US banks pay premium for staff redundancy fears

After making widespread redundancies in 2001 and 2002, leading US banks are finding it hard to attract junior staff in continental Europe.

Andreas Weik, an executive search consultant at Hofmann & Heads AG & Co, a Frankfurt headhunter, said young Germans are unwilling to rejoin banks such as Merrill Lynch and Credit Suisse First Boston. He said: 'These banks cut a lot of younger people, and they fear that if they return they will lose their job again two years later.'

To attract juniors, Weik said Merrill and CSFB are offering sweeteners of around €5,000, making their packages 10% higher than international rivals'. Sources close to the banks said they were having little trouble attracting talent; both banks declined to comment.

Jürgen Merkel, managing director of MB Consulting in Frankfurt, said US banks compensate staff for the perceived risk of losing their jobs: 'American houses have a bad reputation. Junior-level bankers have heard from friends about redundancies and expect to be paid more as a result.'

Alberto Gavazzi, head of the financial services division at Russell Reynolds in Milan, said young Italians are similarly circumspect: 'The attraction of investment banking is definitely lower than it used to be. Young people are concerned whether they will have a long-term career.'

Figures from Universum, the graduate research company, show the proportion of students at top European universities aspiring to careers in investment banking fell from 19.9% to 12.8% between 2001 and 2004.

Disinterest in banking careers comes as allegedly unpopular banks are seeking to increase junior hires. Merrill Lynch has already hired three senior associates and five analysts in Germany this year, up from one associate and no analysts in 2004. In November CSFB hired an associate and an analyst to its German real estate team.

It is unclear whether either bank paid a premium for its new staff. However, competition looks set to intensify: Weik said other international banks are looking for a similar number of junior staff in preparation for an anticipated rise in M&A execution work.