Commercial Banking

Commercial Banking: Facts and Trends

Banking is Satisfying In 1992, Money magazine surveyed 100 jobs in the United States. The job of banker was listed as the second most satisfying. Bankers love their jobs!

Banking is in a Period of Consolidation Banking is going through a period of tremendous consolidation with frequent mergers and layoffs. Mergers abound such as those of Citibank and Travelers into Citigroup or NationsBank and BankAmerica. Customers don't go to branches like they used to an increasingly rely on ATM's and electronic transactions. And many now direct their savings into mutual funds like Vanguard and Fidelity. At the same time business increasingly raise money using commercial paper and medium-term notes instead of bank loans This means jobs are getting tighter. Fortune, 10/30/95 p. 45: "Few industries have experienced as intense a spasm of consolidation and corporate restructuring as has banking in the past decade. New mergers-and job cuts-are announced practically every we k..."

Think Online David Taylor of the Bank Administration Institute notes that "PCs and modems are reaching a 40% penetration level for households with annual incomes over $50,000, banks' best customers." Home banking offers tremendous convenience to these customers a d will grow enormously in the next decade. "Before doing the Saturday morning shopping, you can check the status of your checking account, pay any outstanding bills, and, with the advent of smart cards, some day download credit onto your card to pay for he shopping."

Don't Forget Government Job Opportunities in Banking State governments and the U.S. government actively recruit banking regulators. Interesting places to look include The Office of Thrift Supervision, the Federal Financial Institutions Examination Council and the Federal Reserve Banking System.

Branch Out Jobs in bank branches could be risky. According to a recent study by Deloitte & Touche about 30% of bank employees (850,000 people) work in branches. However, productivity improvements are expected to replace 151,200 of them, and electronic delivery f services is projected to eliminate an additional 344,400 jobs. When new jobs created by electronic delivery services are factored in, the study shows a net loss of 450,000 jobs by the year 2000.

Banks are Getting Aggressive The competitive environment is changing too. USA Today writes on Aug 29, 1995: "Behind the bank deals: The easy times are over for bank earnings. Banks have posted record profits since 1991, thanks to falling interest rates and their efforts to slash costs. But interest rates aren't falling anymore, loan demand has slowed and bankers can't cost-cut their way to continued prosperity. They must grow and sell their services aggressively in new markets to keep earnings up and investors happy."

US Banks Aren't That Big The largest banks in the world are outside of the United States. In 1999, the world's largest bank was Japanese with $1,270 billion in assets. [See table below]. That is two times as big as the largest US bank: Citigroup.

Banking is Shrinking The business of banking is changing dramatically as traditional demand deposit and CD business shrinks. The U.S. banking system's share of financial assets in the economy has sunk to 25%, the lowest in the last 130 years. It is forecasted that half t e nation's retail branches will close in 10 years and that as many as 450,000 bank jobs may disappear (Orlando Sentinel, 9/1/95).

The Future is in New Areas Because traditional banking is in decline the future of the industry lies in services and new areas. Many banks are now starting to compete against investment banks, for example. One in five banks owns a full-service brokerage firm today. Half of ban s own a discount broker. Expect these numbers to rise.

Specialized Banks are Doing Best Banks which specialize in a niche such a retail lending, credit card operations, cash management or global retail appear to be doing better than more diversified banks. Expect focused banks to continue to succeed and create more jobs. Players like Associates, MBNA and Providian are doing well at present.

You May be Traveling New regulations permit interstate banking. Historically, you might not have been asked to travel much as a banker or deal with businesses in other states. That is changing rapidly.

Middle-Managers Are In Demand The shake-up in banking has left a shortage of good middle-managers, especially at smaller banks which find it more difficult to hire well-trained managers away from well-staffed larger banks. Other hot areas include loan review officers, technology pecialists and auditors.

Commercial Banking: Skills & Talents

Broad Business Understanding and People Skills Needed To be good in banking you need a broad understanding of business because your job will most likely involve interacting with businesses. People skills are essential because you will be helping people get the loans and investments that they want.

Accounting and Writing Skills are Crucial The most common jobs in commercial banking are as a credit analyst and as a lending officer. These jobs require a strong understanding of accounting. Because banking often requires that you document loans and justify credit analyses you've written communication skills are extremely important.

High Grades less important than work ethic Banking attracts a diverse group of people. You don't have to be a superstar student with a phenomenal GPA to make it. You do have to be detail oriented, unafraid to sell and conscientious.

International talent is in high demand at money-center banks. According to Hoyle Jones, Head of recruiting at Citicorp: The firm is "aggressively in the hiring market. "We're looking for U.S.-educated Asians and Latin Americans to go back home and grow businesses."

