What Does A Credit Analyst Do (including Their Typical Day at Work)

The particular group I was in largely focused on quarterbacking prospective transactions as a debt investment for Citigroup. Generally speaking, a client would have a funding need, and when the need was for debt, it was our job to create financial models and complete a diligence process to determine whether or not it was something we could invest in and/or syndicate to other banks as participants in an offering.

The building of MUFG at 6th and 49th

As an analyst, depending on how senior you were (A1, A2, or A3, with A3 being the most senior), your responsibilities would consist of different things. A3s could be staffed on any range of the following:

• Inputting historical financial data into a model to prepare for projection scenarios (commonly referred to as “spreading”)
• Creating projection scenarios based on various macroeconomic sensitivities and company-specific sensitivities
• Running various analysis and debt capacity models to see the effect of different financing structures on the company’s ability to repay debt
• Creating internal memoranda outlining the various scenarios, assumptions considered in each, and overall analysis, conclusions, and ultimate recommendations
• Participate or lead internal discussions with deal committees and risk personnel surrounding the investment in the debt facilities
• Review and assist in drafting legal documentation (credit agreements)
• Determine appropriate risk-adjusted pricing utilizing credit rating models comparing the prospect company to large historical data sets of other companies which takes into consideration statistical probability of default and loss given default (“PD” & “LGD”)

Depending on the time available to complete the transaction (often shorter notice than not), hours worked could vary between 60-80 hours on a normal level of deal flow, however could push into the 100 hour mark during busier times and depending on the complexity of transactions.

Pros

Incredible amount of learning potential: As an investment banking analyst you become privy to the inner workings of sophisticated financial transactions. Ranging from straightforward debt refinancings to acquisition financing to bankruptcy processes, the amount of technical knowledge in addition to business acumen required to properly analyze a particular situation is immense. Given this is your job, you will be required to learn all of it.

Broad exposure to a variety of businesses in different industries: As part of your analysis, you will need to understand the drivers of both revenues and expenses of a company. In order to understand a business, you must understand how and why it sells things, and the same for why it is able to be profitable and generate cash flow. Depending on your group focus, you can gain exposure to various industries if you are in a group that is not in a silo (i.e. Technology, Media, and Telecom “TMT,” Industrials/Diversified, Leveraged Finance). For example, at MUFG, I worked on a transaction related to a major cruise line one week, where the next I worked on a company that sold commercial carpet tiles.

Very steep slope to financial modeling: In banking, you will either sink or swim. Meaning you are expected to perform at extreme performance levels or be fired. Your interview process (which will be highly demanding, require you to have top credentials and “fit” the type-A profile) should not be viewed as a hard test to pass and be done with before you “get in,”, but rather the tip of the iceberg in terms of what it will be like on the actual job. If you land a job here, you will find yourself pushing the limit on the breadth and depth of learning like never before. Because financial modeling is literally the foundation of every single thing a bank does, (keeping) the job depends on your ability to learn and execute. As such, assuming you do not get fired, you will become a world class expert on financial modeling and understand businesses better than 99.9% of other people.

Company-paid dinners: If you work or intend on working past 8PM (some banks differ the time), generally you will be provided a company-paid dinner. If you work past 10PM, some companies let you expense a car service home.

Cons

Long hours: Investment banking is notorious for long working hours. This is not ideal if you plan on having any sort of normal life outside of work.

General complete loss of work/life balance: Referencing the long hours above, depending on how busy your group is and the complexity of your transactions, you may find yourself working 80-100 hours per week. At that rate, it becomes literally impossible to do any other activities outside of working and sleeping (and, of course, commuting to both of those activities).

High stress: In reference to the “sink or swim” dynamic above, banking roles are constantly pushing you to your limits and the expectations only increase as you gain more experience. Additionally, the work is frequently very fast paced, with limited time or resources available to help you learn.

Competitive pressure from colleagues: Because analysts get ranked relatively to one another (which determines monetary compensation levels in forms of year end bonuses), you are constantly being compared to your peers.