What is the difference between corporate and commercial banking

The term "commercial banking" covers services banks offer to individuals and small businesses. Commercial banks manage checking and savings accounts for individuals and small businesses, as well as provide credit for borrowers. Small businesses obtain needed credit from commercial banks for business loans. Commercial banks also invest in credit instruments such as government or municipal bonds. These bonds often deliver steady return rates that keep pace with inflation. One of the primary examples of commercial banking is how commercial banks serve as primary lenders on nearly every type of consumer credit.

Commercial banks make loans to individuals on such items as auto loans, credit cards and home mortgages. Commercial banks also provide lines of credit to small businesses for equipment loans, construction loans and mortgages on commercial property. These banks also help depositors earn more on their money through instruments such as certificates of deposit, money market accounts and interest-bearing checking and savings accounts.

If a company needs to borrow beyond its current capacity, it can do so by drawing on its Revolver, which is usually undrawn at first. The company pays interest on the full principal remaining in each period. See our full tutorial on original issue discount! These loans are often syndicated , i. Fees may also be split with industry coverage , capital markets, and other teams at the bank, depending on the nature of the deal and who sourced it.

The key difference in corporate banking is that you tend not to use projected financial statements in lender presentations and other documents. Your task is to prove your client deserves a higher credit rating, which will result in a lower cost of borrowing. First, note that there is a big difference between banks that classify corporate banking within investment banking and ones that place it in commercial banking or other groups. Your base salary will increase as you move up, but there will be a modest discount to IB pay at each level and a significantly lower bonus as well.

So… decently interesting work, good hours, and the potential to earn in the mid-six figures once you reach the top levels. For example, it is almost impossible to move directly from corporate banking to private equity , hedge funds , or corporate development. If you stay in CB, the exit opportunities are similar to those offered by DCM: Treasury roles in corporate finance at normal companies, credit rating agencies, or credit research. If you make it to the Relationship Manager level and you develop a solid client list, other options might be private wealth management or private banking.

If you are looking to work crazy hours and make the most amount of money humanly possible in the finance industry, then corporate banking is not for you. It can also be a solid way to get into IB through the side door, but if you want to make that move, you have to do it quickly, or you risk getting pigeonholed. Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development.

He earned his B. Free Exclusive Report: page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews. Hi Brian, thank you so much for this thorough and insightful guidance! Currently i am interning as an Analyst in Corporate Banking.

I want to break into IB after i graduate next Summer. Should i apply for an internship in IB this fall or apply for full time IB jobs? I have heard they prefer undergrads with prior IB internships. Please guide me through. I just got invited for with JPM where I will have the chance to interview for either middle markets or their corporate banking.

My question to you is, do I risk my possibilities of going for the corporate banking role where I really want to be or do I secure the Middle markets route with JPM they do way bigger deals than wells fargo, but I will have super relevant experience with this group. I would focus on one role per bank at a time.

If you want to do corporate banking at JPM, aim for corporate banking. Hi I would like to speak in corporate banking exit opportunities into IB a bit more. Let me know how we can connect.

Sorry, what is your question? You can ask questions on this site in the comments. You network extensively, learn the technical side on your own, and eventually ask your contacts for interviews after you have enough corporate banking experience maybe months. Hi Brian, Just wanted to say thank you for putting out such informative content, it has helped me massively.

What area within the big 4 do you believe is the best to apply? Would a deals advisory program such as that at KPMG be more useful than an auditing role?

Thanks again. Yes, if you can get in. Spot-on summary. Zero outside job opportunities other than similar role at different bank. But hey, who am I to complain, this is a great gig. I currently work at a Big 4 in Tax for the past 2 years and graduated from a top 25 school with a 3.

How would I best position myself for a potential switch to corporate banking? I would not bother with an MBA for corporate banking. You can probably just network into the group directly from where you are now. If not, try to move into a more relevant group at your current firm first, such as anything related to transactions or due diligence on deals rather than tax.

I have a degree in Finance, but when I graduated I stepped away from finance and went directly into tech sales. Start networking by finding people on LinkedIn and reaching out to them via email.

Come up with a solid story that explains why you went into tech and now are moving away from tech after only 1. This is an amazing breakdown; I wish I had found it when I was doing my interviews. I am a third-year student from a non-target that was able to secure a Corporate Banking internship at a mid-tier BB for my third-year summer internship Summer I know my technical cold Bought your guides! I also networked with our VP of HR and she said internal mobility is very possible. But how quickly through my internship should I begin to network with pure IB individuals?

I would start maybe halfway through the internship, but it depends on what you want to do — are you trying to move into IB for a full-time role? If so, that will be very difficult because so many people try to switch banks around that time. For CB analysts looking to make the switch to IB, which groups are the most feasible to transition to? DCM, LevFin, and any industry groups that do a lot of debt deals such as Industrials are the best bets.

Appreciate the insight. Besides industrials, which other groups typically do a lot of debt deals? Follow up with them a few times and ask about lateral openings. Repeat this process for many banks. I am afraid they would consider me overqualified for analyst position and underqualified for Associate position because of lack of local experience.

The question is, should I? I also love the culture and the people in corporate banking and appreciate the work-life balance we also get paid almost the exact same as the investment bankers all-in compensation despite the difference in hours compared to the investment bankers.

On the other hand, the investment bankers role is all technical focus while ours is a combination of relationship management and technical and I feel as though it would be beneficial to attain the technical experience beforehand in the investment bank.

My plan for life is to either: 1 continue in the corporate bank 2 work for a F firm 3 start my own business and in that order. Thanks for you advice! Hi Brian, Thanks so much for this article! I know quite a few people who have done that with IB, wondering if this is possible for CB as well and what they route may look like.

Thanks in advance! Another difference between commercial and corporate banks is in their facilitation. Within the retail banking sector, the bank acts as the primary moneylender to its clients. So, whether small businesses need to open lines of credit or individuals need a mortgage or auto loan, the bank will provide the loan. That is not always the case with corporate banks. However, corporate banking companies do more than advance direct funding to their business clients. They also enable businesses to achieve their goals by creating investment instruments like bonds, writing letters of credit and providing business asset management advice.

In addition, corporate banking also includes commercial real estate, equipment lending, payroll services and structured business solutions to international business clients. Losing money is always a concern for anyone. You will receive the money in the form of a check or alternative bank account in another similarly insured bank. Unfortunately, FDIC tends to insure a limited number of financial products , such as CDs and checking, savings and money market deposit accounts.

For that reason, corporate and investment banking products like bonds, mutual funds and stocks, among others, are likely to be uninsured. And that protection will be separate from what you get as an individual. You can receive comprehensive banking services in one go.