Banks have cut graduate job offers by as much as 25%

But it does not look like the sunniest of springs. If graduate hiring is a barometer of optimism, then investment banks are distinctly gloomy about their prospects. For all the comforting talk of recovery in the second half, actions speak louder the words: offers in 2002 are significantly down on last year, perhaps by as much as 25%.

Few banks admit to taking a scythe to their graduate intake Deutsche Bank confesses to a 15% reduction, Citigroup says that numbers are down 'a little'. But the bulge-bracket US banks that are both the biggest hirers and the worst affected by the downturn in corporate finance, are implacable. 'We've recruited across all divisions. Numbers are down this year, but not a lot,' says one graduate recruiter. On campus, however, it is a different story. 'There are a lot of worried students,' says David Ainscough, a specialist in financial services careers at Cambridge University's careers service.

'Offers are coming through late while recruiters wait to see how the markets go. Quite a few summer interns who were verbally promised places last year have had those offers rescinded and are now too late to apply anywhere else.'

Problems at Cambridge are echoed at other institutions. At the European School of Management in Berlin, where as many as two thirds of students usually go into the industry, investment banking recruitment for 2002 is reported to be vastly down second year students, who are obliged to undertake a three-month internship as part of their course are finding it hard to get banking placements. Tony Butler, head of Oxford University's careers service, says that the seemingly dire state of the industry is encouraging students to look elsewhere.

Unsurprisingly, it is positions in equities and corporate finance that have suffered most. These areas have been particularly affected by the downturn, and numbers have been cut accordingly. Ainscough at Cambridge says that CSFB announced that it was not hiring any graduate corporate financiers in 2002. 'They were very upfront about it. They said that it was an area that has been under a lot of pressure,' he says.

CSFB failed to return calls on the subject. But its need for graduate hires may well have been reduced when it offered its 2001 intake the option to defer for a year at around 50% of their starting salary it is unclear how many accepted. Similar schemes are available at other banks, albeit without the inducements.

Graduates aspiring to work in fixed income have fared better. Debt markets boomed in 2001, and hiring in 2002 has reportedly been robust. However, Cambridge's Ainscough says that fixed income trainees must come with added skills. 'Banks can afford to be a lot more discerning: there is now a noticeable need for language skills if you want to go into fixed income.'

As a corollary of last year's strong fixed income growth, banks with a strong presence in fixed income markets are among the most optimistic. Vivienne Dykstra, head of graduate recruitment at Deutsche Bank, says that the bank's strength in debt markets has prevented it reducing the number of offers it has made to the same extent as competitors with a corporate finance focus. Vincent Thomas, head of graduate recruitment at Barclay's Capital, another debt specialist, also says that graduate hiring has been stable in 2002.

At Cambridge, Ainscough is recommending that his students target the few banks in expansionary mode. One of these is BNP Paribas, where graduate recruits in 2002 are expected to be higher than in 2001. Another is Bank of America, which is running a structured graduate trainee scheme for the first time in 2003, and expects to make around 20 hires.

Gaining a place on Bank of America's new scheme is, however, unlikely to be easy. The bank received 1,500 applications for its 20 places. At a ratio of 75:1 this was substantially higher than the normal odds against getting into a more prestigious bulge-bracket firm. Morgan Stanley, for example, received 20 applications for every one internship place last year.

All this may be expected to reduce the allure of a banking career. Cambridge's Ainscough confirms that applicants to corporates have soared as hiring for graduate management schemes at companies such as Unilever and BP remained strong. At Deutsche Bank, applicants for this summer's internship programme are apparently down as graduates reconsider whether they want to work in an industry perceived to offer little job security.

However, some students will not be deflected from the investment banking dream. Christine Taylor at the European School of Management in Oxford says that a core of banking devotees are unlikely to be put off, no matter what the market is like. Moreover, they remain determined to find places at top firms, where the prospects are poorest. 'Students know that last year was difficult for US banks, but they are still determined to apply to the likes of Goldman Sachs. They look at league tables, see firms near the top and say that this is where they want to go,' she says.

That some graduates will not be deterred from going into banking, is just as well - banks have not stopped hiring altogether. Moreover, recruiters claim that the battle for top talent remains as fierce as ever. Lesley Wilkinson, head of resourcing at Citigroup, says: 'It's still necessary to work hard to get the people we really want. Everyone is chasing students with a global mindset, strong analytics and good teamworking skills.'