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- Fixed Income
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- Credit Analysis
- Credit Analyst Career
- Credit Analyst Interview Questions and Answers
- Credit Rating Process
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- Loss Given Default â€“ LGD
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- Bills of Exchange vs Promissory Note
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- Equity Research vs Credit Research
- Books on Bonds Market
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Credit Analyst Career
Credit analysts facilitate credit risk management by measuring creditworthiness of the individual or a firm. Although, the roles of a credit analyst is similar however variations occur depending on the type of entity they are working with. These are generally employed by banks, credit card Companies, rating agencies and Investment Companies.
Top 5 Credit Analyst Career Paths
The credit analyst career can be broadly divided into five categories:
- Consumer Credit Analyst Career
- Corporate Credit Analyst Career
- Financial Institution
- Credit Investment Analyst
#1 – Consumer Credit Analyst Career
The role of consumer analyst is to examine the financial condition of an individual. He usually analyses the financial position of an individual before the bank/financial institution can grant him loan. The analyst gathers key information such as past credit history, defaults, assets in form of cash, investments or real estate, salary and credit score like FICO.
#2 – Corporate Credit Analyst Career
Corporate credit analyst evaluates the credit risk of a non-financial firm like industrial Companies, manufacturing enterprises, trading firms and service providers. A corporate analyst is generally skilled in the specific industry and does a research not only based on the financial condition of the firm but also based on its scale, geography, products, and sector it is involved in. Apart from knowledge of the specific sector they analyst are well versed with accounting techniques.
#3 – Financial Institution Analyst
A financial institution analyst assesses the creditworthiness of a financial intermediary. He analyses a financial institution related to bilateral or multiple transactions as a counterparty risk. There are a majority of transactions between two banks and financial institutions like interbank funding without collateral, funding based on repos, borrowing of securities, dealing in Foreign exchange, transactions related to various derivative contracts such as credit default swaps, interest rate swaps, Fx swaps etc. An analyst measures the counterparty risk and settlement risk of the counterparty before entering into the transaction or after a major event which may expose his firm to potential loss.
#4 – Sovereign Credit Analysts
Countries across the world borrow funds from other nations, IMF, world bank and other financial institutions. A sovereign analyst measures creditworthiness of the government of a Country. They are majorly employed with rating agencies which give a sovereign credit rating. They analyze a nation on the basis of tax compliance, geopolitical stability, tax collection, government spending, fiscal deficit amongst other factors.
#5 – Credit Investment Analyst
A credit investment analyst analyses the fixed income securities issued by various governments like US treasury bonds, corporate bonds issued by corporate firms. The role is to analyze the security based on various risks like credit risk, interest rate risk of these securities so an institutional investor can make an informed decision before making an investment.
Broad Roles of a Credit Analyst Careers
Above we have discussed the broad careers of a credit analyst. This can be generally employed at the following entities:
- Banks and related financial institutions: Commercial and public banks which provide credit to public and corporate firms are biggest employers of this analysts or measure the creditworthiness of the loan applicant.
- Institutional investors: Institutional investors employ analysts to measure credit risks involved with bonds and other credit securities.
- Rating agencies: This is work with rating agencies to give a credit rating to banks, financial institutions, corporations, and governments. There are three global credit rating agencies which employ such analysts – Moody’s Investor Services, Standard & Poor’s Rating Services, and Fitch Ratings.
- Government agencies: Government agencies like regulators, banks which act as credit providers, market participants and policymakers employ such analysts which work as a regulator to analyze creditworthiness of state-run banks, insurance providers, and other institutions which can have a systematic effect on the market in general and the economy as the whole.
Educational Qualifications Required for Credit Analyst Career
- Most firms employing credit analyst requires the analyst to have a bachelor’s/masters degree in finance and accounting.
- The analyst should have a sound knowledge of finance subjects like accounting, ratio analysis, economics, industry assessments and financial statement analysis.
- Also, some firms prefer additional recognized certifications like Chartered Financial Analyst (CFA) or Financial Risk Manager (FRM).
Credit Analysts Skills
Apart from education qualifications, there are other skills required for credit analyst Career:
- Diligent – It should be diligent and pay great attention to detail. An analyst should not miss any information or data which could lead him to incorrect analysis.
- Quantitative analysis skills – It should have quantitative analyst skills and should be able to read and analyze numbers for a good analysis.
- Written and Oral Communication Skills – Most part of credit analysts career requires communicating the analysis to the team, client or publish a report. Thus, he should have written and oral communication skills and should be able to effectively communicate the decisions to the wide variety of people in verbal or written form.
- Industry Knowledge – As mentioned above, some analysts work in the specific industry and have sector specific skills. Thus, for analysts looking to make a career in a particular sector, they should have a great understanding of the sector and should know all the particulars and details about it.
- Financial Analysis Skills – Such analyst should be able to perform financial analysis of companies as its loan portfolios. They are also good at financial modeling in excel and credit analysis.
- Experience with Financial Software – Most of the work of this analysis is done on Microsoft Excel and other financial software. Thus, knowledge of these tools should be handy for the analyst.
Salary of a Credit Analyst
- While the salary of a credit analyst varies as per the industry, experience, knowledge. As per Indeed.com, a typical salary range in the US is $ 30,000 to $ 109,000 with a mean salary of around $ 58,000.
- As per glassdoor.com typical salary of a credit analyst in India is in the range of Rs 3,87,000 to Rs 12,38,000 with an average of Rs 7,02,000.
This analyst decides the interest rate at which a bank should provide the loan to an individual or a corporate. He measures the creditworthiness of the client or corporate. The credit analyst career may look lucrative but it comes with a lot of responsibilities and requires hard work. It may at times not be easy to compile the huge amount of data and come up to a conclusion, hence the job may become bit stressful.
This has been a guide to Credit Analyst Careers Paths. Here we discuss Credit Analyst career opportunities including corporate analyst, sovereign analyst, consumer analyst, financial institution analyst and credit investment analyst. We also discuss the top skills required to become a credit analyst along with average salaries of such jobs. You can learn more about Credit Analysis from the following articles –