Finance students, Liz Aguilar and Simran Chowdhary, sat down with Craig Schmidt, Managing Director and Head of U.S. Credit Review and Appraisal, Risk Management, from CIBC in Chicago, for an informative discussion around Mr. Schmidt’s current role, the culture and business philosophy at CIBC, and to gain some professional advice and insight for students interested in pursuing a career in financial services.
CAN YOU TELL US ABOUT YOUR ROLE AT CIBC?
Every bank has credit review or, as Mr. Schmidt stated, a “peer review” function to the lenders. The regulators expect there to be a specific group inside of a bank that will look over loans subsequently after they have been made and provide a “credible challenge” to them. Since loans are risk rated, from most risky to less risky by the bank, part of Mr. Schmidt’s role is to provide another set of eyes to see if they have been accurately risk rated. Mr. Schmidt made a seamless analogy. In real estate, the most important thing is “location, location, location”. It works out the same way in banking, however instead, the value is “asset quality, asset quality, asset quality”.
Not recognizing the risk in a loan portfolio often leads to not recognizing the true asset quality. Schmidt noted, “Missing this correlation is where a lot of banks in the past have had issues arise”. Mr. Schmidt plays a critical role, providing analysis of loans on a portfolio basis that are managed by senior executives or a designated group in order to obtain a better sense of the continuity of management. Mr. Schmidt’s overall expectations are to locate and address any deficiencies before regulators do or before something more serious comes about.
CAN YOU TALK ABOUT WHAT DIFFERENTIATES CIBC OVER OTHER BANKS?
Two words, “Relationship oriented”. Schmidt also stated, “The concept is to engage with your clients over the long haul and not focus solely on the transaction”. He went on to explain that anyone is able to telephone a bank, apply for a loan and complete a transaction, all without forming a working relationship. Relationship-oriented banks are looking to establish a long-lasting relationship with a client because there is great value in being a trusted advisor that a client will call first with an opportunity. Mr. Schmidt explained how his relationship-oriented culture is part of the reason clients choose and are attracted to CIBC. When asked how they manage to provide the relationship-oriented service to their clients, Mr. Schmidt responded, “with patience”. He explained how there have been plenty of lenders who call upon clients for many years and it can take a long time to get any type of business activity with the client. Frequently, clients overall choose CIBC because other banks do not provide services in the way they are looking for, and other times because they have come to appreciate the patience and steadfastness of CIBC in continuing calling efforts with clients they have identified they want to be associated with.
WHAT ARE SOME OF THE BIGGEST OPPORTUNITIES FOR CIBC RIGHT NOW?
The opportunities are great with CIBC since it is a large international institution, we have broad array of sophisticated banking products that is attractive to clients. Since CIBC’s client base has grown, client needs have changed, and many are now operating on an international basis. This means foreign currency needs arise, balance sheets are becoming more sophisticated which requires risk management products, interest rate swaps and other products which CIBC is able to provide.
FROM YOUR PERSPECTIVE, WHAT ARE YOUR PROJECTIONS FOR CIBC’S GREATEST AREAS OF GROWTH?
Mr. Schmidt explained how he wants to continue to be relevant in the marketplace and be viewed as the “go-to bank”, especially for up and coming companies. He wants new companies to think about CIBC first, and continue to recognize that there are many workers specializing in different industries and sectors and be able to assure clients they can find the perfect person to work with.
WHEN YOU ACQUIRE A BANK, ONE OF THE BIGGEST COST EXPENSES IS THE CORE CONVERSION PIECE. SO, BANKS HAVE BEEN USING ROBOTIC PROCESS AUTOMATION TO HELP WITH ACQUISITIONS. HOW DO YOU SEE AI IMPACTING THE FUTURE OF CIBC? ARE THERE ANY PLANS CURRENTLY IN PLACE TO ADOPT CERTAIN SOFTWARE OR TECHNOLOGY?
Mr. Schmidt believes it is very important for CIBC, as well as other banks, to be aware of the technological changes that consistently happen around them. He particularly finds blockchain very interesting because of the broadness in the application that can result from it. He fully expects that untold opportunities will come out of blockchain as more and more people devote time and effort to it. As soon as people start to push the model, the technology and opportunities will evolve. This presents a great opportunity for banks or anyone who has a need for some type of bookkeeping or data base management to have efficiencies arise out of it. Mr. Schmidt also noted that blockchain seems to lend itself well to registering transactions, which addresses many banking needs. He believes we will see advancements in machine learning that will be able to help on a fundamental basis in bringing efficiencies in financial analysis in the sense that we will be able to see programming that can point out anomalies.
Overall, Schmidt noted how much technology has evolved over the years and how there are endless opportunities to come in the future. He remembers how back in his day the only piece of technology that existed was one desktop computer in his then workplace, and remembers how it would stand idle. This example shows us how dramatically things have changed throughout the years.
WHAT IS THE BIGGEST OBSTACLE THAT YOU HAD TO OVERCOME IN YOUR CAREER AND WHAT DID YOU LEARN FROM THAT EXPERIENCE? LOOKING BACK NOW, WHAT ADVICE WOULD YOU GIVE YOUR 25-YEAR OLD SELF?
Mr. Schmidt explained, there can be challenges in the workplace and things that serve as a road block, which may prevent you from doing what you want to do it. It’s a matter of stepping back and thinking through the situation and if there is an alternative approach, then making the necessary adjustments before going forward. He also noted that he has been fortunate in the sense that he has generally worked for and with people that have had the common view of always figuring out a way of getting the job done. “Hard situations teach you perseverance, grit, and it helps with patience”, he said. “Difficult situations with others teach you how to be a better person and helps you understand how you may not want to act when you’re in a position where you are leading, managing, and supervising people.”
The advice Mr. Schmidt shared with us that he would give his 25-year-old self is to learn to listen. He mentioned how important it is to be willing to learn in opposition instead of thinking you always have to interject and be a part of a conversation. Once he became better at listening, he learned a lot more and was able to contribute more to conversations.
HOW CAN FINANCE AND/OR ACCOUNTING STUDENTS BETTER PREPARE THEMSELVES FOR A CAREER LIKE YOURS?
“Financial awareness is key”, Schmidt stated. He also noted, reading the papers, such as the Wall Street Journal is important because we all need to be aware of the real world matters that can impact business. “It’s great to know the inside of your company very well; however, to not know what is happening on the outside is like playing with one hand tied behind your back.”
WHAT ADVICE DO YOU HAVE FOR UNDERGRADUATE STUDENTS, OUTSIDE OF EXCELLING ACADEMICALLY, TO BETTER POSITION THEMSELVES FOR A SUCCESSFUL CAREER IN THE FINANCIAL SERVICES INDUSTRY?
Mr. Schmidt reiterated the importance in being proactive about understanding what is going on around you and having the insight to go with the technical knowledge for finance, noting it’s all about awareness in the market around you. Earlier in his career he shared how information would move a bit slower but now that things move faster it is important for students to proactively keep up to date.