Introduction to Corporate Finance

PART 1: INTROdUCTION

increasingly via electronic media such as the Internet. Commercial banking, on the other hand,

involves extending credit and other banking services to corporate clients, ranging from small,

family-owned businesses to global corporate behemoths. In addition, a great many technologically

intensive support positions in banking require excellent finance skills and intimate knowledge

of telecommunications and computer technology. Table 1.2 describes career opportunities in

commercial banking.

Investment Banking

Along with consulting, investment banking is the career of choice for many highly qualified finance

students because of its high income potential and the interesting nature of the work. Investment banking

involves three main types of activities:

■ helping corporate customers obtain funding by selling securities, such as shares and bonds, to

investors

■ providing advice to corporate clients on strategic transactions, such as mergers and acquisitions

■ trading debt and equity securities for customers or for the company’s own account.

TABLE 1.2 CAREER OPPORTUNITIES IN COMMERCIAL BANKING

Position Primary activities

Credit analyst Analyses the creditworthiness of corporate and individual loan applicants

Corporate loan officer Develops new loan business for the bank, makes loan recommendations and services existing loans

Branch manager Manages the personnel and operation of a bank branch and markets bank services to attract new depositors

and borrowers

Trust officer Provides investment, tax and estate advice and products to wealthy bank customers

Mortgage banker Originates and services mortgage loans to homebuyers and businesses

Leasing manager Manages banks’ equipment-leasing operations and develops related products and services

Operations officer Responsible for a number of possible activities, such as electronic banking, internal data processing, security

of electronic transactions and coordination of computer links to ATMs, other banks and the Reserve Bank

Except during the global financial crisis (2007–2011), investment banking has been extraordinarily

profitable since the early 1990s. The large investment banks in Australia include the Australian-owned

Macquarie Group and CommSec and foreign-owned entities such as JPMorgan, Deutsche Bank,

Credit Suisse, Goldman Sachs, Barclays, BNP Paribas and HSBC. As you can see from their names,

these foreign-owned investment banks are from the US and Europe, financial institutions with a global

presence.

Investment banking remains a highly volatile industry. For example, from October 2007 to November

2008, Goldman Sachs’ US share price lost three-quarters of its value, an experience shared by most

of the large American investment banks. On the other hand, the Australian-owned banks lost small

amounts of share value, but overall came out of the global financial turbulence of 2007–2011 with

reasonable financial strength. Investment banking is also notorious for being extremely competitive and

for demanding long working hours from its professionals (especially the junior ones).

Investment banking can offer lucrative rewards for those who master the game. Most undergraduates

hired by investment banks are assigned duties as financial analysts. Starting salaries for entry-level

investment banking positions seem to range from $50,000 to more than $80,000, with some also earning

Bill Eckmann, Principal,

Solar Capital

‘Besides finance, there

are three subject areas

that have really helped

me at the beginning of

my career in investment

banking.’

See the entire interview on

the CourseMate website.

COURSEMATE
SMART VIDEO

Source: Cengage Learning