Three months into the 2015 analyst class and things are looking a little uncertain. Following the volatility in China over August, J.P. Morgan banking analysts are suddenly predicting that revenues will fall 19% at investment banks in the third quarter, Standard Chartered is dumping 25% of its senior staff and clouds are gathering over Deutsche Bank ahead of its strategy update at the end of October.
It's a shame given that it all started so well. The High Fliers UK graduate market report from January 2015 showed banking and finance firms hiking graduate recruitment by 21% in 2015 compared to 2014 (although investment banking intakes specifically increased by a more moderate 2.3%). "Most banks increased their graduate intakes this year," says the head of HR at one international bank, speaking off the record. "It's been a healthier year and deal-flow has been strong, so hiring more juniors sense."
In the first half of 2015, global M&A reached $2.28 trillion, its second highest level on record. At Goldman Sachs, M&A revenues rose 62% year-on-year in the third quarter. In the circumstances, interns from summer 2015 say most of the investment banking classes received offers to join full time in summer 2016 and that banks are working hard to make sure they stay committed. "Virtually everyone in my class got an offer," says one intern from a Swiss bank in New York. "They've also done a great job of continuing to sell the bank to us after the internship. And they threw a fantastic leaving party!"
Nonetheless, what goes up will probably come down again. The last time global M&A was this high was in 2007 - and we everyone knows what happened after that. Even before the events of late summer, some London-based recruiters were suggesting that M&A recruitment looked 'toppy'. J.P. Morgan's analysts suggest deals are likely to be postponed if volatility continues, at which point banks could decide they've got more juniors than they need.
Analysts in fixed income and emerging markets may have to face the reality soonest. Nomura certainly hired several summer interns into its fixed income markets business, but we couldn't find anyone among them who said they'd received a full time offer for 2016 after the bank made at least 60 of its London staff redundant.
Not everyone is pessimistic, however. Richard Hoar, director of banking and financial services at recruitment firm Goodman Masson, says demand for analysts and associates is back up to 2007 and that while there might be some "ups and downs", there's unlikely to be the sort of "fundamental collapse we saw during the credit crunch." Similarly, the head of HR says banks are making more effort than ever before to keep analysts engaged: "Nowadays it's all about making sure the quality of work we give to our graduates is high. - They want to be inspired and to see that they're gaining skills and finding fulfillment."
Even so, some students are going into the industry with their eyes open. "The hours are brutal," says one ex-intern who plans to join an IBD team in 2016. "You can't help but wonder whether we're just being employed as work horses to get banks through the next few years, with no prospect of advancing to VP or MD level."