eFinancialCareers

The job of banker to companies and governments.

Corporate banking is a broad term given to the different banking services that large companies, (known by banks as “corporates”), governments or other big institutions need in order to function daily.

It spans the relatively simple business of issuing loans to more complex matters such as helping to minimise tax paid by oversees subsidiaries, managing changes in foreign exchange rates or working out how to finance the construction of a new theme park.

If an organisation is exporting its widgets overseas, corporate bankers might also arrange an international payment or put together “trade finance” packages to ensure the company is paid by its foreign customers.

In many cases, there’s an overlap between corporate banking and capital markets. Bankers working in capital markets help companies raise money by issuing equities or debt. Corporate bankers typically help clients raise money through loans. But corporate bankers will bring in the expertise of their capital markets colleagues if necessary.

Increasingly, corporate banking also requires an understanding of complex financing methods, such as securitisation, in which a company sells bonds based on the money it will in earn in future from assets like rented shop space or a back catalogue of 1970s disco music.

Trends

Corporate banking had a fairly good year in 2006 in Australia, helping underpin record profits for Australia’s big four banks, which dominate the local market. Because of the concentration in the industry, there is little opportunity for these banks to grow through acquisition, but overseas banks such as HBOS and HSBC are seeking to lift their market share, and have been particularly aggressive in the private equity market, keen to provide banking services to the fastest growing sector of the corporate market.

Regulation is also big news in the corporate banking world. The Basel II accord was implemented at the end of 2006. This proposes that banks in most developed countries set aside a higher proportion of their capital to cover the risk that some of their loans won’t be repaid. Bankers argue that this will damage their business by making loans more expensive.

Key players

In terms of assets, the so called Big Four – National Australia Bank, Commonwealth Bank, ANZ and Westpac – dominate the Australia market. St George is the next biggest bank while HBOS, though its ownership of BankWest is also a significant player.

Roles and career paths

Different banks do things differently, but if you opt for a career in corporate banking, you may well start out as a credit analyst. Credit analysts spend their time looking at companies’ balance sheets and working out whether it’s a wise idea to issue loans to them, just in case they can’t pay them back. It’s not the most exciting role (at first you may not meet many clients), but it teaches you the tools of the trade and is a crucial barrier to help prevent the bank from losing money.

From being a credit analyst, you could progress to being a relationship manager with responsibility for lending money to a handful of the bank’s customers. This is where things start to get interesting: as you progress, you’ll be making judgments on whether to lend millions of pounds to customer X or customer Y. It’s a job that requires an intimate understanding of the company’s strategy and a keen appreciation of the risks of default. Most relationship managers specialise in a particular sector. Relationship managers are the winers and diners of the banking world. They spend a lot of time meeting company finance directors and chief executives in an effort to win, and keep, their business.

If you don’t fancy working in the relationship management side of corporate banking, you could always go into treasury management. Treasury managers help companies cope with their cashflow: they ensure they’ve got enough money to pay for whatever they need to buy, and help them deal with fluctuations in the value of their foreign currency holdings.

As well as front-line, client-facing jobs, corporate banks also have an array of operational positions, including technology and human resources.

All banks offer training in corporate banking.

Pay

Entry level salaries for Corporate Banking roles start around an AU$85k package for accounting/economics/business graduates who have three to five years’ broader banking experience, possibly in private and/or business banking and who have acquired a good knowledge of credit/lending and possibly some structured investments experience.

The next step is relationship management, which involves managing an existing account or portfolio of clients with mostly smaller deal sizes (less that AU$2 million) and with client annual turnover less than AU$100 million. Adam Kolokotsas, manager banking and finance at recruitment firm Tanner Menzies, says that from here the exciting part of the journey starts: relationship managers can progress into more senior roles up to a AU$160k package within the major trading banks but will have at least five years’ experience in more junior roles. Bonuses can range from 50%–100% of base salary and deal sizes at this more senior level are the AU$15–AU$50 million working with clients with an annual turnover of AU$100–AU$500 million.

Originators (Hunters) can earn the big dollars up to AU$200k base salaries for candidates with five years plus in the corporate banking space able to hunt out new deals. They can earn the same again in bonuses. Candidates at the top end need comprehensive knowledge of structuring debt and/or equity strategies that allow their clients (companies) fund expansion.

Skills

Corporate bankers need to be friendly types with a cool and calculating streak: it’s no good befriending clients and lending them money if they can’t pay it back. Equally, it’s no good being an expert at analysing the risk of clients defaulting if you can’t also build client relationships – unless you want to remain a credit analyst, of course. As a result, banks tend to have relatively generic requirements of their corporate banking trainees.

• “You need good skills in accounting, but you also need to have engaging and professional personalities in order to interact at a senior level with clients,” says Adam Kolokotsas, manager banking and finance, at recruitment firm Tanner Menzies.

• Rick Jansz, managing consultant with BSI People, says: “Banks want switched-on people who have commerce or finance qualifications. They find that client facing roles are the hardest to fill, because they are looking for people with good personal skills as well as technical expertise.”

• Matt Gowan, senior manager at Hays Banking, says candidates need a good degree in commerce, banking, finance, or accounting as a bare minimum. “What is really, really important is numeracy skills. You will be tested and you will be expected to be in top 5%–10%. You need to have a brain for numbers, you need to be able to demonstrate the right type of personality – a team player that can think outside the square – and be a lateral thinker.”