Banking downturn hits graduate pay, MBAs suffer too

The salaries offered to entry-level analysts arriving in 2003 in London will remain static, for the third year running. At the same time, peripheral benefits provided for graduates, and MBA entrants in particular, have been slashed.

Recruiters at leading banks said the typical salary offered to graduates who began work in autumn 2002 was identical to 2001, at between 30,000 and 35,000, depending upon the position. Graduate salaries have already been fixed at this level for 2003, the recruiters said.

Entry-level pay is highly uniform across different investment banks, because their recruitment staff meet several times a year to discuss remuneration.

Although banks are facing pressure to cut costs, recruiters' meetings have so far not prompted a reduction in undergraduate pay. Graduate pay in investment banking remains considerably higher than in most other industries.

Vivienne Dykstra, head of graduate recruitment at Deutsche Bank, said: 'Salaries and peripheral additional payments were hyper-inflated during the very tough recruiting market of 2000 and 2001. Salaries therefore remain at what some would consider an artificially high level for the market conditions.'

Heidi Plant, head of graduate recruitment at UBS Warburg said: 'We have not touched base salaries, even in this market. We are still competing for the top candidates and therefore our compensation levels will remain the same.'

Nevertheless, cost-cutting means that other elements of the pay package are falling by the wayside. 'The base is flat, but peripheral bells and whistles are being trimmed', said Dykstra.

First to be trimmed was the relocation bonus, or 'golden handshake'. In the past, golden handshakes were as high as 7,000 for graduate entrants. In the current environment graduates are lucky to receive 5,000.

Nevetheless, graduate packages have withstood the downturn better than those of MBA or associate level entrants. Some banks have cut the signing-on bonus offered to MBAs by as much as 50%, to between $15,000 and $25,000. Last year's signing on bonuses were often more than $30,000, said recruiters

The reductions could prove a problem for MBA students, who use the signing-on bonus to subsidise expensive tuition fees. The cost of an MBA course can exceed $60,000.

MBA entrants are also reeling from the loss of their guaranteed bonus. In 2000, guaranteed bonuses for first year associates were between $20,000 and $30,000, said Dykstra.

This year, bonuses are not guaranteed. MBAs will be lucky if they receive a bonus of more than $5,000.