Bloomberg News

‘High Risk, High Reward’ Banking Still Seducing U.K. Graduates

September 01, 2011

Sept. 1 (Bloomberg) -- U.K. graduates made more applications to investment banking than any other industry for the first time since 2008, the year Lehman Holdings Brothers Inc. collapsed.

Graduates can earn starting salaries of about 42,000 pounds ($69,000) a year, according to a report from High Fliers Research Ltd., a U.K. market researcher that specializes in graduate recruitment. In return, prospective employees can expect to work at least 12 hours a day. They will also have to compete with the 50,000 workers that have been released by U.K. banks this year, according to Bloomberg data.

“It’s probably the worst time to come into investment banking for a graduate,” Ravi Rajani, 22, a graduate from Cass Business School in London, said in a telephone interview. “It’s an issue of supply and demand. Supply is so huge.”

The number of candidates seeking work in London’s financial services climbed 32 percent in July, as bankers sought new jobs ahead of likely cuts at their firms, according to recruiter Astbury Marsden. The High Fliers survey was based on interviews with 17,851 final year students from 30 U.K. universities.

Katie Little, 23, from Brighton, England, has just completed a masters in business management at Leeds University. She said the excitement of “high risk, high reward” is what attracts her to investment banking, although she realizes opportunities are limited.

“The dream is investment banking but it’s hard to get into without any experience,” she said in a telephone interview.

Job Cuts

European banks have eliminated about 67,000 roles this year, according to Bloomberg data, as concern about the sovereign debt crisis unsettles financial markets.

HSBC Holdings Plc will cut 30,000 jobs by the end of 2013 as first half investment-banking profit fell 12 percent to $4.81 billion. Barclays Plc said it will lose 3,000 roles, while Royal Bank of Scotland Group Plc said it will shed 2,000 posts as revenue in its securities unit dropped 35 percent in the second quarter. UBS AG is cutting 3,500 jobs, or five percent of its workforce, mainly from investment banking.

Rajani had 25 applications for graduate programs rejected after finishing university before impressing with the scope of his questions at a Barclays Capital presentation, being invited to apply for an internship.

“If I get knocked back, fine, I just keep on trying,” he said. “If it doesn’t work out in investment banking in the U.K., I would look to Asia or emerging market countries. Investment banking is all I want to do.”

‘Big Swerve’

The prospect of increased regulation crimping bank earnings and hiring may deter some candidates, according to Jonathan Evans, chairman of executive-search firm Sammons Associates.

“I would think a lot of people are potentially giving it a big swerve at the moment,” he said in a telephone interview. “There aren’t the amount of jobs that there normally are and I don’t think the pay and rations are as they used to be.”

In the 12 months to March, 14 billion pounds was paid out in bonuses to workers in the financial and insurance industries, according to data from the Office for National Statistics, down from 19 billion pounds in 2007.

Lenders are also being forced to cut costs in order to hold more capital as part of new regulatory rules to protect themselves against insolvency.

“I’m not putting my hopes up because it’s just so competitive,” Dan Davis, 22, said in a telephone interview. “I’m now looking at other options, smaller investment banks or asset management.”

Davis is pursuing a career in investment banking after completing an economics degree at Leeds University and said he refuses to be put off by the long hours or the turmoil in the banking industry.

The main concern is the “sheer amount of people applying for one single graduate job,” he said.

Campus Recruiting

Martin Birchall, managing director of High Fliers, said investment banks have been back out on campus “with a real vengeance” this year, even as they are cutting jobs elsewhere.

“They’ve not quite restored all of the vacancies they had in 2007 and 2008 but there is quite a bit of debate over whether those pre-recession levels of recruiting were bumper years anyway,” he said in a telephone interview.

RBS said it’s recruited more than 450 graduates globally this year and expects to add a similar amount next year. Chris Jackson, graduate program manager for RBS global banking and markets, said the company sees its graduate program as an essential part of its rebuilding process.

‘Investment’

“Whilst the approach may seem contrary to prevailing market conditions, it is our view that these hires are an investment that will pay off over a two to four year time frame,” he said in an e-mailed response to questions.

High Fliers’ report shows that about half of entry-level jobs at investment banks will be filled by graduates who have already completed work experience with the company.

Prospective bankers must accept that they will be entering an industry where job cuts are likely to continue in future.

“In the past banks didn’t cut jobs, they just didn’t pay bonuses,” said Sammon’s Evans. “Now because basic salaries are so high, the short-term approach is to slash jobs, it’s as simple as that.”

--Editors: Peter Branton, Mark Gilbert

To contact the reporter on this story: Ben Edwards in London at bedwards35@bloomberg.net.

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net


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