Careers
in
Credit Research and
Analysis
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AIM of this presentation
• To define the Credit Research Market & the services.
• Provide an idea of its size and recent growth
• Examine the career opportunities in the Credit
Research industry
• Describe the competitive landscape and the ways to
reach there.
• Introduce CCRA Certification program as a gateway to
careers in Credit Research and Ratings
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Definition of Credit Research and
Analysis
• Credit Research and Analysis
– Research to assess the overall credit quality for
Investments into its fixed income related instruments
• Fixed Income is an Investment that has an up-front capital
Investment and pays interest on a regular basis
• Credit research usually includes credit analysis, fixed income
valuation, credit rating. credit assessment, formulating credit
strategy and credit enhancement
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Fixed Income - Products
• Common financial instruments:
– Bonds/Debentures
– Certificates of Deposit, Fixed deposits
– Money Markets Instruments (short term)
– Loans (including foreign current loans)
– Others
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As we understand…….
• Credit Analyst’s has to look at all the risk
factors for a company unlike equity analysts
• Credit Analysts can be a qualified person with
appropriate credit knowledge like MBAs, CFA
Charterholders,
Chartered
accountants,
Graduates or any credentialed professional
money manager.
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Client Segments
• Credit Research roles are targeted at any
part of business where there is a need for
new capital for e.g. for SME’s, large
corporates, private companies, special
purpose vehicles, individuals
• The roles could be targeted for
independent analysis like a credit rating
analyst or a portfolio analyst for a buy
side/sell side firm
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Depth of Credit Research
Source : http://www.zerohedge.com/news/visualizing-tbtf-hub-and-spoke-representation-scale-free-modern-banking
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Equity is over played
• There are only 51 stocks in the world that
are rated by more than 50 sell-side equity
research analysts. Of these 49 are in India.
The only 2 stocks outside India are Apple and
Intel. (MS Report).
• Equity Research per se has bulk supply and few
jobs which is inverse compared to the total capital
out in the world
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Market Structure/size
• Bond market Size global - $123.2 tn (BIS Dec 2012)
• CDS market size globally - $27 tn (BIS June 2012)
• Equity market size globally - $50 tn
• Globally equity is only about 25% of the total capital
available while debt remains 75%.
Much Ado about Nothing
Market Players for Credit
• Credit Rating Agencies like CRISIL, ICRA, CARE, FITCH,
Moody's, S&P
• Credit Information Companies like CIBIL, Equifax,
Experian and Highmark
• Banks/NBFC – Retail and institutional Credit, Other
loans
• Banks – Treasury dept. buying and selling G-sec
• MNC Banks – Fixed income trading desks, Research
• KPO’s – Tracking international Bond markets
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CCRA Competitive Landscape
Global
Players
Ratings
Indian
Players
High
Capabilities
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Source : logo’s are taken from respective companies website and are not for marketing purpose.
High
Submit
Submit
Jobs
job title,
city,
state
Salaries
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Recent Regulatory updates
• NSE Launched its Debt trading segment recently and trying to
promote it, other key exchanges are planning as well
• RBI Announced/approved CDS Guidelines in 2012 and all
regulators including PFRDA, IRDA, SEBI etc. allowed mutual
funds to trade in the same
• RBI is actively changing competitive landscape for
debt/debentures etc with changing guidelines, rules
• Recently around 20+ corporates applied for banking license and
that will open up banking jobs plus Nationalized banks are
expanding
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Present Market Scenario
• JP Morgan: Credit Research
• Each Credit Research senior analyst focuses on one or more
industries, comprising anywhere from 30 to 70 companies.
• Analysts use knowledge of the industry, the companies and the
fixed income market to issue bond and credit derivative
recommendations.
• Copal Partners – A Moody’s Company
• The role is ideal for someone who is a domain expert on one or
more sectors and wants to move from being an analyst to a
manager.
