Why corporate banking instead of investment banking?

papermachine's picture
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What Do Corporate Bankers Do? - Corporate Banking Definition

It is the corporate banker's job to get secure financing for clients.

mlamb93 - Investment Banking Associate:

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.

IBBD:

I'm a first year analyst in CB. I'm not sure how Citi structures 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.

datphukinnewb - Investment Banking Analyst:
  1. Underwriting/portfolio management 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

  2. 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.
FreshPrinceDot6:
  1. Scope for a longer term career (less turnover/ no "2 and O" culture).
  2. Developing an ability to understand businesses fundamentally to foster long-term relationships (not so much transaction focused as IB).
  3. 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 least 10k per 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 banking summer analyst position. 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.

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.

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.

intlbanker153 - Investment Banking Analyst:

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.

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Comments (39)

Jan 14, 2014

Technical questions will not deviate all that far from many SA basics. Will sprinkle in debt focus on "creditworthiness". What's makes a good borrower? (collateral, cash flow, etc.) Questions around what would reduce/increase risk in lending situations. May get into borrowing base, working capital, cash flow related questions, and that would be extremely technical for a college interview.

As for "why corporate banking" you need to fully contemplate the DIFFERENCES between IB and CB and then if you really want to do this, come up with why fueling the activities of companies (acquisitions, capex, special projects, short term capital) is more appealing than the headliner events of advising on M&A or sellouts/buyouts.

Disclaimer: not in CB, but looking to transition there, so asking myself the same ?s

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Jan 14, 2014

Correct me if I'm wrong, but I believe that corporate banking focuses a lot more on the relationship aspect. ie. the company you're covering wants to raise X amount to finance a new building -> go to corporate banker -> corporate banker connects them with appropriate team. Think it might be a good idea to talk about how you like making relationships and helping clients achieve their goals as well as working with various business groups within the bank.

That's really high level..but hope it helps.

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Jan 19, 2014
explosions09:

Correct me if I'm wrong, but I believe that corporate banking focuses a lot more on the relationship aspect. ie. the company you're covering wants to raise X amount to finance a new building -> go to corporate banker -> corporate banker connects them with appropriate team. Think it might be a good idea to talk about how you like making relationships and helping clients achieve their goals as well as working with various business groups within the bank.

That's really high level..but hope it helps.

+1

Haters gonna hate

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Jan 14, 2014

Haha you won't be handling any relationships as an analyst trust me. When you think of corporate banking just think of the "revolver" on the balance sheet. That's pretty much the portion of the BS that the corporate banking department is in charge of.

Jan 14, 2014

There is a wide range of corporate banking roles, but my understanding of it is that it comes down to where the money originates from. IB means any funds will come client side and external to the bank, whereas corporate banking will handle funds from the firms own balance sheet. The upshot is that there is a great deal more emphasis of risk management and credit analysis.

I'm no corporate banker, so please correct me if someone is in a better position to comment.

Jan 14, 2014

Corporate banking is just a anorexic version of leveraged finance so just prep as you would for LevFin and you'll be good to go (except the Why CB part)

Feb 27, 2014

The reason for "why CB" is that you don't want to work 100 hours per week and want to enjoy your life outside of work. Also, there is no "up or out" requirements in CB. All the MD's started as analysts. Further, your seniors respect your time and never ask you to come in on the weekends.

Jan 14, 2014

Different banks run their CB groups differently. One place might have you doing borrowing bases for an ABL, other places might be providing more senior term loans. JPM Corp banking will be different than say PNC Corp banking. Think different levels of sophistication, etc.

I'd know credit basics, know how ABL revolvers work, try and find out the space the bank you are interviewing for operates in. Stuff like that.

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Best Response
Jan 14, 2014

I'm a first year analyst in corporate banking. I'm not sure how Citi structures 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.

With that being said, 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.

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Jan 16, 2014
IBBD:

I'm a first year analyst in corporate banking. I'm not sure how Citi structures 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.

With that being said, 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.

Who the fuck gave this kid monkey shit?

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Jan 20, 2014

Pretty solid response. For corporate banking, you will most likely deal with revolvers, term loans, bridge financing, etc, which will most likely be all senior secured/unsecured.

@"papermachine" 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. PM me if you have any specific questions.

