Real examples of the most common questions (and best answers) used to hire in commercial banking
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What are the Most Common Commercial Banking Interview Questions?
We’ve asked countless commercial banking account managers, relationship managers, and credit analysts what the most common commercial banking interview questions are. Based on their responses and feedback, we’ve laid out the most likely questions to be asked in an interview with a hiring manager.
We’ve organized the interview questions into two categories:
Technical (finance and accounting)
Behavioral (personality and relationships)
In this guide, we’ve also provided what we believe are the best answers to these commercial banking interview questions. For other careers, please check out all our interview guides.
How would you determine the creditworthiness of a company?
There are two main approaches: (1) assets, and (2) cash flow. A thorough approach involves a full financial analysis of the business based on its financial statements, market conditions, and the management team.
On the asset approach, it’s important to understand how much the assets are truly worth, how liquid they are, and how much you think you could get for them. On the cash flow approach, the historical ability to generate cash flow (or net income, EBIT, EBITDA, etc.) will be relied on, in conjunction with a realistic forecast to assess how much debt they can service.
If you were asked to analyze a set of financial statements, what would you do?
The first thing I would do is put them in a clean Excel workbook, or company template, in an organized format. Next, I would calculate a variety of ratios: profitability, growth, margins, leverage, and liquidity (see question below for specific examples). Finally, I would analyze these ratios and identify trends (based on at least 3 years of historical information), which I would try to extrapolate into the future.
There is a wide range of credit metrics. A few of the most common ones include:
Leverage: debt to equity, debt to capital, debt to EBITDA, interest coverage ratio (or fixed charge coverage ratio), and other variations of these ratios.
Liquidity: working capital, current ratio, quick ratio, cash ratio.
Where do you think interest rates are headed?
You have to be careful with your answer to this commercial banking interview question. Every bank has its own economist, and every economist typically has three different outlooks on interest rates (up, down, and flat). The key is to simply demonstrate that (1) you know what current interest rates are, and (2) you can identify some intelligent scenarios that would cause them to either go up or down. Avoid making a precise prediction, but show that you’re informed.
If you were given an income statement where revenue was going up and net income was going down, what would you think the problem is?
There could be many issues. The most likely explanation is that the company is fueling its revenue growth by (1) increasing its marketing expenses (see: return on ad spend), (2) decreasing prices, (3) experiencing an increase in cost of goods sold, or (4) changing accounting policies, like no longer capitalizing an expense that used to be capitalized. The main point is, more investigation into the income statement is required, but it’s often an indication that growth is being pursued in an uneconomic way (although that’s not definitively the case).
What’s more important, the income statement, balance sheet, or cash flow statement?
This is sort of a trick question, as all three statements are extremely important and you can’t really get by with just one of them. The income statement is important to see what a company earns over time and what its operating margins are like. The balance sheet shows what a company owns and what it owes. Finally, the cash flow statement shows how much actual cash the business is generating or consuming. All three are important together.
This is an opportunity to show you can think on your feet and apply the principles of risk management in a different way. There is no right or wrong answer. The key is to point out that there are various ways to think about risk (risk of loss, the risk of missing out, risk vs. reward, etc.). You could talk about your finances, or you could even talk about personal activities.
What does it take to be a great commercial banker?
This is a wide-open commercial banking interview question. There are lots of ways to answer it; the key is to think about the skillset required in commercial banking and tie your response to that. The main two skills required are (1) analytics and (2) sales/relationship management.
Where do you see yourself in five years, if you’re hired?
This is a sensitive topic. It’s likely to be one of the commercial banking interview questions because so many people try to go into it as a stepping stone, trying to get into corporate finance or investment banking, so it’s important not to make them think you want to leave in a few years. You want to come across as ambitious, but not too ambitious (e.g., don’t say “in five years, I see myself in your job”).
You may or may not be asked a question along these lines, depending on what role you’re going for in commercial banking. A lot of commercial banking is sales-oriented, so it’s important to be able to demonstrate you’ve got what it takes to thrive in a sales environment. There are many approaches to sales: relationship-based, need-based, value-based, etc., so this is a very open-ended question.
More interview questions
Thanks for reading our Commercial Banking Interview Questions and Answers guide. Check out our other interview guides and explore our interactive career map to advance your finance career:
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