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Even if banks cut MBA pay, it’s still worth it

Landing a job in an investment bank is likely to be a lot more difficult for the MBA classes of 2008 and 2009, but if they can land a job (and this may be a big if), splashing out on the course will still be worthwhile.

Although Morgan Stanley is rumoured (Dealbreaker) to be reducing the amount it offers to subsidise US students struggling with MBA fees, recruiters this side of the Atlantic say generous banking sign-on bonuses are set to remain static.

In 2007 the average sign-on for a student going into banking after an MBA course was 22k, according to the London Business School. This year, Merrill Lynch has reputedly increased its sign-on pay from $30k to $40k to compensate for the falling dollar.

The head of MBA hiring at another US bank says sign-on payouts are set to remain static – “There’s absolutely no indication of them being slashed.”

Figures from recruitment firm Cornell Partnership indicate that average pay for a first-year associate in a bulge-bracket firm was around 110k last year (including 60k basic, 20k stub/sign-on bonus, and a 30k bonus paid in January); second-year associates earned 150k; and third years earned an average of 200k plus.

With the MBA course at LBS costing a total of 44.8k and students able to earn up to 12k during their summer internship, this suggests a net present value of 195k over four years (assuming the student starts work in July of his/her second year and the cash would otherwise be sat in a bank account earning interest at 6%).

Even if interest rates rise to 8% and bonuses are slashed, MBA students who manage to land a banking job will still be heavily in the black over a four-year period.

The big issue is, naturally, whether MBAs will be able to land a role in the first place and whether they will be made redundant before the four years are up. Some LBS MBAs are opting to work in Asia rather than London, and one says that those without summer internships are panicking.

The head of MBA recruitment at the US bank says they have reason to be panicking: “It’s going to be a lot, lot harder to land a role without an internship next year.”

Comments (28)

Comments
  1. My current title is Associate and I work in Credit Origination at top Canadian Bank. However, my slary is no where near to the numbers mentioned above. Is that because I dont have an MBA and/or Canadian Banks are considered as Tier 2 banks? and they dont pay as high as other american banks?

  2. I know the Canadians (CIBC, RBC, TD etc) pay very low compared to the US houses or even the likes of DB, Credit Suisse and UBS. So my advice to you sir, is get out there while you have a chance.

  3. “Average pay for a first-year associate in a bulge-bracket firm was around 110k last year; second-year associates earned 150k; and third years earned an average of 200k plus.”

    These numbers are absurdly low, and its clear Cornell have averaged largely a bunch of 2nd tier banks rather than the bulge bracket. They say 150k is what an average 2nd year Associate gets having completed a full year? You have to be kidding. 150k is what a 2nd year ANALYST gets all-in. To get a true reflection of what the creme de la creme get, refer only to Goldmans, JPMorgan and maybe Morgan Stanley. All the other banks out there right now are a bad-paid joke.

  4. Dupshar,

    What evidence do you have 2nd year Analysts get 150k? Is this like 1 case or what?

    Analysts 2/3 in FO typically get 50%-100% of base implying MAX = 100k

  5. Vivek, I don’t know where you work but your numbers are laughable. Analysts get 50-100% of base? As a trainee who’s been there 6mths maybe, but even after a full year on the desk grads get a MULTIPLE of their bonus – 100-150%, as was confirmed on a previous eFN article here. Pretty much EVERY 2nd year analyst I know at JPMorgan and GS got over 100k just in bonus end of last financial year. Even at Citi they got about 90k average. As an associate you’ll VERY comfortably getting over 250k all-in after a full year on the desk. By the way I’m talking trading and sales, not IBD gimp work. Obviously if you work at an inferior bank my numbers will look like a fairytale to you.

  6. “Analysts 2/3 in FO typically get 50%-100% of base implying MAX = 100k”

    Hahaha. What bucket bank do you work for where analysts’ base is more than their bonus???? Even as a 1st yr grad your bonus is *at very least* 40k and more like 50k = more than 100%.

  7. “Vivek, I don’t know where you work but your numbers are laughable. Analysts get 50-100% of base? As a trainee who’s been there 6mths maybe, but even after a full year on the desk grads get a MULTIPLE of their bonus – 100-150%, as was confirmed on a previous eFN article here. Pretty much EVERY 2nd year analyst I know at JPMorgan and GS got over 100k just in bonus end of last financial year. Even at Citi they got about 90k average. As an associate you’ll VERY comfortably getting over 250k all-in after a full year on the desk. By the way I’m talking trading and sales, not IBD gimp work. Obviously if you work at an inferior bank my numbers will look like a fairytale to you.”

    Do people still work in banks? As a first year analyst at hedge fund I was on 100k basic.

