The commercial banking industry exemplifies many of the reasons why some of us wanted to become CPAs in the first place — work in a profitable industry and utilize our analytical skill sets. Commercial banking offers many of the same experiences and perks for accountants as those working in accounting firms or corporations — with the exception of having “banker’s hours,” of course.
Commercial banking is a profitable industry, with a lot of meaningful work for accountants in the form of compliance, risk and assurance, and the earnings potential for a qualified individual is evident. In New Jersey alone, banks employ nearly 52,000 employees with a median total compensation of $99,438 according to the American Bankers Association (data as of 2018). Banks have a tremendous impact on economic growth and job creation. Commercial banking revenue, for instance, has grown 7.2 percent annually from 2014 to 2019.
Here are some areas in commercial banking in which CPAs have plenty of opportunities to thrive:
The entire commercial credit process is managed by this department. Commercial lenders are responsible for sourcing various commercial loan transactions by developing and maintaining relationships with local businesses. While credit analysts are tasked with the independent oversight of risk in individual loans (at origination and review), both lenders and analysts must possess the ability to interpret financial statements, have an aptitude for numbers and have good written and verbal communication. A junior credit analyst would be an excellent entry-level position for recent accounting graduates aspiring to be CPAs. Conversely, being a commercial lender normally requires many years in the industry and a stacked book of business. A seasoned CPA with connections to small and midsize accounting and law firms can do very well in this role.
Credit Risk Management/Review
The credit risk department is a bank’s internal control function, which measures, manages and monitors the portfolio of loans of banks against heavy concentrations, weaknesses in loans, the external and internal environment, and other sources of credit risk both on and off the balance sheet. Credit risk review analysts must have the requisite skills to be able to create a representative sample which would reflect the bank’s loan portfolio. By doing so, any trends found in the loan samples can be reasonably projected out to the entire loan population. The skills of an experienced auditor or senior auditor with a CPA would be essential to credit risk departments of commercial banks.
A bank’s finance division is often comprised of the accounting and treasury departments for commercial banks. As expected, CPAs are highly sought out in these areas given the work involved with respect to Financial Accounting Standards (FAS) 114 and 5, which will be soon be replaced by the new accounting standard, current expected credit loss (CECL), and many other areas of accounting. Furthermore, the treasury function is responsible for managing the liquidity risk, interest rate risk, capital management and other strategic operating initiatives. Having a strong business acumen along with analytical skills and the ability to read and interpret large sets of data are a must to be successful in the finance division of commercial banks; fortunately, CPAs are known for having these skill sets.
CPAs have knowledge, skills and connections that are transferable between public and private sectors. Leading a commercial bank in any of the areas of credit, risk or finance is just as lucrative and just as exciting as being a partner at a large firm, with the bonus of having work-life balance. With great bias, I would say that a career in banking is a wise and excellent choice for CPAs.