Corporate banking careers explained
Corporate banking is all about providing a range of tailored banking services, in particular loans, to companies (rather than people) to help them run their day-to-day operations. Corporate bankers often called ‘relationship managers’ (RMs) because they are tasked with growing client relationships over the long-term rather than focusing on a single deal.
If that sounds a bit dull, bear in mind that corporate banking is a key profit centre for many large banks and has been rising in prominence since the financial crisis showed up the more speculative activities of trading and investment banking. By helping their clients to grow their businesses, corporate bankers also play an important role in the expansion of the wider economy.
While corporate banking is often used interchangeably with the term “commercial banking”, the latter is actually an even broader sector and typically encompasses not just corporate banking but also retail/consumer banking services to individuals. Some firms run corporate banking separately from investment banking, while others – like Deutsche Bank and J.P. Morgan – combine the two divisions to allow bankers to cross-sell products to their larger clients.
By helping their clients to grow their businesses, corporate bankers also play an important role in the expansion of the wider economy
Corporate banking clients come in all shapes and sizes, from multi-billion dollar conglomerates to small and medium-sized enterprises (SMEs) with a few million in revenues. Smaller companies can generate large revenues for banks if you have enough customers, so some banks have dedicated SME teams.
Corporate bankers also tend to manage clients in just one or two industries – healthcare, communications or retail, for example – and they develop highly specialised product knowledge and financing expertise as a result. Those servicing energy, mining or utilities companies might be project finance experts, working out the business case for funding a new power plant or mine.
Providing loans is one of the main services that most corporate bankers provide regardless of industry. They are tasked with structuring and arranging the terms of the loan for their clients – for example, a single bank can arrange a secured loan for a company, which is relatively straightforward. On the other hand, banks could be involved in a more complicated ‘syndicated loan’, where several banks combine to provide the funds for a loan, spreading the risk amongst them.
A loan can also be specific to what the company is using it for – as the name implies, ‘equipment lending’ involves customising loans and leases for equipment in sectors like manufacturing and transportation. Although loans and other credit products typically make up the bulk of a corporate banking division’s business, they are also its greatest source of risk if the loans go sour.
Corporate banking clients come in all shapes and sizes, from multi-billion dollar conglomerates to small and medium-sized enterprises
Corporate banking extends beyond loans, however. ‘Transaction banking’ is an important sub-set of corporate banking and includes both cash management and trade finance. Cash management involves collecting and managing a company’s cash to ensure its financial stability, managing changes in foreign exchange rates, and offering treasury solutions. Corporate banks routinely provide trade finance services – such as factoring and export credit and insurance – to clients with international operations. The most common service is a ‘letter of credit’, a bank-backed guaranteed payment to the exporter.
Corporate banking involves a range of other services, such as commercial real estate (banks might help with portfolio evaluation, real asset analysis, and debt and equity structuring) and employer services (including payroll and group retirement plans). It also provides similar services to those offered by retail banks to members of the public – the issuance of cheques and bank drafts, or overdrafts, for example.