•
A key longer term component of this role is also to structure and devise a
rule based Artificial Intelligence system that can automate Research
output.
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• Fidelity Fixed Income/Credit Research
• This division is home to Portfolio Managers, Research Analysts,
Traders and Quantitative specialists.
• And they work on either the Equity side (stocks) or on the Fixed
Income side, otherwise known as Credit (bonds, gilts, and so on).
• Career Opportunity at AMBA Research :
• ANALYST/ ASSOCIATE VICE PRESIDENT - FIXED INCOME AND
CREDIT RESEARCH
•
Standard Chartered Credit Research
• The Global Credit Research team, headed by Kaushik Rudra,
comprises two areas: Credit Analysis and Credit Strategy
• PIMCO’s approach of Credit Research for a better Investment
• CRISIL
• CRISIL is a global analytical company providing ratings, research,
and risk and policy advisory services.
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Role of a Credit Analyst
• Long Hours (less hours than Investment Banking)
• Life will revolve around companies
• A lot of phone time / meetings with clients, other banks, lawyers, & internal
colleagues
• Credit analysis
o Financial Statement Analysis / Modeling and Industry Studies
• Must know your clients better than the competition
o Investor Calls / Presentations
o Company press releases as well as reports in the media
o 10-Ks, transcripts, sell-side research etc.,
• Broad product experience / limited understanding of each product
• Competitive / High Pressure Environment
o Can be said about any position at a bank. Especially front office but also
middle and back.
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Career Considerations
Analyst Role / Responsibilities
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Career / Role Benefits
Financial analysis and financial modeling
Company valuation
Comparable analysis
Preparation internal credit / approval memos
Industry and company research
Developing client presentations
Marketing material (i.e. Teaser, Confidential Information
Memorandum)
Updating all internal databases and systems
Administrative tasks (set up calls, fax, FedEx, etc.)
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Career Options – Firm Types
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Commercial banks
Finance companies / specialty funds
Hedge funds and mezzanine funds
Rating Agencies etc
Trading Desks
Banking-like training programs
Greater access to superiors & senior management
Truly understand corporate growth, financial analysis &
capitalization
Develop strong knowledge of many industries
Analysts tend to wear more hats than in larger banks
Quality of life: Hours, flexibility, goals & expectations
Defined career paths & competitive compensation
Opportunity to change career path both internal /
externally
Introduction to numerous business owners
Environment – Work / Life Balance
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10-12 hour days, weekend work depending on firm
Medium/High stress levels: Pressure to perform,
competitive environment & demanding superiors with
little room for error
Multiple deals / companies / projects at one time
Work frequently with others in deal teams of 2 – 4
people within your group
Frequent “fire-drill” deadlines for client driven approvals
Frequent meetings & conference calls throughout the
day
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Association of International Wealth Managers
(AIWMCM )
 Based in Switzerland, Non-profit Association
established in 2007 to promote & strengthen global
education in private banking industry
 AIWM is affiliated to Swiss Financial Analysts
Association (SFAA). SFAA is a global forum for
financial analysts and was set up in 1962.
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Association of International Wealth Managers
(AIWM)
Association founded by:
 AZEK , founded in 1990, the Swiss Training Centre for
Investment professionals
 LawInContext, online legal & training service created by
global law firm Baker & McKenzie
 Central Law Training(CLT), UK’s leading provider of
postgraduate legal training & course provider of
renowned STEP Diploma in International Trust
Management.
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AIWM Member Nations
• Currently present in Switzerland, France,
United Kingdom, Germany, Italy,
Luxemburg , Hong Kong & Monaco.
• Recently launched in South Asia
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Role of AIWM India
 Assists graduates in acquiring core competencies in
finance & in qualifying for key positions within the
industry
 Established to set a globally recognised standard for
the qualification of wealth management & Credit
Research professionals
 Facilitates client’s access to first-class, reliable and
comprehensive advice & services.
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AIWM India’s Objectives
• To facilitate research & high quality education in field of
international wealth management & credit research.
