difference between credit risk analysis and equity analysis

could anyone share some insights on these 2 career paths? They sound almost the same to me. Reading SEC filings, perform industry comparisons, etc. Thank you. Also, in today’s market, which career path has more job security? Last year BOA fired hundreds of equity analysts, including the price-winning start analysts.

They’re similar, in that each one may find themselves reading similar materials and examing sector data, but each position is reading the reports from a very different perspective. An equity research analyst will be looking at historical and future profitability and competitive advantage, whereas a credit analyst will be looking at key solvency ratios, z-scores, and the like. There is a portion of overlap however, in that an equity research analyst will look at credit data to determine risk level and gather data used in determining cash flow certainty and discount rate, and some profitability data is used in credit analysis as well. The key I guess is that at the end of a report, an equity research analyst still has to create a valuation using either DCF or comparables whereas a credit analyst won’t. Regarding job certainty, I believe the credit analyst may have a slight advantage here, however the pay and hours for credit analysts are also typically slightly lower. Credit analysts have a less volatile job market, however they are also still exposed to some cyclicality. In bull markets, credit risk tends to be reduced and thus firms tend to be less defensive, so job demand for credit analysts may suffer. In bear markets, credit risk raises, and with decreased growth prospects firms tend to become more defensive, thus raising demand for credit analysis. So credit analyst demand is countercyclical. Equity research analyst demand is more volatile and follows a cyclical cycle with a very close correlation to AUM in the equity markets. Both are rewarding if you are an academic and like the variety of what you’re doing. In general, equity research tends to be more in depth and challenging, although this can vary from firm to firm dependent upon the quality of the department. I think it’s key to find out how much your firm values each respective department before taking the job as you basically want to work at a firm performing quality research.

Thank you very much, this is so insightful.

In other words, equity analyst is searching the upward potential while the credit analyst is searching the downward risk. In my company, credit analysts seem to have a much higher pay than equity research, when I say much higher I mean about 15% higher