These days, not everyone wants a job in banking: banks are reportedly struggling to sell the industry to interns. But several thousand students do still want banking and financial services jobs, and they need to know that things have changed - both for the better and for the worse.
In the old days, students left university and applied to the so-called 'bulge bracket' investment banks (Goldman Sachs, Morgan Stanley, Merrill Lynch, J.P. Morgan) in the hope of securing a graduate job that would set them up for life. In the new days, students are still partial to big name banks, but they're missing a trick if they only apply to the top names - this year big name banks only expect to hire 813 graduates in the UK, of whom only around 300 are likely to go into front office office roles.
Away from big name banks, there's been a flowering of junior finance positions in smaller firms in the past few years. Anecdotally, corporate finance boutiques, smaller brokerage houses, hedge funds and even private equity funds are now taking more graduates than in the past.
Private equity funds used to recruit experienced juniors who'd been through banks' training programmes, but funds like Terra Firma and Blackstone have started hiring graduates. "There are a few small private equity funds and funds of funds which will now hire high achieving students with numerical or science degrees," says Gail McManus, founder of Private Equity Recruitment. "But the best route into private equity by far is still a couple of years of banking experience -they don't really want to train you up," she adds.
One Imperial alum who started work in a large investment bank in the City and migrated to a private equity fund in the West End, says most of his peers are now working outside large banks: "It's very different now - everyone's around Mayfair and Covent Garden. People spend a few years in banking and then get out and work for a boutique or in hedge funds or private equity."
We've touched upon this several times in the past, but it can't be reiterated enough: you can't expect to do a single summer internship and get a job in investment banking now. More and more people have multiple internships on their CVs. And more and more banks are hiring students as 'interns' when intern is code for recruiting someone for a few months before deciding whether to renew their contract for another few months and ultimately indefinitely.
A quick look at this year's summer analyst classes reflects the new reality. RBS has got someone who interned last year at Morgan Stanley. Goldman Sachs has got someone who's previously been a summer analyst at UBS, Ernst & Young and ING Investment Management. Deutsche has got someone who's previously interned at Citi and Barclays Capital. Banking recruitment is becoming increasingly incestuous: if you want to be attractive as a potential hire, you'll need to signal that you're a desirable part of the wider banking family.
In a world where capital requirements are increasing, banks are struggling to keep their costs low in order to improve their return on equity. This is fine in theory, but hard in practice. As banking commentator William Wright noted this week, banks have only succeeded in cutting their overall costs by 1% so far this year. The problem isn't salaries and headcount, but inelastic fixed costs like technology and buildings which can't easily be slashed.
Under cost pressure, banks are trying to make do with less. In areas like M&A, where revenues this year have been lacklustre in Europe, the number of analysts and associates has been kept low (although banks are now trying to remedy this). M&A bankers have always been worked hard, but some are now being worked harder than ever: tales of three all-nighters a week at associate level are emerging.
Finally, banking has become a long game. "People have a lot less money now than they used to," says one rates analyst. "Salaries have gone up - if you're a vice president you can now get £140k instead of £70k, but the cash bonus payment for your bonus is a lot lower than it used to be."
Without massive bonuses, bankers can still make money - but not enough money to retire early. The new watchword for banking careers is therefore resilience - even if you are pulling three all-nighters a week.