credit analyst interview

d3donahue Wrote:
——————————————————-
> I was just hired to the same position in May at my
> bank. Remember you’re just an analyst, not a
> lender yet. So they won’t kill you with too hard
> of questions.
>
> 1. The most important one is definitely “Which
> statement is more important and why” It WILL be
> the balance sheet. I said it was because I wanted
> to know if we are financing them to stay afloat or
> to grow (ie. tangible net worth). (If x, y, and/or
> z happened, what would happen to their
> financials)
I am just curious as to why the balance sheet as opposed to Statement of Cash Flows?
 
Viceroy Wrote:
——————————————————-
> ^^
> Really ? I find that surprising… But hey if you
> say so….
>
> I think a fundamental difference to be made is if
> this job description applies to new credits or to
> the portfolio of credits. If it’s for new credits,
> I doubt very much that the guy will bother about
> ALM.
>
> However if it’s an internal department and the guy
> does some risk management, then that’s a different
> story.
>
> Do we agree ? Or how does it go at your bank ?
>
> I also work for a small bank (18B) and these
> functions have nothing to do with one another.
I agree with this. My first job out of college was a commercial credit analyst at a 1.5B bank and it had nothing to do with the treasury function.
My next job was doing AL at a $3.5B bank and it had nothing to do with the credit side.
I’m now at a $1.5B bank doing AL and, with the exception of running pricing models for the credit/lending guys, it has nothing to do with credit.
To OP, I would focus more on general FSA, know what a debt-service coverage ratio is, know about the statement of cash flows, and maybe know a bit about UCA cash flow.
Also, I would try to come across as outgoing because generally the career path goes from Commercial Credit Analyst -> Lender. Even if you could never see yourself in a lending role it would be wise to imply otherwise as, in my experience, having no desire to go into a lending is a deal-breaker for that role. Best of luck!
 
cash flows are variable, balance sheets are more stable than cash flows.
the balance sheet is the most important because it shows whether the company is over-leveraged or not. lending is based on collateral (secured loans), which means that if you default the lender wants to know that they will get their collateral. this is where the balance sheet comes in.
while the statement of cash flows is important because it is how a borrower makes their interest and principal payments, the more conservative route is to consider the default of the borrower. consider a borrower with 75% debt to total assets, even with good cash flows, if business turns sour they may not be able to recover 100% of the collateral.
I am not a credit analyst, but that is how I would think as a lender.
 
Bankin’ Wrote:
——————————————————-
> Viceroy Wrote:
> ————————————————–
> —–
> > ^^
> > Really ? I find that surprising… But hey if
> you
> > say so….
> >
> > I think a fundamental difference to be made is
> if
> > this job description applies to new credits or
> to
> > the portfolio of credits. If it’s for new
> credits,
> > I doubt very much that the guy will bother
> about
> > ALM.
> >
> > However if it’s an internal department and the
> guy
> > does some risk management, then that’s a
> different
> > story.
> >
> > Do we agree ? Or how does it go at your bank ?
> >
> > I also work for a small bank (18B) and these
> > functions have nothing to do with one another.
>
> I agree with this. My first job out of college
> was a commercial credit analyst at a 1.5B bank and
> it had nothing to do with the treasury function.
>
> My next job was doing AL at a $3.5B bank and it
> had nothing to do with the credit side.
>
> I’m now at a $1.5B bank doing AL and, with the
> exception of running pricing models for the
> credit/lending guys, it has nothing to do with
> credit.
>
> To OP, I would focus more on general FSA, know
> what a debt-service coverage ratio is, know about
> the statement of cash flows, and maybe know a bit
> about UCA cash flow.
>
> Also, I would try to come across as outgoing
> because generally the career path goes from
> Commercial Credit Analyst -> Lender. Even if you
> could never see yourself in a lending role it
> would be wise to imply otherwise as, in my
> experience, having no desire to go into a lending
> is a deal-breaker for that role. Best of luck!
I guess I’ll have to concede that the general trend is that you don’t have any interaction with the ALM side as a credit analyst at most banks. My bank must be f x x k.
How’d the interview go?
I like BS and CF for the two primaries, with BS leading the way and CF being the second.
 
CFAcountry Wrote:
——————————————————-
> d3donahue Wrote:
> ————————————————–
> —–
> > I was just hired to the same position in May at
> my
> > bank. Remember you’re just an analyst, not a
> > lender yet. So they won’t kill you with too
> hard
> > of questions.
> >
> > 1. The most important one is definitely “Which
> > statement is more important and why” It WILL be
> > the balance sheet. I said it was because I
> wanted
> > to know if we are financing them to stay afloat
> or
> > to grow (ie. tangible net worth). (If x, y,
> and/or
> > z happened, what would happen to their
> > financials)
>
> I am just curious as to why the balance sheet as
> opposed to Statement of Cash Flows?
At first I mentioned CF Statement, but they said “if you only had a choice between BS or IS” it’s nice to add that you can derive the CF statement from the BS and IS too.
 
I could be jumping the gun with this one, but what would you thing the exit opps are for this position and size of bank? Also, what (assuming an offer) could I expect as compensation?
 
CFAcountry Wrote:
——————————————————-
> I could be jumping the gun with this one, but what
> would you thing the exit opps are for this
> position and size of bank? Also, what (assuming an
> offer) could I expect as compensation?
For a bank of that size, in this economy, I’m guessing the comp for an entry level Commercial Credit Analyst would be 45k max. Probably closer to 40k.
The vast majority of the Commercial Credit Analysts I have known personally have gone into lending, a few are still pegging along as Credit Analysts or something similar (commercial account managers), a couple went into accounting, a few are in Law/Business school, and I went into Treasury.
Unfortunately if you are looking to break into ‘high finance’ this probably isn’t the best path, but it will count towards your CFAI work experience.
Hope that helps.
 
