Morgan Stanley Dean Witter intends to double the head count of its German operation to 500 bankers by 2004, in response to an expected upturn in corporate activity.
This increase is linked to planned changes to German tax law which come into force on January 1, 2002.
Dr Lutz Raettig, head of Morgan Stanley for Germany and Austria, said: "The bank intends to grow across all product areas: mergers and acquisitions, equities, debt, private client and real estate finance. The planned changes to German tax law will free up large numbers of corporate cross holdings, leaving large corporate packages open for an increase in M&A activity."
According to Raettig, the bank is already taking instructions from both German and Austrian companies on corporate restructuring. He added that many international companies had instructed the bank in the expectation that the initial restucturings would provide acquisition opportunities.
He said that the bank's expansion strategy would be based on both lateral hiring and graduate recruitment to ensure long-term organic growth. Lateral recruitment would be made at various levels from other investment banks both in Germany and elsewhere in Europe with personnel transferred to the Frankfurt office.
Raettig acknowledged that the pool of sufficiently experienced bankers within Germany was too shallow for Morgan Stanley to look solely at recruiting from the German market. The bank also wants to hire German speakers based in Germany or elsewhere.
He agreed that in order to attract the best graduates to Germany the bank would need to compete with the rates being paid by the leading investment banks in the UK and the US. This could lead to a pay war in Germany.
Leading recruitment consultants said that bulge bracket banks in London were offering graduate level base salaries of between 30,000 (€47,000) to 35,000. In addition they offer first year bonuses of up to 75% of base salary, meaning that at the top end remuneration packages can reach 61,250.
However, the top Wall Street banks are tempting graduates with packages between $150,000 (€160,000) and $225,000 according to Karen Wong, director of financial services at Michael Page International, the New York executive recruitment firm.
The base salary ranges between $75,000 and $85,000, topped up with a sign-on bonus of $10,000 to $50,000, depending on the cache of the graduate business or law school and the tuition fees that need to be paid off. The remainder is made up of a guaranteed first-year bonus.