Banks plan to hire more graduates

Students who graduate in 2004 have reason to crack open the champagne. After two years in which their predecessors were lucky to find a job at an investment bank, it looks as though banks are ready to increase their graduate hiring. For MBA students, however, the outlook is less certain.

Investment banks were increasingly bullish as 2003 progressed about the size of their graduate intake this year.

As the time for sending out job offers approaches, their optimism is undented as economic signals remain positive.

Recruiters at Deutsche Bank and Goldman Sachs said they expect their 2004 graduate intake in Europe to increase by at least 25%, while Merrill Lynch expects a 50% rise. Bank of America, Dresdner Kleinwort Wasserstein and JP Morgan expect numbers to rise by smaller amounts.

Jenny Thomas, head of graduate recruitment at Morgan Stanley, said recruitment is likely to increase most in front office areas. She said: "We are particularly looking to increase our intake of graduates this year in the fixed-income, corporate finance and equity divisions."

Callum Forrest, head of recruitment at Goldman Sachs, said: "There is guarded optimism about the future." He said hiring in Europe is likely to be up across all areas of the bank.

Tom Wilson, head of graduate recruitment at Bank of America, said the bank's overall intake of graduate and MBA students was likely to rise more than 15% in 2004. This would bring the intake to about 35, of which at least half are likely to go to Bank of America's growing corporate finance division.

Some European banks appear to be in a less expansionary mood. UBS said it was expecting to recruit the same number of graduates as last year.

Zoe Henman, training and development manager at Lazard, said the bank tried to keep its numbers constant: "We believe this provides more security for our graduates."

The effect of the upturn has been felt at universities, with careers services saying banks are more interested in hiring than last year and banks admitting that the competition for good students has intensified.

Careers counsellors at the London School of Economics and Cambridge University in the UK, Bocconi University in Italy, Instituto de Empresa in Spain and Essec in France said prospects were improving.

Gordon Chesterman, director of the Cambridge University careers service, said: "Banks are a bit more enthusiastic. There is more advertising in student newspapers."

Michel Baroni, who runs finance courses at Essec, said a year ago some investment banks came on campus only to say they had no vacancies. None are saying that now.

Fiona Sandford, head of the careers service at the London School of Economics, said some students already have several offers from different banks.

As competition for talent hots up, banks are revaluing the way they approach students. Sallyanne Birchall, head of graduate recruitment at Deutsche Bank, said: "It's become all about getting to know people earlier in their university careers." Banks increasingly offer full-time positions to students who have done summer internships in their penultimate year. First-year internships are becoming more common, too.

While the outlook for university graduates appears favourable, business school graduates who want to go into banking may have less to look forward to.

Several of the large US banks, which traditionally account for the bulk of MBA recruiting, said MBA hires were likely to account for a smaller proportion of the mix in future.

Dresdner Kleinwort Wasserstein, which used to hire MBAs in the late 1990s, but stopped during the downturn, said it had no plans to re-enter this area of the market.

A graduate recruiter at one US bank said: "During the bull market of 1999 to 2000 MBAs accounted for 25% of our junior intake. That has now dropped to 10%. We don't see it increasing."

Although MBAs are in strong demand in corporate finance roles, he said they were falling out of favour in capital markets divisions. He said: "When you stand a graduate-level analyst and an associate-level MBA side-by-side in trading roles, the difference between what they can do doesn't warrant the extra expense."

Ellen Miller, head of graduate recruitment at Lehman Brothers in Europe, confirmed the trend. She said analyst recruitment was set to increase more than MBA recruitment overall. Recruiters at other banks said analysts were cheaper than associates and they offered recruiters a broader talent pool.

Equally, MBA hiring represents a bigger commitment. While MBAs are brought in on permanent contracts, analysts are usually recruited on a two-year contract. This is considered preferable by banks as it enables them to eliminate weak performers when the two years are up, without incurring big severance costs and dashing long-term expectations.

If the global economy turns down again, graduates who are celebrating now may be crying into their drinks in two years' time.ñ