Thursday, April 12, 2007

Impressions from the ground: the current job market in investment banking

Following Citigroup's announced layoffs - 1,000 of which are supposed to be in London - I think it is time to comment on the current job market for MBAs interested in joining global investment banks. I do not have any overall numbers and can only comment on what I can conclude based on what is happening with the class of 2008.

First of all, I think the headline of "1,000 bankers in London to lose their jobs", as proclaimed in yesterday's Evening Standard, sounds more threatening to future bankers than it is. Most cuts are made in back office and administrative jobs, obviously. Furthermore, if you talk about the few M&A or Sales & Trading jobs that will be shed, I would assume only those who are losing money would be shed - if you want to cut costs to improve profitability, you will not fire anyone who brings in profitable deals, as your profitability goes down if you fire profitable employees. So I believe, even those MBAs interning at Citigroup this summer should not be worried, though obviously I understand that some who may have rejected Deutsche or Lehman offers to join Citigroup over the summer might wonder if they made the right decision.

But moving on from Citigroup, our summer job recruiting season has given us some good insight into the job market in the finance industry. I remember when we started the year, I was impressed by how well the 2nd years had done last summer, but also concerned - if there were so many summer interns last year and they almost all received offers at the end of the summer or joined other investment banks full time, how many spaces would be left for us? I can now safely say that I believe hiring this year has been even better than last year, so my impression is that we are lucky enough to have entered the MBA and the summer recruiting season at a time when investment banks are competing hard to hire MBAs.

Why do I get this impression?
- First, what usually seems to interest most on the business week forum, what I would call the "Goldman Sachs Index" :-). Basically, their core school is Harvard and I believe if they could they would like to hire as many people as possible from Harvard and fill up the rest with Wharton students. When hiring is down, they will focus on their absolute core schools. But when they want to hire more, they will obviously expand their search and look at "lesser schools" such as Columbia, Chicago, London Business School etc. as well. This year, it seems they have made a record number of offers to our class. I don't actually know the number because I only know of those I know personally, so I only know they minimum number, but I know of at least 9 offers (across M&A, Trading and Private Wealth Management). Taking into account our class size, this would be similar to ~25 offers at INSEAD or Harvard. So it's not a bad start

- Secondly, you may have guessed, I could mention the Morgan Stanley index ;-). Morgan Stanley has always been happy to hire from London Business School, but they are also very prestigious if not to say elitist, so I think they have always been quite picky and only taken a handful of people whom they could not say no to. Well this year it has been quite different, I think they extended at least 10 offers in M&A as well as Sales & Trading that I know of, so again taking into account our class size, this is a considerable number. You can see that around 8-10% of our class will spend the summer at either Goldman or Morgan Stanley, which is not bad considering that only 40% aspire to work in finance

- Regarding the other investment banks, some of them have actually made a record number of offers this year. Deutsche has extended more than 15 offers and Lehman I believe almost 20 offers. Barclays must have extended at least 20 offers, because I know 5 in my stream alone who are joining Barclays Capital, then I know two others with offers from Barclays Global Investors, so my estimate of 20 offers is likely to be conservative. Then you have many other banks, such as Merrill, HSBC, JP Morgan, Credit Suisse, UBS etc. which have probably all extended around 5 offers each if not more

- Low yield: this is another indicator of how well it is going. I know some banks extended a lot of offers but won't actually get that many summer interns from our school because these people had too many other attractive offers. I know of one very good ibank that gave 7 offers for M&A jobs and only one guy took it

- The buy side: this is an area where our school can definitely improve compared to Harvard or Wharton. But I think we did quite well this year, and hopefully we can strengthen this area little by little. The Investment Management Club has definitely done a great job in marketing our class to investment management firms and hedge funds and it seems to have paid off. Fidelity, PIMCO and Capital Group have made several offers, as well as UBS Asset Management, T Rowe Price, and several smaller hedge funds and other buy side firms. There even seem to be quite a decent group of people going to private equity. I know there is someone going to Bridgepoint Capital, and someone else going to Actis Capital, which is big in PE investment in Africa and India. I can't say exactly, but I would think that about 20 of us are going to work in investment on the buy side

So where does this leave us? My impression is that of the 40% of us who came here with the aspiration of going into finance, about 15% are going into actual investment banking, about 10-15% into Sales & Trading/Markets, about 5-10% into Investment Management and about 5% into Private Wealth Management. So my impression is that those who came here with a clear idea of what they wanted to do, we have been lucky to enter an friendly environment, even though as I mentioned earlier the whole recruiting process did turn out to be more competitive than I had expected. At least, things look bright in the world economy, and I think the class of 2009 will encounter equally benign conditions next year.


forrest gump said...

Overall, a good post again. But the best line had to be "I think the class of 2009 will encounter equally benign conditions next year"....i hope it comes true :)

Rahul said...

Thanks for these insights Angie.
I came to know about your blogs yesterday and spent almost an hour reading through the entire consulting labelled posts. They were really great.

And yes, like Forrest, I too hope that the job market will be similar for the class of 2009 ;)

MBABlogger said...

Thanks for the optimisim to we 09'ers :)

Anonymous said...

Hey Angie --

I appreciate all the insight on your blog, it's been very useful and entertaining to read.

Coming from McKinsey, do you have any insight on next year's full time recruiting outlook for Consulting? I know last year was a record year for many firms (in terms of # hires), and I was wondering if this trend is expected to continue through next year?

angie said...

hey anonymous, yes from what I know it will continue, I know in Germany last year they planned to hire 200 people and this year 250, so they might hire even more this year than last in general. Currently the outlook is very good and they are going crazy organizing events, workshops etc. to attract good candidates.