Amit Goyal tells you how a career as a credit analyst can be lucrative for those with excellent communication skills, patience and diligence
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 — 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.
Job profile
The analysts work in the lending and credit departments of commercial banks, credit card companies and other financial firms. They are responsible for evaluating the creditworthiness of new credit applicants and monitoring the ongoing financial performances of existing credit customers. Analysts may work directly with consumers and business customers to collect information and conduct credit evaluations, or they may work in partnership with retail sales agents or credit officers who handle customer communication.
They use a variety of analytical techniques to evaluate the risk associated with lending money or extending credit to applicants. Analysts typically assess credit reports, payment histories, financial statements and job histories. When evaluating a business, analysts may also study its operations and the industry and local market in which it operates to make determinations about its ongoing competitive outlook. Credit risk analysts generally produce reports and recommendations based on their analytical work. In some positions, credit risk analysts are responsible for making the final decision whether to approve or deny credit applicants.
Scope
Most credit risk analysts start working in junior analytical positions after earning associate or bachelor's degrees in accounting, finance or a related business field with a quantitative focus. Some positions deal predominantly with consumer credit evaluation and may be open to candidates who have associate degrees and relevant experience. Positions that focus on business credit evaluation often demand greater knowledge of finance and accounting principles.
With several years of experience and a record of good performance, junior credit risk analysts can progress into senior positions with responsibility for more complex assignments. In some firms, senior analysts oversee a team handling analysis for a particular market, region or industry. Top-performing analysts can rise into financial management positions overseeing analytical departments, making final credit decisions and monitoring departmental performance.
Qualification
The minimum educational requirement for the position of credit analyst is a bachelor's degree in finance, accounting or another related field. A bachelor’s degree in finance or accounting exposes you to subjects like basic accounting and finance, statistics, ratio analysis, calculus, economics, industry assessment and financial statement analysis. These subjects are necessary to function as a credit analyst because they aid in risk assessment. Educational subjects like industry and ratio analysis are necessary because part of assessing the risk for a company includes assessing its environment. Candidates also do the post graduate diploma in banking and finance for the professional and practical knowledge of these sectors.
Skills required
A commercial credit analyst must have accounting skills since he spends time running calculations for corporate financial statements and tax returns. His knowledge of spreadsheet programmes allows him to create reports to compare with data from previous years. He prepares a narrative report and recommendations based on the analysis of the data. He needs written and oral communication skills to present his findings to the company’s management team.
Benefits
One major advantage to being a credit analyst is that you are not limited to a particular type of company. A credit analyst does not have to work only for a bank or credit rating agency. A credit analyst can work for any company that offers financing for its products and services. This means that a credit analyst can work with an automobile manufacturer, retail store, utility or even an energy company. Another benefit of being a credit analyst is that it can lead to higher and exciting career paths like investment banker, portfolio manager and loan and trust manager.
Remuneration
Credit analysts can work in a variety of fields and locales. Many work for lending institutions like banks or insurance companies. Additionally there is great demand in investment, working for an asset manager or private equity firm as a bond analyst or for rating agencies. The plethora of opportunities is reflected in the salary range that credit analysts receive. The annual salary for credit analysts ranges between Rs5 lakh to Rs8 lakh and is dependent upon level of experience, type of industry, and geographic location.
The writer is director of TKWs Institute of Banking and Finance