Presentation – Careers In Credit Research

Careersin

Credit Research and Analysis

Confidential, Copyright AIWMI

• To define the Credit Research Market & the services.• Provide an idea of its size and recent growth• Examine the career opportunities in the Credit

Research industry• Describe the competitive landscape and the ways to

reach there.• Introduce CCRA Certification program as a gateway to

careers in Credit Research and Ratings

AIM of this presentation


Definition of Credit Research and Analysis

• Credit Research and Analysis– Research to assess the overall credit quality for Investments

into its fixed income related instruments

• Fixed Income is an Investment that has an up-front capital Investment and pays interest on a regular basis

• Credit research usually includes credit analysis, fixed income valuation, credit rating. credit assessment, formulating credit strategy and credit enhancement


Fixed Income - Products • Common financial instruments:

– Bonds/Debentures– Certificates of Deposit, Fixed deposits– Money Markets Instruments (short term)– Loans (including foreign current loans)– Others


• Credit Analyst’s has to look at all the risk factors for a company unlike equity analysts

• Credit Analysts can be a qualified person with appropriate credit knowledge like MBAs, CFA Charterholders, Chartered accountants, Graduates or any credentialed professional money manager.

As we understand…….


http://en.wikipedia.org/wiki/MBA

http://en.wikipedia.org/wiki/Chartered_Financial_Analyst

Client Segments• Credit Research roles are targeted at any

part of business where there is a need for new capital for e.g. for SME’s, large corporates, private companies, special purpose vehicles, individuals

• The roles could be targeted for independent analysis like a credit rating analyst or a portfolio analyst for a buy side/sell side firm


Depth of Credit Research

Source : http://www.zerohedge.com/news/visualizing-tbtf-hub-and-spoke-representation-scale-free-modern-bankingConfidential, Copyright AIWMI

http://www.zerohedge.com/news/visualizing-tbtf-hub-and-spoke-representation-scale-free-modern-banking

• There are only 51 stocks in the world that are rated by more than 50 sell-side equity research analysts. Of these 49 are in India. The only 2 stocks outside India are Apple and Intel. (MS Report).

• Equity Research per se has bulk supply and few jobs which is inverse compared to the total capital out in the world

Equity is over played


• Bond market Size global - $123.2 tn (BIS Dec 2012)• CDS market size globally - $27 tn (BIS June 2012)• Equity market size globally - $50 tn

• Globally equity is only about 25% of the total capital available while debt remains 75%.

Market Structure/size

• Credit Rating Agencies like CRISIL, ICRA, CARE, FITCH, Moody's, S&P

• Credit Information Companies like CIBIL, Equifax, Experian and Highmark

• Banks/NBFC – Retail and institutional Credit, Other loans

• Banks – Treasury dept. buying and selling G-sec• MNC Banks – Fixed income trading desks, Research• KPO’s – Tracking international Bond markets

Market Players for Credit


The Absolute Return Letter, July 2013

Much Ado about Nothing

CCRA Competitive Landscape

Global Players

Indian Players

Ratings

High HighCapabilities

Source : logo’s are taken from respective companies website and are not for marketing purpose.Confidential, Copyright AIWMI

Salaries


JobsSubmit Submit job title, city, state

Recent Regulatory updates• NSE Launched its Debt trading segment recently and trying to

promote it, other key exchanges are planning as well

• RBI Announced/approved CDS Guidelines in 2012 and all regulators including PFRDA, IRDA, SEBI etc. allowed mutual funds to trade in the same

• RBI is actively changing competitive landscape for debt/debentures etc with changing guidelines, rules

• Recently around 20+ corporates applied for banking license and that will open up banking jobs plus Nationalized banks are expanding


Present Market Scenario • JP Morgan: Credit Research

• Each Credit Research senior analyst focuses on one or more industries, comprising anywhere from 30 to 70 companies.

• Analysts use knowledge of the industry, the companies and the fixed income market to issue bond and credit derivative recommendations.

• Copal Partners – A Moody’s Company• The role is ideal for someone who is a domain expert on one or

more sectors and wants to move from being an analyst to a manager.

• A key longer term component of this role is also to structure and devise a rule based Artificial Intelligence system that can automate Research output.


• Fidelity Fixed Income/Credit Research• This division is home to Portfolio Managers, Research Analysts,

Traders and Quantitative specialists. • And they work on either the Equity side (stocks) or on the Fixed

Income side, otherwise known as Credit (bonds, gilts, and so on).• Career Opportunity at AMBA Research :

• ANALYST/ ASSOCIATE VICE PRESIDENT - FIXED INCOME AND CREDIT RESEARCH

• Standard Chartered Credit Research• The Global Credit Research team, headed by Kaushik Rudra,

comprises two areas: Credit Analysis and Credit Strategy• PIMCO’s approach of Credit Research for a better Investment• CRISIL

• CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services.


• Long Hours (less hours than Investment Banking)• Life will revolve around companies • A lot of phone time / meetings with clients, other banks, lawyers, & internal colleagues• Credit analysis

o Financial Statement Analysis / Modeling and Industry Studies• Must know your clients better than the competition

o Investor Calls / Presentationso Company press releases as well as reports in the mediao 10-Ks, transcripts, sell-side research etc.,

• Broad product experience / limited understanding of each product• Competitive / High Pressure Environment

o Can be said about any position at a bank. Especially front office but also middle and back.

Role of a Credit Analyst


Analyst Role / Responsibilities Career / Role Benefits

• Financial analysis and financial modeling• Company valuation• Comparable analysis• Preparation internal credit / approval memos• Industry and company research• Developing client presentations• Marketing material (i.e. Teaser, Confidential Information

Memorandum)• Updating all internal databases and systems• Administrative tasks (set up calls, fax, FedEx, etc.)