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Jan 17, 2014

I'm an analyst in Corporate and Commercial Banking. It is a super regional bank in the U.S but has a huge Europe and South American presence. What everyone has said is more or less correct. In my group bigger deals actually require less analysis and work as they are usually syndicated, which is less work because you take it or leave it as is. Commercial and middle market banking is a great place to learn and get credit analysis experience. It is very different from the corporate finance topics you see on WSO. It won't provide you with the technical skills for IB but you will most likely still learn a lot. You won't be dealing with relationships. Typically lenders and team leads deal with 98% of client interaction. You can PM me if you have more questions.

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Jan 17, 2014

Corp banking over IBD:
1. 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 3rd 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

2. Better hours / work life balance

3. 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

4. You develop a solid foundation in cash flow analysis & learn about collateral (depending if it is ABL group or middle market lending vs. large corporate)

5. Corp banking is very relationship focused

6. 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

7. Can be a generalist or cover industry vertical depending on what group you are in

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Jan 19, 2014

Great thread on corporate banking. Because we have may people posting here that are currently in the industry- how much better is the work life balance? Also, what does the pay look like at the senior level?

Jan 19, 2014

It will depend on the bank. I believe Citi's corporate bank focuses on loans and some debt and has better hours than the IB.

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Jan 19, 2014

Would've been useful if I read it before my interview this past week.

Good info nonetheless

Jan 19, 2014

Given that I am not in IBD I can't directly comment on the difference between work like 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 out work 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."

n1cktm and explosions09 are correct that there is a relationship focus, which is centered around the lender or relationship manager who has a portfolio to monitor and manage. Some lenders have portfolios that are too large from them to handle which is where Relationship Associates or Junior Lenders come in. At some banks they are glorified assistants.

As far as compensation goes, there is a lot of long term potential to make >$100K base + bonus in a back office position. (Bare in mind I'm in Texas not NYC) It just takes some time to work up to that level. If you want to do a back office role or be a career analyst you will hit that limit and not be able to make much more, but there are a lot of back office positions that require analysis and a take macro-approach to bank management that most people don't know exist, which has the potential to bring home a very good paycheck. It is my understanding that a lot of lender compensation is around their bonus, which is similar to commission, but they also have a solid base. Lenders in my opinion are similar to door-to-door sales reps. Their life centers around customer calls and going out and pounding the pavement. Some banks will hire lenders with very little technical or accounting knowledge.

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Feb 27, 2014

"Some lenders have portfolios that are too large from them to handle which is where Relationship Associates or Junior Lenders come in. At some banks they are glorified assistants."

This position is called Banker Associate in corporate banking at BB.

Jan 20, 2014

In a corporate banking group you really get to know the companies in your portfolio. It's transaction based, but you are constantly revisiting these companies as they grow (or become distressed at times) and need their credit facility amended, upsized, etc. Each time this happens you have to go through a whole analysis of the company both on a historical basis and a pro forma basis for what has changed.

My advice would be this: In an investment banking role, you pretty much know what you're going to get. However in corporate banking, I think there's a vast difference in the type of experience you can have. Getting into an industry group in which you're working with large private, small and mid-cap, non-investment grade companies is the most beneficial experience in my opinion (opposed to large cap investment grade entities in which the analysis and structuring is pretty straight forward and relatively risk-less).

It's also beneficial to be at a bank where your counter-parties in leveraged finance / DCM are very active and prominent. This provides opportunities to work in conjunction with them on big underwrites when the your bank is a lead arranger. They often will lean on you to get approval to underwrite a high % or maybe even all of the credit part of the debt package in an acquisition.

Feb 27, 2014

Providing bank loans and other products to company with over $1 billion in revenue thoguh it depends on the bank. Most of these companies tend to be public companies and are usually part of syndications.

Feb 27, 2014

Really depends on the shop.

If you're at a firm that has a Corporate Investment Bank, like JPM that houses IB and CB under the same umbrella, you will be doing mostly lev fin/syndication/DCM, but you will also get a taste of some more exotic IB activities (M&A, ECM, and if you're lucky, one of your companies IPOs). Think of it this way, instead of having a product or industry coverage group, you have a geographic coverage area and target companies slightly smaller than traditional IB (F1000 - F500

On the other hand, there are plenty of banks that have completely separate (or no) IB teams, so you're pretty much stuck doing credit, loans, treasury, and other non-sexy products.

