When a firm or company wants to take a loan, someone at the bank that has been approached will examine whether lending money to that party is safe. This professional, called a credit analyst, needs to figure out if the lender will be able recover its money.
Credit analysis exposes you to diverse industries and organisations, which could include large corporates, small and medium enterprises, partnership or proprietorship firms, as well as other banks. This makes it “one of the most enriching career options for a professional wanting to pursue a career in finance,” says Swati Agrawal, regional head of rating agency Credit Analysis and Research Ltd (CARE) in New Delhi.
“From the smallest firms to the biggest companies in the world, everyone needs to be assessed before a bank issues them a loan. So, you can imagine the opportunity,” says Apoorv Jain, a credit analyst with a leading multinational bank in Mumbai, who earlier worked with a private sector Indian bank and a rating agency.
“We are ensuring that the bank’s money goes into the right hands,” adds Jain. With a Master’s in finance and control from the University of Delhi, Jain says he chose this line because it’s “very interesting and challenging. You get to know the risks a company faces.”
These professionals are mostly employed in corporate lending arms of banks, investment banks, credit rating agencies, financial institutions, mutual fund houses, and private equity firms. Knowledge process outsourcing (KPO) firms, too, recruit credit analysts. “Credit analysts are widely sought after by banks, financial institutions, investment banks, private equity players, mutual fund houses, etc,” says Agrawal.
In a credit rating agency, a credit analyst interacts with the client, who wants to raise debt, for information. S/he also analyses the information provided by the company, checks out the industry and financial data related to it and goes for plant/site visit to better understand the operational aspects. The analyst – with a senior manager – has to constantly interact with the client to know about, for example, the business plan, the rationale behind it, how it will be funded, how challenges are addressed and the company’s vision and so on.
Who’s suited to this field? According to Jain, this work is not for a “very outgoing” person who likes to meet a “hundred people every day. It requires patience. You study the company, meet and talk to the client. It’s a desk job.” At the same time, “it’s a great choice in that it gives you an idea of what companies are doing. It gives you an idea of current practices in an industry.”
Jain adds that knowledge of good accountancy standards will stand you in good stead. And so will strong communication skills in English for writing reports and making presentations.
What's it about?
A credit analyst evaluates clients’ financial information to figure out their creditworthiness. S/he analyses financial information from various sources (company balance sheets, news reports, etc) and assesses the risk of issuing credit to the client. These professionals are mostly employed in corporate lending arms of banks, investment banks, credit rating agencies, financial institutions, mutual fund houses, and private equity firms
The average workday of a risk analyst at a credit rating agency:
9.30 am-1 pm: Reach office. Check and respond to mail. Discuss work plan with supervisor. Go through financial papers (company information, project plan, balance sheet) and analyse company and industry data. Call up and discuss issues with clients
1 pm: Lunch break
2 pm: Prepare for meeting with client A. Meet management of client B. After the meeting, write a report on credit analysis of the issuer (client B)
7.15 pm: Confirm flight ticket booking for a plant visit
7.30 pm: Pack up for the day
The pay package of a credit analyst from a reputable instution is about Rs 5 lakh to Rs 6 lakh a year. Pay hikes depend on your performance. With experience, you can grow to be a CEO or an MD. The median salary of a CEO, with a PG degree and 20 years’ experience, is about Rs 40 lakh a year
. Good quantitative aptitude
. Sharp analytical and organisational skills
. Confidence. Strong written and oral communication skills in English (for report-writing, making presentations)
. Ability to multi-task and perform under deadlines
. A sense of ethics
How do I get there?
You may opt for any subject combination at the plus two and Bachelor’s level. Industry professionals say it’s not necessary to opt for the commerce stream in senior school. However, subjects that hone your quantitative and analytical skills will give you a leg-up. Many employers ask for BTech, BCom or CA qualifications, but you need a Master’s degree, such as an MBA, to grow in your career. Credit rating agencies typically recruit MBAs in finance, preferably with a BCom or BTech degree. To gain an edge, you may consider top-up credentials such as certified financial analyst and financial risk manager
Institutes & urls
. Indian Institutes of Management and other top-rated b-schools
. University of Delhi (Faculty of Management Studies, and Department of Financial Studies)
. Department of Management Studies, Indian Institute of Technology, Delhi
. Institute of Chartered Accountants of India
Pros & cons
. Work involves a steep learning curve
. Opportunity to interact with senior management; make presentations to rating committee, which comprises experienced people from the banking and financial
. Exposure to different industries and companies
. Freedom to function independently; entrusted with responsibilities from an early age
. Work may involve travel to plant sites
. Stressful job due to strict deadlines and multi-tasking (as you handle different assignments simultaneously)
A senior industry insider talks about analysts’career prospects
What do credit analysts do?
Credit analysis is one of the most enriching career options for a professional wanting to pursue a career in finance. The job requires sharp analytical skills and a keen interest to analyse financials and operational information pertaining to a company. It provides you an opportunity to take part in discussions with the top management of the client and conduct independent research to make an overall assessment of the credit profile of the client.
What are the growth prospects like in this profession?
If you have the right qualifications, the right attitude, ambition and proven capability, you can reach a top management position, like MD or CEO. As you go along, there are immense opportunities.
Credit analysts are widely sought after by banks, financial institutions, investment banks, private equity players, mutual fund houses, etc.
A typical credit analyst rises to the position of senior analyst wherein s/he spearheads the assignment. With more experience, the analyst moves up to the managerial level, handling teams of analysts and looking after certain industries/sectors. The right candidate can rise to top management level.
Can you pinpoint the right qualifications?
We look for MBAs in finance or CAs. Then, there are add-on qualifications, such as CFA (chartered financial analyst) and FRM (financial risk manager) that employees earn to get an edge in the job market.
What about plain graduates? There are job postings asking for graduates (BTech, BCom etc)...
Graduates, yes but we take them in the category of junior analysts or management trainees. They are required to assist the analysts.
Is it wise to opt for commerce with accounts at the plus two level and earn a BCom degree?
We can’t say BCom is better. You should have a natural inclination towards this kind of analysis. It’s a little specialised and requires dedication, hard work and a flair for analysis as well as the ability to understand businesses. Exposure to accountancy helps people perform but once students (with a non-commerce background) do their MBA, they catch up. Analysts with an engineering background also tend to perform well as they can appreciate the manufacturing process and have good quantitative and analytical skills.
Among rating agencies, banks and financial institutions, who pays the best?
Rating agencies may not be the best paymasters but they offer a superior job profile in terms of exposure to different industries, undertaking plant visits, holding management discussions and complete independence to write your analysis. We assign multiple industries to a credit analyst so that there’s no monotony. The analyst also gets an opportunity to acquire in-depth insight (read: specialisation) in a particular sector.
Swati Agrawal, regional head, Credit Analysis and Research Ltd (CARE) Interviewed by Rahat Bano