Marketing Types Wanted A new business model which is spreading into banking is that of the marketing-oriented consumer products company. Banks are trying to build valuable brand images with consumer-oriented advertising and distinct product lines. According to Richard Kovacevich, CEO of Norwest: "I believe we all must be salespeople; and we should be proud of it... We can no longer be ordertakers, which is still the characteristic of the old banking industry. In fact, we must be great as salespeo le. We must be customer-oriented, we must be needs-based and we must be aggressive." In light of this demand, if you have good marketing skills and have taken a number of marketing courses, you will be well-suited to this new environment. Because of the increasing marketing orientation, many banks have also been paying big bucks to lure product managers away from consumer products companies. Pros with skills in product design and market segmentation wanted (American Banker, January 5, 19 5).

Wall Street Types Will Find a Home Because commercial banks remain profitable and are more involved than ever in the financial markets, they are competing with Wall Street for "high-tech finance jocks" involved in foreign exchange derivatives and financial engineering.

Corporate Investment Products in High Demand There is also high demand for finance professionals who can develop products for the corporate market. According to Windle Priem of Korn/Ferry International, a top recruiter in banking: "Half of the [recruiting activity in banking] has been in the capital markets and corporate finance arena of these banks. The other part of the commercial banking practice that's booming is investment products and mutual funds. That's been very, very strong. ...Most of those people have been hired from other investment firms, other mutual fund companies. The traditional corporate lending people continue to be downsized and terminated." (American Banker, 1/5/95).

MBA Optional It is generally not necessary to get an MBA in commercial banking although it wouldn't hurt you. Many of the execs at the very top do have MBAs from prestigious schools. And others have attended summertime masters programs at places like the Southwestern Graduate School of Banking (Dallas, TX) or the Stonier School of Banking (Madison, WI).

Days of Easy Hours Long Gone Banking is reputed to be a low hours/workload position. This is possible, especially in smaller markets, but increasingly bankers are working longer hours as their jobs become more oriented towards general marketing of financial services. Consumers are increasingly banking from home using online services and the Internet. If you are Internet savvy and familiar with computers you will have an edge in banking. "Banks are at the point now where they have to seriously start moving into an on line environment, or risk losing some of their best customers, potentially forever. It's a very crucial and very perilous time for banks," said David Taylor, executive vice president at the Bank Administration Institute, in December 1995.

A typical job in banking in the lending or branch management area would require the following skills:

Key Skill Area Requirement
People skills: High
Sales skills: High
Communication skills: High
Analytical skills: Medium
Ability to synthesize: Medium
Creative ability: Medium
Initiative: Medium
Work hours: 40-60/week

Commercial Banking: Job Options

Credit Analyst This is a common entry level job which requires that you evaluate business and consumer loan applications made to your bank. Your duties include projecting a company's future cash flow, evaluating its current financial soundness, visiting and interacting with financial people at businesses and dealing with lenders. You will learn a lot about business in this job. Your success in this job will depend on how detail-oriented you are, your knowledge of accounting and your ability to communicate.
Loan Officer This is a highly desirable job in banking which involves making loans to businesses and consumers. Being a loan officer requires that you have good selling skills, an ability to understand a business and a solid understanding of how banking works. Most people in upper management at banks were once loan officers.
Branch Manager You would be responsible for overseeing all activities at your branch including opening new accounts, loan origination, solving customer problems, foreign exchange and safe deposit boxes. Most importantly, you are responsible for establishing relatio s with customers. This job can be very satisfying, is never boring and requires you to be hands-on. Many bank managers start as tellers or customer service representatives. Key things go have for this position are customer service skills, empathy, quanti ative ability, strong work ethic, organization and and a solid understanding of banking. Can move up to be a market manager and oversee branches in a market.
Trust Officer In this job you would deliver trust services, financial products and advice to bank customers (often more upscale ones). This work will give you knowledge of business, investing, estate planning, taxes, probate law and will involve a lot of counselin .
Mortgage Banker Your job will be to make mortgage loans to homebuyers and businesses. This involves heavy contact with real estate professionals, credit checks, and dealing with new buyers. Today, many loans are sold to other investors in the mortgage backed securit es market. This job has a good future because an increasing fraction of the population is likely to buy a house in the future.
Other jobs in banking involve accounting, marketing and advertising, commercial card operations, securities transfer, wire operations, private banking, cash management services, installment loans, loan servicing, corresponent banking, personnel, operations and commmunications.


Commercial Banking: Overview

Commercial banks are in the business of providing banking services to individuals, small businesses and large organizations. While the banking sector has been consolidating, it is worth noting that far more people are employed in the commercial banking sector than any other part of the financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business, interact with people and build up a clientele.

Today's commercial banks are more diverse than ever. You'll find a tremendous range of opportunities in commercial banking, starting at the branch level where you might start out as a teller to a wide variety of other services such as leasing, credit card banking, international finance and trade credit.

If you are well-prepared and enthusiastic about entering the field, you are likely to find a wide variety of opportunities open to you. Carefully, read through the material below as you decide whether you've got what it takes to pursue a career in commercial banking.