, but there are differences to study for. Here are a couple of things to know from @TNA.
I'd know credit basics, know how ABL [asset-based lending] revolvers work, try and find out the space the bank you are interviewing for operates in. Stuff like that.
I was in your shoes a while back and the IB prep was pretty useful. As IBBD mentioned, you take on a buy-side mindset. With that in mind, you should know your typical sources of repayment (refinance on a unsecured/secured basis, sale borrowing base assets, cash flow from ops, etc) and key credit risks.
Bulge Bracket vs Middle Market Firm
CB is a different experience depending on the firm in two regards - clients and pay. Here are the differences.
There is also a difference between corp. banking at avs. corp. banking at an MM/regional bank.
- Client Size - Corp banking at a BB deals with companies with revenues of 1bn+ whereas corp. banking at a MM, clients will start at 200MM+. Basically, the middle market/commercial banking division of a BB will handle the type of clients MM CB will have.
- Pay - Corp banking that is housed with IBD (i.e. Corporate & Investment Banking) will typically have same base as IBD. Bonus will be 20-30%. Corp banking separate from IBD may have smaller base salary but shouldn't be below 65k.
Although the MM corp. banks cater to clients that fit in the range of commercial banking at a BB, corp banking at an MM will still be more lucrative than commercial banking at a BB.
Original Inquiry - Why CB?
So just to give you guys a little bit of background, I had a couple of superdays for IB about a week ago, and for one reason or another, I didn't get any offers. So I'm cutting my losses and applying to anything I can get to fill up my junior summer. So with that said, I have an interview with Citi next week for their CB role, and I'm not sure how to answer the inevitable, "Why CB instead of investment banking?" question.
Also, if anybody can point me to the direction of what guide I can buy to thoroughly prepare for the interview, that would be great. I have the WSO technical guide, but I feel like that's more geared toward IB and doesn't really get into loans. Any comments would be greatly appreciated!
Interested in Investment Banking - Breaking In
The fact of the matter is you won't improve unless you practice. To have any chance at the technical questions, you need to prepare yourself with legitimate questions. The WallStreetOasiscourse is designed by countless professionals with real world experience, tailored to help you break into investment banking by acing the technical questions.