The Bank Credit Analysis Handbook: A Guide for Analysts, Bankers and Investors, 2nd Edition

Chapter 2

The Credit Analyst

Though the principles of the banking trade appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from those rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous, and frequently fatal, to the banking company which attempts it.

—Adam Smith, Wealth of Nations

If you warn 100 men of possible forthcoming bad news, 80 will immediately dislike you. And if you are so unfortunate to be right, the other 20 will as well.

—Anthony Gaubis1

What is a credit analyst?

What are the various types of credit analyst?

How do their roles differ?

Where do bank credit analysts fit in?

These are the questions this chapter seeks to answer.

Although all credit analysts undertake work that involves some similarity in its larger objectives, the specifics of each analytical role may vary a great deal. In the previous chapter, it was suggested that the approach to credit evaluation is contingent upon the type of entity being evaluated. In addition, the scope and nature of the evaluation will depend upon the functional role occupied by the analyst. Hence, while the same core questions underpin the analytical process, the time and resources available to perform the credit risk evaluation will vary.

This chapter seeks to survey the various subfields of credit analysis, as well as the different roles that can be undertaken within each corner of the field. The aim is ...