Graduate hiring to stabilise in 2003

Now, however, 'battening down the hatches' appears a more apt description of investment banks' attitude to graduate hiring. Difficult market conditions made graduate recruiters more guarded in 2002. Numbers were cut, nets were hauled in and presentations were made only to students at select universities.

But it seems 2003 may mark a return to an even keel. The investment banking industry is still in recession, with revenues falling for the past eight quarters in a row, but among many graduate recruiters, there is a feeling things are unlikely to get much worse.

UBS Warburg, Royal Bank of Scotland (RBS) and Morgan Stanley say graduate hiring this year is expected to remain stable compared with 2002. JP Morgan is even forecasting a slight rise.

JP Morgan anticipates hiring 200 to 250 graduates in 2003, many of which are thought to be operational positions; Morgan Stanley expects to take more than 100 graduates; UBS Warburg expects to recruit around 150 this year; and RBS forecasts it will take on 100.

Deutsche Bank is forecasting a slight reduction in its numbers, however. Analyst hires in the UK are expected to fall from around 200 in 2002 to 160 in 2003; in continental Europe the figure is expected to fall from 140 to 110.

Nevertheless, Martin Birchall of High Fliers Research, a company that monitors graduates' career intentions, says the mood is one of relative calm. He says five years ago banks were prone to closing their graduate hiring programmes when times were tough. Nowadays they display a bit more sang-froid.

'Investment banking used to be characterised by yo-yo recruitment: bring them in when times are good and cut back when times are bad. Banks have stopped doing that. They have learned that graduate recruitment is about long-term planning, not short-term panic,' says Birchall.

Yo-yoing has not been entirely absent in recent years. But after boosting employment in 2000 and 2001, and cutting back in 2002, Birchall says banks are reaching a stable level of graduate hiring. Barring any important market upheavals, he says constancy should continue in years to come.

The new stability comes as banks are rethinking the manner of their approach to undergraduate students.

There is a growing belief that recruiting should be more targeted and educational in nature. Rebecca Neale, head of graduate recruitment at Morgan Stanley, says: 'Typical milk-round presentations are very costly, particularly if you have a roadshow involving a stage and a lot of equipment.'

Morgan Stanley has no plans to stop making campus presentations, but the bank is increasingly cost conscious, says Neale.

Events with a focus on improving students' skills, such as discussions on how to do well in assessment centres, and open careers days, in which banking recruiters sit alongside university careers counsellors, offer good returns, she says.

Kamini Persaud, a graduate recruiter at Bank of America, confirms the emergence of a more educational approach. She says: 'We are aiming to develop a relationship with universities which is not entirely based on recruiting.'

Bank of America plans to run lectures at target universities and to work through case studies with students.

The new initiatives come at a timely moment. Widely publicised redundancies and big cuts in graduate hiring during 2001 and 2002 mean students are understandably wary when it comes to staking their futures on a career in investment banking.

Many need reassurance that investment banks are still recruiting in quantities that befit their position as the UK's third largest hirer of graduates.

To overcome this, Birchall says recruiters need to regain students' trust. 'When an investment bank turns up at a recruiting event, some students question whether they have any jobs. Banks need to make it clear that they are not just there on a PR exercise.'

Firms are sensitive to students' scepticism. Neale says when recruiters from Morgan Stanley made student presentations last year they began by announcing the number of full-time positions they were recruiting for. She says that for some, the number of vacancies came as a pleasant shock.

Not everyone agrees that students have become wary of applying to the industry, however. Tracey Bloomfield, head of graduate marketing at JP Morgan, says the bank received the same number of applicants for spaces in 2003 as it did in 2002.

Similarly, Kate Dodd, head of the careers service at Warwick University, says students are as keen as ever to be investment bankers. 'People who want to be investment bankers are usually competitive and very confident in their skills. For them, heavy competition for places is not seen as a problem.'

Nevertheless, Dodd says Warwick students are advised to prepare a 'Plan B'. She says many opt for accountancy as a fallback position. Accountancy firms are the UK's biggest graduate recruiters and are relatively immune to changes in the economic cycle.

Come what may, investment banks have one thing going for them when it comes to attracting graduates, and that is money. Although salaries offered to graduates look to remain constant for the third year running, at between 30,000 and 35,000, this is still considerably higher than the UK average of 20,000.

Management consultants come closest to rivalling banking pay packages, with a median salary of 28,500 in 2003. But consultants' pay accelerates more slowly than bankers' pay.

The message to graduates looking for jobs in investment banking remains fundamentally the same as before. The industry offers good rewards and good opportunities. But the advantages must be weighed against competitive entry conditions and that if seas become too stormy, staff, including graduate hires, are thrown overboard.