Commercial Banking
In the most basic terms, commercial banks take deposits from individual and
institutional customers, which they then use to extend credit to other
customers. They make money by earning more in interest from borrowers than
they pay in interest to those whose deposits they accept. They're
different from investment banks and brokerages in that those kinds of
institutions focus on underwriting, selling, and trading corporate and
municipal securities.
Most of us maintain checking accounts at commercial banks and use their
ATMs. The money we deposit in our neighborhood bank branch or credit union
supports economic activity through business loans, mortgages, auto loans,
and home repair loans. Banks also provide loans in the form of credit card
charges, and render local services including safe deposit, notary, and
merchant banking. The bank branch or credit union office remains the
cornerstone of Main Street economic life.
Banks have been undergoing rapid change over the past decade or so.
Traditionally conservative businesses, most large banks now offer banking
services over the Web. Branch banks have proliferated as well, as banks
like Washington Mutual attempt to become as ubiquitous as 7-Eleven stores.
The 1999 repeal of the Glass-Steagall Act, which limited the businesses
commercial banks could operate in, created huge new areas of business as
well. Many commercial banks have gone into nontraditional commercial
banking businesses such as selling insurance products and securities.
New Electronic-Payment Options
For years, there were just three main means by which most consumers and
businesses purchased goods and services: They paid in cash, wrote a check,
or, if the purchase was sufficiently large, they charged the purchase to a
credit card. Thanks to technology, purchasers now enjoy a whole host of
payment options and banks enjoy a number of new revenue streams, thanks to
the fees and interest charges associated with the new payment options. For
example, most big banks now offer prepaid MasterCard and Visa cards. Debit
cards, which, when used, withdraw money directly from the cardholder's
bank account, are another relatively new product. Online payment
technologies allow consumers and businesses to transfer money to vendors
from whom they make purchases via the Internet. And then there are
micropayments; where, in the past, vendors would only accept credit cards
for a certain minimum transaction amount, today it's becoming more and
more common for purchasers to use credit cards and other electronic-payment
options for relatively minor purchases, like music downloads and fast-food
purchases.
Trouble in Credit-Card Land
While credit cards have been one of the biggest sources of retail-banking
revenue growth in recent decades, business hasn't been without its
downsides for card issuers in recent years. Legal actions brought by
purchasers and vendors alike have reduced card issuers' bottom lines.
On the consumer side of the equation, for instance, American Express has
had to settle class-action charges that it charged customers improperly for
foreign-currency transactions (similar charges are pending against Visa and
MasterCard and banks that issued those cards). Meanwhile, vendors who
accept payment in the form of credit cards have been battling to lower the
fees they pay to the credit card associations; to settle charges brought by
merchants, the card associations have paid the merchants billions of
dollars and lowered certain fees.
Consolidation
For decades, banks profited by simply holding customers' money and
charging them check-writing fees and interest on loans. Jobs were well
defined and stable, and the paths to promotion were clear and secure. Not
anymore. Consolidation, competition, and technological change are shaking
the industry to its core, forcing layoffs while creating opportunity.
Since 1995, more than 200 large and small banks have merged, with an eye on
building market share and/or increasing economies of scale. Today, a
handful of recently consolidated giants—Citibank, Bank of America, JPMorgan
Chase—dominate the banking industry. The new behemoths are entering new
markets, while replacing service personnel with online and other
technologies. However, hiring by a growing number of nonbanks compensates
for this trend to a degree. These firms, which are pioneering new ways of
delivering financial services, include Capital One, a credit card lender,
as well as transaction processing and data services companies like First
Data and Fiserv.
Deregulation
The Glass-Steagall Act, passed by Congress in 1933, served as the backbone
of banking regulation. During the late '90s, however, banks and other
financial institutions found ways around the restrictions placed on them by
Glass-Steagall and related legislation. Finally, in late 1999,
Glass-Steagall was repealed, eliminating the legal framework for
Depression-era boundaries for financial services firms. This has created
new opportunities for small and large banks alike, which continue to shake
up the banking landscape.