• Banking-like training programs • Greater access to superiors & senior management• Truly understand corporate growth, financial analysis &

capitalization• Develop strong knowledge of many industries• Analysts tend to wear more hats than in larger banks• Quality of life: Hours, flexibility, goals & expectations• Defined career paths & competitive compensation• Opportunity to change career path both internal /

externally• Introduction to numerous business owners

Career Considerations

Career Options – Firm Types Environment – Work / Life Balance

• Commercial banks• Finance companies / specialty funds• Hedge funds and mezzanine funds• Rating Agencies etc• Trading Desks

• 10-12 hour days, weekend work depending on firm• Medium/High stress levels: Pressure to perform,

competitive environment & demanding superiors with little room for error

• Multiple deals / companies / projects at one time• Work frequently with others in deal teams of 2 – 4

people within your group• Frequent “fire-drill” deadlines for client driven approvals• Frequent meetings & conference calls throughout the

day


Association of International Wealth Managers (AIWMCM )

Based in Switzerland, Non-profit Association established in 2007 to promote & strengthen global education in private banking industry

AIWM is affiliated to Swiss Financial Analysts Association (SFAA). SFAA is a global forum for financial analysts and was set up in 1962.


Association of International Wealth Managers (AIWM)

Association founded by: AZEK , founded in 1990, the Swiss Training Centre for

Investment professionals LawInContext, online legal & training service created

by global law firm Baker & McKenzie Central Law Training(CLT), UK’s leading provider of

postgraduate legal training & course provider of renowned STEP Diploma in International Trust Management.


• Currently present in Switzerland, France, United Kingdom, Germany, Italy, Luxemburg , Hong Kong & Monaco.

• Recently launched in South Asia

AIWM Member Nations


Role of AIWM India Assists graduates in acquiring core competencies in

finance & in qualifying for key positions within the industry

Established to set a globally recognised standard for the qualification of wealth management & Credit Research professionals

Facilitates client’s access to first-class, reliable and comprehensive advice & services.


AIWM India’s Objectives• To facilitate research & high quality education in field of

international wealth management & credit research.• To provide an internationally recognized certifications in

private banking (CIWMCM) & Credit Research (CCRACM)• To create a forum for the interchange of ideas and

information in the finance and wealth management field• To assist a world wide network of private banking

experts & financial analysts


Certified Credit Research Analyst (CCRACM ) Program

• Advanced international professional certification for credit research professional, developed by industry experts.

• Has corporate acceptance• Global, regional and local education component• Program developed by highly qualified academics &

practitioners; skilfully combines both theory & practice


Strengths of CCRACM Program

Ensures an in-depth knowledge of Credit Research and Credit Strategy

Focuses on Credit Analysis Provides access to rating methodologies, industry

practices Teaches sophisticated techniques & takes holistic

approach to a Credit Ratings, Analysis and Research


Profile of Aspirants for the CCRACM Program

Candidates aspiring for a career in the following domains should pursue CCRACM program:

• Credit Analysis• Credit Ratings• Commercial and Retail Finance • Investment Banking• Private Equity• Private Banking• Banks• Economic Research• Portfolio Management• Fund Management• Academics


CCRACM Examination Structure

The designation combines a topic-based and levels-based approach• Both progression and topic specificity are

present There are two levels of examinations covering all

topic areas


CCRACM Examination Structure Level 1 tests

• Knowledge and understanding• Problem solving

Level 2 tests• Problem solving• Evaluation and judgemental skills



Examination paper structure:

Common Exam hours No. of papers• Level 1 2 1• Level 2 3 1

5 2



Examination paper structure:

Common Exam Schedule• Level 1& 2 Online NSE Exams



Topic areas – Level 1• Understanding of Financial Statement Analysis

– Balance Sheet, Profit & Loss Statement, Cash-flow, Ratio & its analysis, Accounting Policies, Projections, Red Flags

• Credit Specific Analysis – Liquidity Analysis, Stress Case Testing, Scenario, Base, Bear Bull, Covenant

Testing with Projections, Comparison- Sector vs. Global, Liquidation Scenario, Event, M&A, LBO

• Understanding of Bonds/ Bond Maths – Bonds, Covenants, Pricing, Spread, Curves, CDS, Seniority Ranking, Rich Cheap

Analysis, SWAP, OAS, YTW, Term Structure & its theories, Duration, PVBP


CCRACM Exam StructureTopic areas – Level 2• Credit Ratings Basics

– 4C Model, Types of ratings, Default rates, Recovery rates, Business, Industry, Financial and other risks, Scenario Analysis, Sovereign Ratings, Methodology, CIBIL/FICO

• Credit Strategy – Pair trade, Basis trade, Rating Analysis – Trends, Sectors, etc., Debt maturity

profile, Retrace analysis, Sector charts, Efficient frontier, Commodity based traders, FX-based correlation, Senior vs. sub, CDS trader Analysis, Company charts

• Credit Enhancement : Structuring, Types of enhancement • Others : Related party transactions, Management analysis, Overview of fixed

income markets around the world, Distressed Investing


• Eligibility- • Minimum Work Experience – N.A• Minimum Qualification during

Certification– Graduation (Students of final year of graduation can register)

Pathway to CCRACM Certification


Conclusion

• Credit Research Analysis will always be a critical function for financial institutions.

• The market is growing with the entry of various institutions & products. Credit Analysis in this scenario provides a true differentiator and sustainable competitive advantage.


Thank You

Association of International Wealth Management India (AIWMI)Regus, Level 9, Platina, G Block, Plot C-59, BKC, Mumbai-51

Email: [email protected] Web: www.aiwmindia.com

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Presentation – Careers In Credit Research

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