Bankin’ Wrote:
——————————————————-
> CFAcountry Wrote:
> ————————————————–
> —–
> > I could be jumping the gun with this one, but
> what
> > would you thing the exit opps are for this
> > position and size of bank? Also, what (assuming
> an
> > offer) could I expect as compensation?
>
>
> For a bank of that size, in this economy, I’m
> guessing the comp for an entry level Commercial
> Credit Analyst would be 45k max. Probably closer
> to 40k.
>
> The vast majority of the Commercial Credit
> Analysts I have known personally have gone into
> lending, a few are still pegging along as Credit
> Analysts or something similar (commercial account
> managers), a couple went into accounting, a few
> are in Law/Business school, and I went into
> Treasury.
>
> Unfortunately if you are looking to break into
> ‘high finance’ this probably isn’t the best path,
> but it will count towards your CFAI work
> experience.
>
> Hope that helps.
I’d say that’s pretty accurate as far as compensation and career opportunities. The monetary range could be subject to some variation depending on cost of living. I’m a Credit Analyst in Corporate Banking and some of my coworkers started off as analysts on the Commercial side.
 
Bankin’ Wrote:
——————————————————-
> CFAcountry Wrote:
> ————————————————–
> —–
> > I could be jumping the gun with this one, but
> what
> > would you thing the exit opps are for this
> > position and size of bank? Also, what (assuming
> an
> > offer) could I expect as compensation?
>
>
> For a bank of that size, in this economy, I’m
> guessing the comp for an entry level Commercial
> Credit Analyst would be 45k max. Probably closer
> to 40k.
>
> The vast majority of the Commercial Credit
> Analysts I have known personally have gone into
> lending, a few are still pegging along as Credit
> Analysts or something similar (commercial account
> managers), a couple went into accounting, a few
> are in Law/Business school, and I went into
> Treasury.
>
> Unfortunately if you are looking to break into
> ‘high finance’ this probably isn’t the best path,
> but it will count towards your CFAI work
> experience.
>
> Hope that helps.
Well I think people overschematise what high finance is.
I work for a small commercial banks, but we have some activities that are overlapping with investment banking.
For example, we have an LBO portfolio. (commercial banks typically participate in senior debt & revolvers in LBOs).
The LBO team (to which I partly belong) is involved in covenant waivers & renegotiations, refinancing, also collaborating with PE firms (when we are arrangers of the LBO), etc.
Unfortunately we are just managing the portfolio now and not doing new business in LBOs.
We also have syndication activities (basically we underwrite a loan to sell it to other banks afterwards).
So what I mean to say is that while these things are done by a small commercial banks, they in fact converge with IB activities.
The dude at a typical investment bank doing market research in ER or working on M&A pitches (both not taking any decision) is, in fact, not really more of an investment banker when you really think of it.
My point is that the finance world isn’t as black and white as many people seem to think.
 
Viceroy Wrote:
——————————————————-
> Bankin’ Wrote:
> ————————————————–
> —–
> > CFAcountry Wrote:
> >
> ————————————————–
>
> > —–
> > > I could be jumping the gun with this one, but
> > what
> > > would you thing the exit opps are for this
> > > position and size of bank? Also, what
> (assuming
> > an
> > > offer) could I expect as compensation?
> >
> >
> > For a bank of that size, in this economy, I’m
> > guessing the comp for an entry level Commercial
> > Credit Analyst would be 45k max. Probably
> closer
> > to 40k.
> >
> > The vast majority of the Commercial Credit
> > Analysts I have known personally have gone into
> > lending, a few are still pegging along as
> Credit
> > Analysts or something similar (commercial
> account
> > managers), a couple went into accounting, a few
> > are in Law/Business school, and I went into
> > Treasury.
> >
> > Unfortunately if you are looking to break into
> > ‘high finance’ this probably isn’t the best
> path,
> > but it will count towards your CFAI work
> > experience.
> >
> > Hope that helps.
>
>
> Well I think people overschematise what high
> finance is.
>
> I work for a small commercial banks, but we have
> some activities that are overlapping with
> investment banking.
>
> For example, we have an LBO portfolio. (commercial
> banks typically participate in senior debt &
> revolvers in LBOs).
> The LBO team (to which I partly belong) is
> involved in covenant waivers & renegotiations,
> refinancing, also collaborating with PE firms
> (when we are arrangers of the LBO), etc.
> Unfortunately we are just managing the portfolio
> now and not doing new business in LBOs.
> We also have syndication activities (basically we
> underwrite a loan to sell it to other banks
> afterwards).
>
> So what I mean to say is that while these things
> are done by a small commercial banks, they in fact
> converge with IB activities.
>
> The dude at a typical investment bank doing market
> research in ER or working on M&A pitches (both not
> taking any decision) is, in fact, not really more
> of an investment banker when you really think of
> it.
>
> My point is that the finance world isn’t as black
> and white as many people seem to think.
I don’t disagree with anything you’re saying, I worked on a previous employer’s IPO, I’ve been involved in valuing potential acquisition targets, I’ve helped evaluate bond purchases, and have written up deals on public companies. There are tons of opportunities to do interesting things at a Commercial Bank, but if he’s hoping to do this for a couple of years and then move into a 80+ hrs a week / 130k+ salary position at a BB, the odds of that are teetering on zero.
 
^ Bankin
I’m currently in a very similar function in a large global bank and am thinking about changing my career path. I’m very interested in knowing more about your experience in AL (AL means Asset Liability Management, correct?), if you are willing to share. For example, what are the daily responsibilities, work hour, idea on compensation and growth prospect? If you prefer to talk about it in private, can you email me at [email protected]? Thanks.
 
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