Risk
Record levels of consumer debt and personal bankruptcies, the prospect that
the real estate bubble will pop, and rising interest rates and oil prices
all threaten to dampen prospects for commercial banks. Many fear that the
dueling budget and trade deficits in the United States aren't
sustainable. Protecting customer information and transaction data from
cyber threats is another area banks are concerned with, and many are
working to upgrade their enterprise protections. Because problems in the
market inevitably affect banks, many are putting new emphasis on upgrading
risk management capabilities in case something goes awry.
The most important distinction for job seekers to keep in mind is the
distinction between regional banks and the big global ones. Here, we've
broken down the industry by type of banking, rather than size of player,
since banks are increasingly adding new services to their array of
traditional ones.
Consumer or Retail Banking
This is what most people think of when they think of banking: A small to
mid-sized branch with tellers and platform officers—the men and women in
suits sitting at the nice wooden desks with pen sets—to handle
customers' day-to-day needs. Although thousands of small community
banks, credit unions, and savings institutions still exist, employment
opportunities in this sector are increasingly coming from a few megaplayers
such as Citibank, Bank of America, and J.P. Morgan Chase, which have built
national—and even international—banking operations.
In addition to extending their consumer-banking operations, many of the
larger banks have added to their investment banking and asset management
capabilities. So, make sure you're applying to the right part of a
large diversified organization.
Business or Corporate Banking
Many of the players in this group are the same ones in the consumer banking
business; others you'll find on Wall Street, not Main Street. At the
highest level, the larger players (Wells Fargo and Wachovia are two names
to add to the list of megaplayers above) provide a wide range of advisory
and transaction management services to corporate clients. Depending on
which institution and activity area you join, the work can resemble branch
banking or investment banking.
Securities and Investments
Traditionally, this field has been the domain of a few Wall Street firms.
However, as federal regulations have eased, many of the biggest commercial
banks, including Bank of America, Citibank, and JPMorgan Chase, have
aggressively added investment banking and asset management activities to
their portfolios. For anyone interested in corporate finance, securities
underwriting, and asset management, many of these firms offer an attractive
option. Be aware, though, that hiring for these positions is frequently
done separately from that for corporate and consumer banking.
Nontraditional Options
Increasingly, a number of nonbank entities are offering opportunities to
people interested in financial services. Players include credit card
companies such as American Express, MasterCard, and Visa; credit card
issuers like Capital One; and credit reporting agencies such as Experian.
Although people at these firms are still in the money business, the
specific jobs vary greatly, perhaps more widely than jobs at traditional
banks do. In particular, given the volume of transactions that many of
these organizations handle, opportunities for people with strong technical
skills are excellent.
Two of the major trends in banking in the past decade have been
consolidation (e.g., the acquisition of Bank One by JPMorgan Chase, or the
takeover of FleetBoston by Bank of America) and the increasing use of
technology (e.g., online banking, or automated check processing). Both of
these trends have had and will continue to have a negative effect on job
growth in the industry. Indeed, the number of jobs in the banking industry
is expected by the U.S. Bureau of Labor Statistics to decline by 2 percent
between 2004 and 2014, as compared to an expected overall growth in the
number of jobs in the U.S. of 14 percent during that time.
But it's not all bad news in banking; the U.S. population is growing,
and new population centers are emerging all the time, so there will be new
jobs available in new locations. And while opportunities for bank tellers
and back-office clerical workers stagnate, financial analysts, financial
advisors, trust officers, marketing pros, and techies will enjoy growing
opportunities as the baby boom generation ages and bank operations become
increasingly automated.
In fact, many banks are actively preparing for the retirement of the baby
boom generation by launching talent management programs designed to look at
training, performance management, and workforce planning as related parts
of a bigger whole. The emphasis on retail banking and the repeal of
Glass-Steagall have created opportunities for people in banking to become
providers of a suite of financial products, rather than just bank tellers.
In coming years, look for more opportunities for financial services sales
reps and fewer opportunities for loan officers and others with only a
limited knowledge of the full array of financial products banks can now
sell.