If you don't know which you're applying to, the starting salary is a good proxy. Option A, you'll find yourself at a 10-15% discount all in to your average IB counterpart [(A1 CB = $120,000+) vs (A1 IB = $140,000+)]. In Option B you'll find your all in comp topping out at around $80k.

Feel free to PM if you have any other q's.

Source: I'm in CB.

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Feb 27, 2014

double post

Jan 20, 2014

Most well known corporate banking products are term loans, revolving lines of credit, syndicated loans w. multiple arrangers. You also have ABL facilities, bridge loans, etc.

There is also a difference between corp. banking at a BB vs. corp. banking at a MM/regional bank.
1. 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 corporate banking will have.
2. 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 a MM will still be more lucrative than commercial banking at a BB.

The benefits of CB is that it has a well defined career path and you can make it past associate without having to go back for a MBA to be able to wine and dine clients. In Cb there are two main career paths - relationship management (sales) and credit.

Feb 27, 2014

Because not good enough for investment banking.

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Feb 27, 2014

What a douchebag response.

Feb 27, 2014

Bump.

Feb 27, 2014

What excites you about the opportunity? There has to be something, and that's what you should answer with (in detail, of course. Explain why.). If there isn't anything about it that excites you, than you're probably shooting for the wrong job.

Feb 27, 2014

there were a few posts on this around the forum. a few things re-iterated are:

1) scope for a longer term career (less turnover/ no "2 and O" culture)
2) developing an ability to understand businesses fundamentally to foster long-term relationships (not so much transaction focused as IB)
3) 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)

good luck!

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Feb 27, 2014

Better hours than IB and only giving up little in terms of pay. You should try and sell it as a lifestyle thing + the standard clients/scope of work/exposure to deals etc

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Feb 27, 2014

I'd actually second what Mc0015 said. Many people in corp. banking tend to be those who enjoy the challenge and rigor of IB, who enjoy working with large and complex clients, but would like a better work/life balance that lends itself to a longer career within the same firm.

Feb 27, 2014

Got a corporate banking offer, I would NOT try to sell CB as IB with a slight paycut but better hours. Don't do this as it makes it seem like you just want ibanking lite when they are pretty different.

Some ways to go about it:
1. Underwriting/portfolio management 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
2. Credit Mindset: 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.

There are many different ways to go about this

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Feb 27, 2014

You're a lender which means you are making an investment decision. You'll also be living with the deal for a while, through add ons, amendments, refinancing, etc. Corporate banking allows a lot of flexibility also. You can be pure credit, RM, lateral into banking or DCM, credit fund, etc.

Really not hard to sell if you understand the difference.

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Feb 27, 2014

Thanks for all of your advice guys.

Jan 20, 2014

I have worked in both so i will opine.

In my opinion, what i did in IB was much more interesting. You truly modeled a company's financials out and understood a lot more. In CB, they usually break out into two tracks: credit analysis and relationship management. The credit analysts all want to move into an RM role and are often interchangeable with little career growth. Credit analysis is not like at a FI fund. Often you use some proprietary bank system and update boilerplate memos. I actually think I met only one credit analyst who was able to do a 3 statement linked financial projection and that was after he did a CFA. On the RM side you make a lot of pitchbooks where you incorporate work from other product groups. You feel as if there is little in terms of true finance. There was a Director I hated who made seven figures one year and he came over to me after I finished the CFA to tell me you don't need to know finance to be a "banker". If you are an associate you will attend client pitches and see just how sales focused it is. You need to work hand in hand with the loan groups mainly (syndications, lev fin, loan capital markets, etc.) as well as other product groups like DCM or ECM or whomever to present their ideas but they are the ones who do the analysis and often feed you slides for your pitchbook. Over time you start to understand the game....you know when revolvers and term loans or big bonds are due and start pitching 1.5 years in advance to get a piece of the book or to lead it. Bigger banks use their balance sheets to get investment banking and ancillary product business (i.e. Bonds). The revolvers and term loans are either bilateral and on the bank's books or syndicated out. When you are a senior associate RM you start to have more client interaction and by the time you are a VP you will be getting smaller names for your "portfolio" to call on and pitch to. And my experience stops at the VP level.

Your schedule is much much better than in IB and you have more of a voice with quicker progression, but it isnt about finance in my opinion as much as it is about sales. It also attracts people who care about having families that they actually get to see and there were more women in CB than IB. If you are in a good group, you will travel frequently though.

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Jan 5, 2018

Bump

Jul 24, 2018
Jul 24, 2018