MBAs have fallen out of love with investment banking and investment banks are trying to win them back the only way they know how – by throwing money at the problem.
Median salaries for MBAs going into investment banking from top business schools in the US and UK have increased by around 25% on last year, even as the number graduates choosing the sector continues to decline – or at best remain static.
In a strangely consistent turn of events, median salaries for MBAs going into investment banking at Wharton, Columbia, Yale, Chicago Booth and MIT Sloan have increased from $100k in 2014 to $125k for the class of 2015.
Add in sign on bonuses and other variable compensation – which has remained largely static year-on-year at the schools that break it out – and investment banks are comfortably among the biggest payers for new MBA graduates.
Is all this money encouraging MBAs into investment banking? Not really. The largest proportion of MBAs going into investment banking came from NYU Stern, where 24% of the class of 2015 went into the sector (30% went into consulting). But this is on the wane – in 2014, 27% went into banking and in 2013, 30% choose the industry.
At Stanford and Harvard the situation is more dire. Despite the 25% pay increase at Harvard, just 5% of the class of 2015 choose investment banking – the same proportion as 2014 – while 4% of Stanford graduates choose the sector, down from 5% the previous year.
It’s not simply a case of MBAs heading into entrepreneurship or a hot fintech start-up instead.
At Harvard, financial services broadly defined still accounts for the largest proportion of hires (27%). However, Harvard's MBAs aren't going into investment banking specifically. Instead, they're off to private equity (which attracted 10% of students) and to investment management (which attracted 9% of students). It's a similar pattern at Stanford, where 13% of students went into private equity (PE).
The appeal of the PE industry is well known - pay. At Harvard, MBAs going into private equity were offered median salaries of $150k and additional guaranteed compensation of $125k. At Stanford, one person going into PE received a $250k sign on bonus.
NY Stern, Columbia, Chicago Booth and Wharton – traditional feeder schools for banks – all maintained consistent proportions of MBAs going into investment banking. However, at London Business School – which accounts for a third of investment banking placements in the City – said that just 8% of the class of 2015 choose the sector (down from 12% in 2014).
Are investment banks more popular anywhere? Yes, at Cornell, where the proportion of people going into banking rose from 11% to 17% year on year.