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The Three Ps
The three Ps in banking are pay, portability, and promotions. As the line
between investment and commercial banking continues to blur, commercial
banks increasingly have to match Wall Street salaries. And, regardless of
whether you join the commercial or investment banking ranks, you'll
pick up skills that you can easily take with you to other jobs in finance.
Prima Donnas Need Not Apply
If you're just not the I-banking type and your selling style is less
in-your-face than what most brokerages seem to be seeking, banking may be
where you belong instead—unless, of course, you want to join the I-banking
operations of one of these players. An MBA is helpful but not a
prerequisite to future success. Your degree, graduate or undergraduate,
doesn't have to be a highly prestigious one. You still need to be
smart, detail-oriented, good with numbers and people, and resilient in the
face of fairly constant change, but otherwise, most banks aren't
high-stress, difficult places to work. And it's not against the rules
to be nice to your colleagues.
How Do You Feel About Change?
Mergers, competition, and evolving technology mean fewer jobs and more
uncertainty. Even as you read this, banks are plotting and negotiating the
next big banking acquisition or merger. They have to in order to survive.
There was a time when all you had to do to keep your job at a bank was
remain faithful and stroke the boss. These days, however, even faithful and
competent sycophants are getting pink slips. When it comes to putting your
career on the edge, banking is not Silicon Valley. But no one would mistake
it for the civil service, either.
The Great Banking-Services Robbery
Brokerages, corporations, and insurance firms have snatched bank products
and successfully made off with them. Fidelity, AT&T, Ford, and the rock
group Kiss have all marketed credit cards. Some mutual fund companies allow
customers to write checks and take out loans against their accounts. Banks
no longer have payment processing, mortgages, or ATMs to themselves either.
No matter what area of banking you're interested in, remember that
brokerages and virtually every other type of financial institution are
embarking upon an unstated mission—to make the banking job you want
obsolete. Just so you know.
Bank on Longer Hours
Once upon a time, banking was a 9-to-5 job. But, increasingly, bankers'
hours are coming to resemble those of brokers and consumer product
marketers. What's more, as brokerages, securities firms, and insurance
companies move into banking, their take-no-prisoners culture could mean
even longer work hours for folks in the industry. Banking may still be
better than a lot of jobs for semi-fast-track moms and as-yet-undiscovered
Broadway stars, but your seat on the 5:04 commuter train now belongs to
someone else.
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Top 10 Banks, by 2005 Revenue
|
|
Rank
|
Bank
|
Revenue ($M)
|
1-Yr. Change (%)
|
Employees
|
|
1
|
Citigroup Inc.
|
120,318
|
11.1
|
295,200
|
|
2
|
Bank of America Corp.
|
85,064
|
30.0
|
176,638
|
|
3
|
JPMorgan Chase & Co.
|
79,902
|
40.3
|
161,577
|
|
4
|
Wells Fargo & Co.
|
40,407
|
19.3
|
140,341
|
|
5
|
Wachovia Corp.
|
35,908
|
27.9
|
81,802
|
|
6
|
General Motors Acceptance Corp.
|
33,222
|
23.9
|
33,900
|
|
7
|
American Express Co.
|
24,267
|
–16.7
|
77,500
|
|
8
|
Washington Mutual
|
21,326
|
33.6
|
52,548
|
|
9
|
Ford Motor Credit
|
17,882*
|
–12.5*
|
18,804*
|
|
10
|
U.S. Bancorp
|
16,596
|
12.9
|
49,684
|
*2004 numbers.
Sources: Hoover's; Fortune 500; WetFeet analysis.
|
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The jobs available at different commercial banks vary significantly
according to the scope of their operations. Mega-banks offer a huge variety
of positions, from hard-core programming spots to investment banking and
trading. Small and regional banks tend to have a smaller range of more
traditional positions (loan officer, teller, credit analyst, etc.).
Loan Officer
Many a bank executive has started in this job. Many will continue to do so.
Loan officers determine, based on the bank's criteria and an
ever-improving intuition and instinct, who gets loans (and on what terms)
and who does not. There's a fair amount of schmoozing in this job,
either at the local chamber of commerce and Rotary Club or overseas in
emerging markets. If you prefer to crunch numbers in private and deal with
people only occasionally, this isn't the job for you. But an accounting
whiz with sales skills and diplomacy will thrive. Salary range: $35,000 to
$100,000.
