UBS leads the way with graduate hiring spree

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If banks increase graduate intakes in 2005 as forecast, numbers should rise more than 20% this year. This follows an increase of some 40% in 2004. Could it be that banks, long known for increasing graduate hiring when times are good and cutting back vigorously when times are bad, are finally on a steady upwards trajectory?

According to the banks, this is the case. Mike Bolin, chief administrative officer at UBS, said the best banks had realised the need for home-grown talent.

He said: "In the long run, point-to-point recruiting doesn't work: you can't always bring people in from the outside and expect them to perform immediately." For grow-your-own enthusiasts, recent graduates are not just a source of cheap and easily dispensable labour. Bolin described them as "a core group of intellectuals, and owners of the culture". Accordingly, UBS is boosting graduate hiring by nearly 50% this year.

Morgan Stanley's graduate recruitment is set to rise 25%. Joanna Scott, head of graduate recruitment, said higher numbers were partly a reflection of a more positive business outlook and an appreciation of the benefits of nurturing talent. "We have become more long-term in our thinking and are very aware of the benefits of developing a pipeline of talent."

Banks have learnt the value of graduate talent the hard way. After a spate of frenetic recruiting in 2000 and 2001, many pruned their intake heavily in 2002 and 2003. At the same time, junior staff bore the brunt of redundancies. As a result, when markets picked up at the start of 2004, banks found themselves without sufficient junior staff. They rushed to hire on the open market, often at inflated prices.

John Axworthy, managing director of Virtual IB, a search firm specialising in junior investment banking hires, said pay for analysts and associates rose 20% in 2004. "Banks found they had huge gaps at the bottom. If there is a lesson to be learnt, it is that they need to keep hiring juniors even when making redundancies," he said.

Unfortunately for graduate recruiters, but fortunately for students, banks seem to have reached this realisation at the same time.

Nancy Labiner, head of graduate recruitment at Goldman Sachs in Europe, said there was increasing momentum behind hiring. "Banks' recruiters are out in fuller force than they were two years ago. We are seeing a much greater presence from everyone on campus."

Established recruiters, such as Goldman Sachs, Morgan Stanley and JP Morgan are not the only banks chasing graduates. In the past few years UBS, Barclays Capital, HSBC, Royal Bank of Scotland and Bank of America have also expanded their graduate programmes. Bolin said competition for students was growing. "More banks are fighting for the same students." UBS offers selected students sponsorship packages worth 20,000 (€29,000) over three years.

However, the true extent of commitment to graduate hires will only be visible during the next downturn. Aidan Kennedy, a partner at search firm Armstrong International, said last year's swathe of junior corporate finance hiring was already looking over-optimistic: "We need to see higher levels of M&A execution activity to justify the junior hiring that took place last year."

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