eFinancialCareers

Banking to the big boys.

Corporate banking, as its name suggests, is the broad term given to the different banking services that corporate institutions need in order to function. Also known as business or commercial banking, it spans the relatively simple business of issuing loans, to more complex matters such as helping to minimise tax paid by overseas subsidiaries or managing changes in foreign exchange rates.

Corporate bankers might also arrange an international payment or put together 'trade finance' packages to ensure a 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 they will bring in their capital markets colleagues if necessary. Increasingly, corporate banking requires an understanding of some of the more complex financing methods.

Trends

2006 was a good year for corporate bankers. Low interest rates and low default rates conspired with corporate acquisitions and leveraged buyouts to drive companies' demand for loans to record levels. In December 2006, the global value of syndicated loans (loans which are made by a group of banks rather than just one) rose to a record £1,690bn – up 8% on the year before. Loans to finance infrastructure projects, such as bridge and road building, rose particularly rapidly.

The infrastructure boom continued in 2007, with Barclays Capital, Dresdner Kleinwort, HSBC and RBC Capital Markets clubbing together to issue a £4bn loan to back the takeover by Macquarie of German power utility RWE.

As the volume of corporate loans has grown, questions have been raised about the likelihood of defaults on repayments. At the time of writing, this has yet to happen. But there are indications that the market expects an increase in defaults soon – the market for 'loan credit default swaps', which allow investors to trade the risk of a loan defaulting, is growing fast.

Key players

When it comes to assets, Barclays is by far the biggest force in Europe, with over €1.5 trillion behind it. And Barclays may be about to become bigger – in April 2007 it launched a takeover bid for ABN AMRO of Holland, which if successful (and not gatecrashed by Royal Bank of Scotland) will see its assets swell to nearly €2.5 trillion.

Roles and career paths

If you opt for a career in corporate banking, you may well start as a credit analyst, or selling products to corporate customers. Credit analysts look at companies' balance sheets and work out whether to issue loans to them. It's not always seen as the most exciting role, but it gives you the tools of the trade and is a crucial barrier to help stop the bank losing money.

From there, you could, for instance, progress to being a relationship manager, lending money to a handful of the bank's customers. This is where things get interesting: as you progress, you'll decide whether to lend to customer X or customer Y. It requires an intimate understanding of the company's strategy and a keen appreciation of the risks of default. Most relationship managers are winers and diners: they spend a lot of time meeting company FDs and CEOs in an effort to win and keep their business.

If you don't fancy the relationship management side of corporate banking, you could always go into risk/credit, product, operations or treasury management. Corporate banks also have an array of operational positions, including IT and HR. Various banks, including Barclays, Lloyds TSB, Royal Bank of Scotland and HSBC, offer training in corporate banking.

Pay

If you become a corporate banker you may not become as impressively rich as an investment banker or trader, but you'll still do 'quite well' and have a life! According to recruitment firm Morgan McKinley, senior relationship managers earned a maximum of around £130k in 2007.

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.

"Regardless of the area, candidates will need to be numerate and analytical, be able to develop trusted relationships and have strong customer outlook. Only after you have spent some time with us can you make an informed decision about which area is most suited to you," says Hannah Field, head of graduate recruitment and development at Barclays.

But you must research well, she advises: "It doesn't matter if you don't have an economics degree, but candidates need to make sure they have opinions about the financial services and corporate banking sector before coming to interview."

Stephen Smith, HR director at Lloyds TSB Wholesale and International Banking, adds: "Our senior executives look for the golden combination of exceptional academics, with maths, science and analytical capability being an absolute must, coupled with the ability to build strong, long-lasting client relationships."