Branch Manager
This is a great way to learn the industry. A merger could temporarily
derail your career; but the risk may be worth it if you want to learn all
there is to know about banking. This is a bit like the principal of a K-6
elementary school. You cannot be an imperious executive. But if you manage
operations well and take good care of your upper management, staff, and
customers, everyone will be happy to reward you. Many of these people have
been promoted from a position as a loan officer. Salary range: $40,000 to
$150,000.
Bank Teller
This is the front line in the banking world—and possibly the position most
likely to feel the shock waves from banking consolidation and automation.
In addition to having extensive customer contact, tellers have to have a
good feel for numbers, a willingness to handle large amounts of cash, and
an attention to detail. There are more than 500,000 tellers in the United
States; most work 9 to 5, and one-third work part-time. Salary range:
$18,000 to $40,000.
Programmer
Financial institutions have a huge need for programmers and people with
technical skills: Citibank boasts that it has more software programmers
than Microsoft does. Specific responsibilities can range from managing
network systems to coding applications for a wide variety of
transaction-oriented processes to modeling bank functions such as loan
approvals and risk management. Positions usually require specific platform
experience or programming knowledge. Salary range: $35,000 to $150,000.
Sales
Sales is another relatively sure prospect for the uncertain future. Banks
are competing with brokerages, investment banks, and mutual funds, all of
which offer more obvious and alluring opportunities in sales. If you seem
to have a talent for this and you'd like a chance to be a big fish
earlier than all the B-school hotshots, then a commercial bank might be
just the pond for you. Demand is also rising for salespeople who understand
product development and for investment managers (brokers). An undergraduate
degree in finance, business, or economics gets you in the door. An MBA gets
you a second interview. Salary range: $30,000 to $150,000 or more
(commissions and new business you bring in can add substantially to these
figures).
Trust Officer
Give this area a shot if you have a flair for financial counseling and if
you like hobnobbing with high-net-worth individuals. The job involves
helping clients with trust services, estate planning, taxes, investing, and
probate law. Warning: Sooner or later you'll find yourself in the
middle of family squabbles, jealousies, disinheritances, and lawsuits. This
job requires diplomacy, tact, deference, and a better, more current
understanding of tax law than most attorneys need. Salary range: $45,000 to
$80,000.
Many roads lead into the commercial banking world. At the bottom end, you
can apply to your local branch for a number of different positions. At the
corporate level, the large banks hire hundreds of people from college and
graduate programs each year; they hire even more from industry, especially
for positions requiring certain types of knowledge or experience:
programming, credit analysis, marketing, and so on. Many of the largest
players also have extensive job listings on their websites and solicit
electronic resumes. If you want to get a foot in this industry, keep these
things in mind:
-
In banking, most jobs relate in some way to convincing people to part
with their money (checking, savings, investing) or to take yours (credit,
loans) and pay you surcharges for the privilege of doing either.
Financial skills are only part of the job. To excel, you need some
serious interpersonal skills as well.
-
Bankers' hours ain't what they used to be. Increasingly, banks
are looking for talented, competitive individuals with the desire to work
hard to beat the competition. Expect an extensive interview process. At
banks, you have to talk to lots and lots of people before you get hired.
And then you have to talk to some more just so they can all be in
complete agreement about what a wonderful addition you'll be to the
bank and its customers.
-
Commercial banking remains a relatively conservative industry. To make a
positive impression on your interviewer: Wear a suit. Don't wear
patterned stockings. Address no one by his or her first name, not even in
California, not even on casual Friday. And smile. No matter how much your
brand-new dress shoes are pinching your feet, smile and have a warm
handshake at the ready.
-
Especially for corporate jobs, you'll be expected to have some
knowledge of the changes going on in the financial services sector—and an
opinion about them. Also, you'll want to keep an eye on the business
section of the newspaper—at least while you're interviewing—to make
sure that you catch the headline about your potential employer merging
with another firm.