2005 grad hiring up but U.S. bests UK, EU on pay

There are good and bad years to go for an entry-level position in investment banking. By all accounts, 2005 will be good: banks say hiring will be up.

Barclays Capital, Bank of America, Citigroup, HSBC, Merrill Lynch and Royal Bank of Scotland expect to hire more analysts (recent university graduates) in Europe in 2005. The average increase is expected at 30%.

The rise is likely to be largest at Barclays Capital, Bank of America and HSBC, all of which have been hiring across the board in an effort to build their European presence. At Bank of America, for example, hiring is set to jump from 40 university graduates in 2004 to 65 graduates in 2005.

'We're on a huge growth track', says Danielle Wrobleski, head of graduate recruitment at Bank of America in London. 'It's very exciting for incoming analysts.'

Joanne Scott, head of resourcing at Morgan Stanley, says, 'Last year our analyst class grew significantly after several years of flat recruiting and this trend seems set to continue. It's a natural progression which follows the improved outlook for our business and the investment banking industry in general.'

The prognosis is even better for MBA students hoping to join banks as associate hires. Goldman Sachs and Merrill Lynch both expect to double European MBA hiring in 2005 compared to 2004. Numbers are expected to grow from 20 to 40 and 10 to 20 associates, respectively.

Business school students confirm the presence of more banks on campus. One MBA student at the London Business School in London says things have picked up dramatically for students interested in banking careers: 'Banks are on campus all the time looking for candidates- there are around two investment banking presentations a day at the moment, which is a lot more than last year.'

However, for European analysts at least, the bad news is that base pay will be almost the same in 2005 as 2004, at 35,000. Sign-on bonuses and year-end bonuses may take this to around 40,000 to 45,000; summer interns can expect around 450 per week. 'At the end of the day, base salaries in investment banking haven't changed for a while,' comments one recruiter.

Pay rises on Wall Street

Graduate recruiters at investment banks in the US are equally optimistic that 2005 hiring will be higher than last year.

'Our analyst hiring will be up 20% in 2005 vs. 2004,' forecasts Aaron Marcus, vice president and head of Americas campus recruiting at Goldman Sachs in New York. 'Associate [MBA] hiring will be up 30% in 2005, which is up another 30% from 2004.'

Kristina Peters, head of recruitment at Deutsche Bank in the U.S., says analyst and associate hiring will be up 20% in 2005.

While graduate banking salaries look set to remain static in Europe, U.S. entrants may benefit from a marginal rise. A survey of starting salaries for this year's U.S. college leavers by the National Association of College Employers (NACE) found that the average starting salary for graduates going into investment banks rose 4.2% between 2003 and 2004, to $47,419.

Recruiters say pay for some MBA entrants will rise on both sides of the Atlantic. 'We're experiencing fierce competition for MBAs from hedge funds,' says a graduate recruiter. 'As a result, we've increased MBA base salaries to between $85,000 and $95,000.'

Rising MBA pay has been visible across the Street. In July, both Bear Stearns and CSFB began offering associates on Wall Street guaranteed starting packages, including end of year and signing on bonuses, of $200,000, rising to $300,000 over three years.

Nevertheless, before rushing to study an MBA, it may be worth bearing in mind that some banks are reporting a long-term decline in enthusiasm for business school graduates. 'There has been a shift in emphasis away from MBAs,' says a senior graduate recruiter at one large Wall Street bank. 'In areas like sales and trading there is a feeling that graduates just out of college are as knowledgeable as we need.'

As a result, he said associate hiring levels are still 60% what they were at the peak of the market in 2000. Analyst hiring is equal to or more than the peak.

In Europe, recruiters' waning interest in MBAs was suggested by research by OPP, a psychometric test company. Last summer, senior managers in UK and European financial services companies said their interest in MBA candidates was waning. Instead of hiring from graduate schools, respondents said they were turning to internal schemes, like executive coaching and mentoring to develop the leadership skills of analysts.