Corporate Banking Primer IIM-Calcutta The document has been prepared to shed some light on what exactly Corporate Banking is, what an associate role entails and on some interview pointers. Please feel free to reach out to me in case you would like me to elaborate on any point. Hope it Helps! Prateek Maheshwari +91 8585010270 Corporate Banking Primer 1) What is Corporate Banking (CB)? Let us look at one of the formal definitions first- Corporate banking is defined as customtailored financing and banking services for corporations. Corporate banking is typically entails all the services that can be extended on a financial level to corporate entities to ease day-to-day operations. Cash management, working capital loans and commercial mortgages are just some of the products available in this form of banking. Put simply, it is the division of the bank that looks at the financial needs & offers solutions to its Corporate Clients. In the Indian Context, Corporate Banking focuses on one or more of the following client segments (Internally CB teams are usually organised to cater to these specific segments) : Indian Corporations (may include Public Sector companies also) – Ex: Tata, ABG, RIL MNC Clients with HQ elsewhere- Ex: P&G, Avery Dennison Financial Institutions – Ex: SBI, Blackrock, Edelweiss Some Banks might organise their CB team as per Industry sectors (Consumer, Energy, Auto, etc). However, this is not a dominant practise in India. 2) Who are these Corporate Clients? How a Bank defines its target market for its Corporate Banking Division is unique to each bank. In India, a top Bank typically chooses to set a minimum threshold on the Corporate’s size to see if it’s a target client. Corporates below $100 Mn in annual revenues are generally catered by the commercial banking team and not the corporate banking team. Some banks have a high target market threshold and it can even go to as high as $1 Bn in annual revenues. However, there are numerous other factors like how much money the bank can make, promoter relations, corporate’s credit risk, etc that determine if a Bank would like to offer its services to a Corporate or not. Corporates also have a host of Banks to choose from. The most important factors that drive their decisions are- Banking products offerings, pricing & relations. 3) How does the division work? These Bankers are responsible for managing the entire corporate relationship. They need to face clients and work with a number of teams within the bank. Externally, they are constantly in touch with the client’s CFO’s team. They are supposed to thoroughly understand requirements and be able to customise products to their needs. These bankers are aptly called as relationship managers. Internally, they work hand in hand with the product teams (Transaction Banking, FX sales, Derivatives Sales, Investment Banking Division, Securities Custody team, etc). They also need to work internally with compliance and legal teams regularly on various financing and banking deals. This banking team understand all the products pretty well but also needs to work with product teams on complex deals. Likewise, some deals may be fairly routine and simple and the CB team may not need to get involved in it as the product team might be liaising with the client directly. Important point to be noted here is that CB team develops a great network within the Bank & outside. Cross team movement is very high as they have good knowledge of multiple products. 4) A Typical Corporate Banking Associate Role– Starting 12-18 months: Many top banks hire from MBA colleges into associate programs where they have 2-4 rotations of about 3-6 months. There might also be a 3-4 week training in HK, Singapore, NY, etc. During these trainings, one may get to work with various divisions in a bank (Ex- Markets sales, SME banking, Transaction Banking, Compliance, Branch Operations, etc). Quite likely that the first stint is with corporate banking team itself. It is also possible that the bank does not offer any rotations. When in CB team: Once with the permanent team, one works closely with 1 or 2 senior bankers. They may start taking you for client meetings in a couple of weeks/months. Main Duties and Responsibilities can be broadly defined as: Creating marketing materials, including pitchbook presentations, for corporate clients Participating in due diligence, including industry and company research Supporting Relationship Managers and their teams on firm-specific updates to senior management Performing financial statement and capital structure analyses on current clients and prospects Evaluating risk aspects related to financing transactions Evaluating potential new transactions and opportunities Within the corporate bank, depending upon which team (Indian Corporate, MNC coverage, etc.) one is in, there can arise differences in the roles and responsibilities. There are pros and cons of each but one should not worry too much as cross movement is generally easy. As you get more experience you get more responsibilities and can get your own corporate clients. Promotions occur typically every 2-4 years till one becomes a Director. 5) Exit Opportunities A great place to explore the various divisions in the Banking Industry. As Corporate Banking teams are much larger than IB or markets, switching banks is relatively easier. A move into one of the product groups with which one works closely with is also very possible (FX sales, Transaction Banking, Custody Services & IB are some typical moves). At senior levels, bankers may also choose to leave and join one of their corporate clients. All in all, exit opportunities are in plenty. 6) What they are looking for and some focus areas for interviewsRecruiters are generally Corporate Banking Division heads or Senior Relationship Managers. You should come across as a person who can handle clients very well as ultimately they expect you to be a handling corporate clients by yourself in a few months/years. Undoubtedly, the most important aspect is Personals. Awareness levels about India Macroeconomics should be good but more important is the ability to speak about these topics confidently and comfortably. CFR knowledge might be tested as it is used on the job. Company analysis done in term 1 of CFR can be a good talking point. However, an IBD-like prep of various valuation models, sector analysis, etc, is not required. Flipping through the Bank Management course and reading about the most important banking products (Loans, Overdraft, payment mechanisms, Packing credit, Letter of Credit, Custodial services, Interest rate swaps, etc) will definitely impress them & earn extra points (however one is not expected to know theses as it’s quite easy to pick these up on the job). 7) Some other topics to read up Basel III norms- What is it? Why is it important? Where are we on it? Interest Rate Cuts- Outlook for Indian Economy High NPAs of Indian Banks Incentivizing MNC Banks to convert Branch Model into a Wholly Owned Subsidiaries set up Priority Sector Lending, Microfinance Base Rate, CRR, SLR, CASA Euro Zone crisis Drop in Oil Prices 8) ‘Corporate Banking’ & other interchangeable used terms (Pls read so that one does not misunderstand the Job Description Form)- Corporate Banking is also referred by some as Wholesale Banking, Commercial Banking, Coverage Banking, Corporate Finance, etc. There are certain important differences between these terms depending upon the context in which these are being used. In India the most preferred term in top Banks is Corporate Banking. An industry veteran who has put in good number of years in US might call it ‘Wholesale Banking’. ‘Corporate Banking’ and ‘Wholesale Banking’ are generally interchangeable. However, Wholesale Banking may also include Commercial Banking. Some bankers might call ‘corporate banking’ as ‘commercial bank’ however these are not interchangeable (this interchangeability of names is generally done by industry old timers). Commercial Banking is generally the division that caters to SMEs. Commercial Banking product and expertise requirement can be quite different from Corporate Banking. Pls note that sometimes, by ‘Commercial Bank’ many Bankers simply refer to the Non-Investment Banking division of Banks. Some Banks also use ‘Corporate Finance’ to refer to their CB team. However it can be confusing at times as some banks use this term to refer to their investment banking team or to their project finance team or to their Asset-Liability management team. Some banks might have roles like MNC coverage or Financial Institution Coverage on offer. These are also Corporate Banking roles, just that called by a different name internally within that bank. In short- banks and bankers may use different names for their CB division. Depending upon the sentence in which a different term is being used, it is easy to figure out what one means by it.
