Bull Bear Report Jan 23 2011

How to Make the Grade as a Credit Analyst

By kyle stock

Related: Credit Analysts in Demand | Working at Moody's

Mark Howard hired quite a few credit analysts when he was co-head of global research and head of credit analysis at Barclays Capital. His picks seldom fit any particular mode.

There was the geologist that Howard hired to cover energy companies, the attorney able to dig into firms with complex legal exposure, and the usual number of candidates from ratings agencies.

Howard, who started with Shearson Lehman out of college in 1986, also looked for candidates with a knack for anticipation. He was fond of hockey players and chess buffs, because they were used to thinking about how things might pan out several steps in the future.

"Great analysts have to be able to think laterally," he said. "My experience is people who are very strong in silos don't necessarily think effectively outside of those silos."

The majority of the country's 68,000 credit analysts have backgrounds in business, math or economics. They also have a knack for communicating, particularly in writing.

The title may be the same, but the role of credit analyst varies substantially between a ratings agency, a commercial lender, a finance firm's risk management team and an investment bank's sell-side department. And MBA or CFA is an advantage in getting a job.

Commercial banks have long been the best places to learn the basics of credit quality. Unfortunately, many of those programs aren't as robust as they once were. And an advisor assessing a loan application needs a different approach from one counseling an institutional investor, for example.

Howard tells credit analyst candidates to garner offers in the area, and at the company, where they would most like to build a career. Succeeding in the role of assessing credit quality takes experience with both clients and the institution evaluating the risk.

Would-be debt assessors should be knowledgeable and have opinions on the news of the day, including everything from a recent earnings reports to shifts in monetary policy. They must be familiar with debt market lexicon. And they should be prepared for questions about a failed initiative or investment. Managers want candidates willing to be frank about mistakes.

"Hubris is a terrible thing for credit analysts," Howard said. "Good analysts will be right 65% of the time, but that means they're going to be wrong 35%. And you need to be able to acknowledge when you're wrong."

Write to Kyle Stock

Related: Credit Analysts in Demand | Working at Moody's

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