Pros and Cons of Becoming a Loan Portfolio Analyst
Loan portfolio analysts are credit analysts who perform risk assessments and provide recommendations for financial institutions and large companies. Here are some things to think about when weighing the pluses and minuses of a career as a loan portfolio analyst.
| Pros of Becoming a Loan Portfolio Analyst |
|---|
| Good job growth (8%-14% between 2012 and 2022 for credit analysts)* |
| Above-average income potential (mean salary of about $76,000 in 2014 for credit analysts)** |
| Variety of daily activities (preparing reports, meeting with customers, examining financial data)* |
| Career opportunities with a variety of businesses (banks, auto dealers, securities and commodities)** |
| Cons of Becoming a Loan Portfolio Analyst |
|---|
| Bachelor's degree is often required* |
| High level of pressure to accurately determine loan risks* |
| In-depth knowledge of numerous government regulations required*** |
| High level of mathematical skills required* |
Sources: *O*NET Online, **U.S. Bureau of Labor Statistics, ***Federal Deposit Insurance Corporation.
Career Information
Job Description and Duties
Loan portfolio analysts monitor lending for banks and borrowers to evaluate risks, predict the performance of loans and provide recommendations for future credit practices. For banks and other financial institutions, loan analysts determine the borrower's credit ratio using analytic computer software and modeling systems. These processes help a loan analyst evaluate the profitability of loaning to certain organizations in specific economic sectors.
As a loan analyst, you may specialize in the portfolios of specific industry segments, such as housing or energy. You may also be tasked with monitoring consumer credit performance and analyzing risk and profitability for auto, home or personal loans. Corporations hire loan analysts to manage asset liquidity and credit capital performance. Strict regulatory compliance is also required of loan analysts, as organizations such as the Federal Deposit Insurance Corporation (FDIC) and the Financial Industry Regulatory Authority (FINRA) help protect consumers and businesses from theft, fraud and improper lending practices.
Career Outlook and Salary Information
According to the Occupational Information Network (O*NET), careers in credit analysis are expected to experience average growth, with a projected employment increase between 8% and 14% during the decade of 2012-2022. Although credit lines for businesses and consumers are directly affected by trends in the national economy and financial markets, providing expertise in risk and profitability projections will continue to be valued by financial institutions and large organizations. Based on 2014 data from the U.S. Bureau of Labor Statistics (BLS), credit analysts earned a mean salary of about $76,000, while the top 10% made more than $126,000.
Requirements
Loan portfolio analysts need to understand how to utilize modeling and analytic software. You'll need strong reasoning and decision-making skills in order to make recommendations and project trends. Working for financial institutions may entail developing strong relationships with clients. In dealing with executives and customers, you will need excellent written and verbal communication skills to present reports and translate ratios into information that is easily understood by clients.
Education Requirements
Many careers for loan portfolio analysts require a bachelor's degree with a background in finance, economics or accounting. You may also choose to pursue a bachelor's degree in business administration with coursework on lending procedures, regulatory compliance, financial markets and banking finance. Since skills in mathematics are a necessity for this career, you'll want to take some math electives, regardless of which major you choose.
Real Job Listings
In addition to general financial lending experience, many employers prefer candidates with industry experience. Experience in underwriting, information systems and customer service is highly regarded. Here are some real job postings from April, 2012:
- A commercial bank in Massachusetts was seeking a vice president/portfolio analyst to prepare reports and measure risks in various loan portfolios. Job duties include performing stress tests and conducting analytical risk assessments. A bachelor's degree plus ten years of experience is required, with a minimum of five years of that experience in commercial and corporate lending.
- A commercial bank in North Carolina was looking for a portfolio analyst to perform delinquent asset performance analytics, credit-risk mitigation and propose bank-wide portfolio policies and procedures. A bachelor's degree is required, along with five years of experience in loan analytics.
- A Massachusetts financial services firm sought a portfolio analyst to evaluate underwriting and compile data. Experience in market research, database management and loan assessment management is required.
- A national bank in Texas wanted a credit and portfolio analyst for periodic review of financial results in peer analysis, industry trends and projections. Other duties include client management and regulatory compliance auditing. Candidate must have a bachelor's degree plus five years of experience with financial modeling and analysis.
- A Texas-based insurance and financial services company needed a lead credit risk analyst to monitor and analyze credit risk exposure for loan products. Candidate must have eight years of experience in financial services and a bachelor's degree. Regulatory experience preferred.
How to Stand Out in the Field
Gain Industry-Specific Experience
Knowledge of specific industries can set you apart from other applicants. Loan analysis depends heavily on trends and traits of specific industries (insurance, manufacturing, energy, healthcare, etc.). Many loan analysts specialize in home mortgage lending or other consumer services. Since many employers want you to have experience in loan analysis and risk assessment, you could begin as a loan officer. You just need a high school diploma for positions that are not dealing with commercial loans, so you could have industry experience before you even finish your bachelor's degree.
Gain Professional Certification
Certification can be a good option if you're looking to gain an edge over other applicants, but you'll want to explore all of your options before you pursue one. The American Academy of Financial Management offers the Chartered Credit Analyst (CCA) credential and the CFA Institute issues the Chartered Financial Analyst (CFA) designation. Obtaining your CCA entails the successful completion of a course program and examination. The CFA exam covers a number of useful topics, such as corporate finance and derivatives.
Alternative Careers Options
Loan Officer
Loan officers work for banks and lending institutions to provide loans to consumers and businesses. You may solicit borrowers with promotional rates and specials as well. Strong customer service skills are required, as you will also be tasked with explaining consumer loan processes to clients. A high school diploma is required for this position. For commercial loan officers, a bachelor's degree may be required, while mortgage loan officers will need to become licensed.
The lending business is tied directly to national economic stability and growth, which should lead to increased opportunities for loan officers in the coming years. Based on BLS projections, loan officers were expected to have a 14% increase in employment between 2010 and 2020. The BLS reported that loan officers earned a mean salary of about $68,000 in 2011.
Insurance Underwriter
Insurance underwriting is similar to loan analysis, since both field determine how much risk is involved in a certain scenario. Insurance underwriters prepare policies and determine risks based on a variety of factors for auto, home, life and health insurance. Their objective is to protect a carrier's risk of loss by using computer software analytics. For most underwriting positions, applicants who have a bachelor's degree are preferred.
Due to the increased efficiency of automated underwriting software, the demand for underwriting agents has decreased over the years. The BLS projected a 6% increase in employment for these professionals from 2010-2020, which was slower than the average for all occupations. Based on BLS 2011 data, insurance underwriters earned a mean salary of approximately $68,000.
Financial Analyst
Financial analysts manage investment portfolios and provide recommendations for clients based on financial trends and historical data. They prepare detailed reports explaining the performance of specific investments over time. These professionals enjoy a high concentration of career opportunities in New York City and other major financial centers.
Financial analysts need a minimum of a bachelor's degree in business, accounting, economic or finance. Many financial analysts pursue a master's degree program, which may be required for some positions and for advancement opportunities. Due to the increasing complexity and amount of investment opportunities, financial analysts should remain in high demand over the coming years, with a projected employment increase of 23% during the decade of 2010-2020, according to the BLS. Although the education requirements for financial analysts may be more extensive than the other careers above, these workers typically have high earning potential; the BLS reported that financial analysts earned about $88,000 in 2011.