  8. At Barcap FO first year analyst fix was 36 and 10 bonus

  9. Do some of you realise that boasting about your pay is bad taste in the highest order? Only those with most limited talent would seek to a public forum to boost their ego by a) telling others how badly paid they are and d) boasting to the rest of the would how wonderfully paid they are.
    Get a life…

  10. If you work in Trading then yes you can make zillions as long as you bring revenue. However, I am quite skeptical to agree that first/second year anlaysts get 100K+ (both at JPM or GS) because a) they are still in training with the bank b)banks are not foolish to pay 100K+ who doesnt know much. Realistic figures would be around 50-70K in my opinion. Dont forget that salary has been pretty much static for last few years!!

  11. gopanb, you are making up estimates, whereas I am giving reality based on years of experience and knowing what I and my peers have been paid (have seen other people’s bonus slips). You are completely wrong that a 1st/2nd year analyst is just training and doesn’t know much. At the top banks you spend a few months intensively learning and then off you go with your own book. Even salespeople make a 40-50k bonus in their 1st year and 6 figures thereafter. Its easy for a young new grad to make good money doing basic stuff.

    “Analyst”, that 10k BarCap bonus is a “stub”, not a 1st yr bonus. Its what someone gets after spending a few months training, they then get 45k on average in S+T after a year on the desk.

    “SandT”, I have worked hard to make it in life and will not let inferior detractors like yourself take away my achievements. Fortunately I couldn’t care less about people like you which has aided my success.

  12. Mr Patel, I did not personally mentioned you in my remarks. But I guess when I mention people that like to talk about their massive pay is a pointless ego boost – you seemed to have proclaimed “that’s me!”. However, as I have no idea who who are, I will not caste any personal dispersions about you – that would be a very low altitude thing to do…

  13. Guys lets not get emotional about what other mite think. Its a discussion board and everyone has their own rights to comment!!

  14. All the chest beating about pay won’t mean a thing when a security guard on 11 an hour escorts you from the building after you’ve been canned.

  15. “Security”, I will never be canned in this current downturn, I’m very confident of that. If you’re good, and know how to play your cards right, you won’t be fired. Even if your desk is in trouble you’ll be redeployed elsewhere if you’ve networked well with senior MDs who like you.

  16. Dupshar, it’s funny how a “top guy” like you fails to understand the simple meaning of the word “average”… but your failure to understand it allows you to boast how much you and your “peers” make per year. Good for you, good for you… but then again, you are right, you shouldn’t let “inferior detractors take away your achievements”. I can only imagine how fulfilled your life must be…

  17. so dupshar, how much should associates who have just joined after an mba or msc with some experience expect in s&t?

  18. by how to play your cards you probably mean threatening them with sexual/racial harassment?

    as for the networking, it doesnt matter how many Md’s you have pleasured before cos if they get canned then so will you.

    Dupshar = muppet Reply
     
  19. dupshar, your remark regarding IBD stinks of your ignorance. as a first year trader you wouldnt be doing anything fantastic and wont know much either. probably calling up the banks’ stupid clients and try to convince them that you are not as retared as you sound and get them to make unnecessary trades. you wont be afforded a large balance sheet to play with and your ‘master’ will be watching you like a hawk ready to crack his whip as the first sign of trouble.

    get over yourself, you are nothing special especially with a name like dupshar. i mean seriously, who the hell is called that?!

  20. What a retarded comment “Patel”. You claim I’m ignorant and then give a load of assumptions based on no personal experience on trading? I’ve been there, done that, and as a 1st year trader most certainly did not do the rubbish work you outlined. I had my own book. I was making serious P&L on prop and agency. A young age and lack of inexperience is irrelevant if you’re at a meritocratic firm where you can prove you have good ideas and quickly gain a track record you’re sorted. Unlike IBD, where however good you are, analyst gimp work is analyst gimp work.

  21. Wow, this Dupshar bloke is unbearable.

  22. Investment banking earns a lot of money… 200k…WOW…I want 300k it’s better….

    Jaime Was HEREjhdsfghdfghruf Reply
     
  23. That’s a lot of money 200k… Wow… I am a high school freshman who want’s to study this field of study i hope to earn the scholarship that pays your college study…I want to go to Georgia tech or Uc Berkley… I go to Ukiah High… I’m a freshman… I love to study math and do the equations it’s pretty fun… I like your website…

  24. WOW Mr patel is an incredible speaker!

  25. Hi all,
    what’s your view on the Master’s in Finance at London Business School?
    I like the concept, ‘cos it’s shorter (10 months), cheaper (31k vs 45k) and more focused than an MBA: in other words, you only study finance and not mumbo jumbo about marketing or HR.

    LBSprospective Reply
     
  26. Dupshar, you are on a recruitment website arguing that your job is safe?

  27. I somehow doubt Dupshar actually works in banking

  28. Interesting this chap Dupshar. He says he’s working in Sales & Trading – he should be on Bloomberg right? – he’s not – i just checked. He’s talking bo**oks. Probably an Estate Agent who has a friend working at Goldmans – and believes the BS he gets fed.

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