• To provide an internationally recognized certifications in
private banking (CIWMCM) & Credit Research (CCRACM)
• To create a forum for the interchange of ideas and
information in the finance and wealth management field
• To assist a world wide network of private banking
experts & financial analysts
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Certified Credit Research Analyst
CM
(CCRA ) Program
• Advanced international professional certification for credit
research professional, developed by industry experts.
• Has corporate acceptance
• Global, regional and local education component
• Program developed by highly qualified academics &
practitioners; skilfully combines both theory & practice
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Strengths of CCRACM Program
 Ensures an in-depth knowledge of Credit Research
and Credit Strategy
 Focuses on Credit Analysis
 Provides access to rating methodologies, industry
practices
 Teaches sophisticated techniques & takes holistic
approach to a Credit Ratings, Analysis and
Research
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Profile of Aspirants for the CCRACM
Program
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Candidates aspiring for a career in the following domains should pursue CCRACM
program:
Credit Analysis
Credit Ratings
Commercial and Retail Finance
Investment Banking
Private Equity
Private Banking
Banks
Economic Research
Portfolio Management
Fund Management
Academics
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CCRACM Examination Structure
 The designation combines a topic-based and
levels-based approach
• Both progression and topic specificity are
present
 There are two levels of examinations covering all
topic areas
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CCRACM Examination Structure
 Level 1 tests
• Knowledge and understanding
• Problem solving
 Level 2 tests
• Problem solving
• Evaluation and judgemental skills
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CCRACM Examination Structure
Examination paper structure:
 Common
• Level 1
• Level 2
Exam hours
2
3
5
No. of papers
1
1
2
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CCRACM Examination Structure
Examination paper structure:
 Common
• Level 1& 2
Exam Schedule
Online NSE Exams
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CCRACM Examination Structure
Topic areas – Level 1
• Understanding of Financial Statement Analysis
– Balance Sheet, Profit & Loss Statement, Cash-flow, Ratio & its analysis,
Accounting Policies, Projections, Red Flags
• Credit Specific Analysis
– Liquidity Analysis, Stress Case Testing, Scenario, Base, Bear Bull, Covenant
Testing with Projections, Comparison- Sector vs. Global, Liquidation
Scenario, Event, M&A, LBO
• Understanding of Bonds/ Bond Maths
– Bonds, Covenants, Pricing, Spread, Curves, CDS, Seniority Ranking, Rich
Cheap Analysis, SWAP, OAS, YTW, Term Structure & its theories, Duration,
PVBP
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CM
CCRA Exam
Structure
Topic areas – Level 2
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Credit Ratings Basics
– 4C Model, Types of ratings, Default rates, Recovery rates, Business, Industry,
Financial and other risks, Scenario Analysis, Sovereign Ratings, Methodology,
CIBIL/FICO
Credit Strategy
– Pair trade, Basis trade, Rating Analysis – Trends, Sectors, etc., Debt maturity
profile, Retrace analysis, Sector charts, Efficient frontier, Commodity based
traders, FX-based correlation, Senior vs. sub, CDS trader Analysis, Company
charts
Credit Enhancement : Structuring, Types of enhancement
Others : Related party transactions, Management analysis, Overview of fixed
income markets around the world, Distressed Investing
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Pathway to CCRACM Certification
• Eligibility• Minimum Work Experience – N.A
• Minimum Qualification during
Certification– Graduation (Students of
final year of graduation can register)
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Conclusion
• Credit Research Analysis will always be a critical function for financial
institutions.
• The market is growing with the entry of various institutions & products.
Credit Analysis in this scenario provides a true differentiator and
sustainable competitive advantage.
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Queries
Thank You
Association of International Wealth Management India (AIWMI)
Regus, Level 9, Platina, G Block, Plot C-59, BKC, Mumbai-51
Email: info@aiwmindia.com Web: www.aiwmindia.com
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