Five of eight investment banks questioned by Financial News said they planned to increase European graduate hiring next year by as much as 20%. Three said recruitment was likely to remain steady.
Graduate recruiters' optimism comes after several good years for graduate hires, following retrenchment during the downturn of 2001 and 2002. This year, some groups increased the number of graduates joining in July by as much as 30% compared with last year, with the result that 2006's intake is likely to be the largest for five years.
Recruiters offered different reasons for their optimism. Clare Witton, head of graduate marketing in Europe for JP Morgan, said the planned increase in graduate hires was a long-term strategic move. "Our talent is a key part of our competitive advantage and growing our own analyst and associate pool is a key part of our strategy," she said.
Danielle Wrobleski, head of European graduate recruitment at Bank of America, said the rise in graduate hiring reflected the company's growth in Europe.
Calum Forrest, head of European recruitment at Goldman Sachs, said hiring was likely to be steady because of buoyant market conditions. He said: "Last year was good for analyst hiring and this year will be too. Business feels good and that translates to a strong graduate intake."
Goldman Sachs announced an 84% increase in net income in the third quarter of this year, compared with the same period last year.
Given the appetite for investment banking careers among the UK's graduate population, recruiters said they should not have a problem attracting applicants. According to an annual survey of students at top UK universities, conducted by research company High Fliers, 10.8% of final-year students aspired to work in investment banking in 2005, up from 10.5% in 2004.
However, graduate recruiters said applicants were concerned about the industry's reputation for long hours. Witton said this matter was raised often as an issue by applicants.
The head of recruitment at another US bank said the supply of quality candidates remained strong but the pool of die-hard bankers had shrunk: "There are a lot more queries about the lifestyle than there used to be. A few years ago we met more people who wanted to get into banking, no matter what."
The head of graduate recruitment at a large European bank said the industry was in danger of alienating talented young people: "Lifestyle issues crop up time and time again. Thanks to the internet, information on what it's like to work in a bank is much more accessible. People realise it's very hard work and are increasingly asking if it's worth it."
The reluctance of students to commit to long working hours coincides with suggestions that investment banks are working junior staff at analyst and associate level harder than before. Severe cuts in graduate recruitment in 2001 and 2002 have created an industry-wide shortage of experienced analysts and associates, particularly in resurgent areas such as mergers and acquisitions.
Jim Nairn, a consultant at recruitment firm Cornell Partnership, which works with banks to fill junior vacancies, said 90% of large banks in the City of London were under-resourced in terms of second-year analysts and third-year associates.
He said: "Business is increasing at a faster rate than banks can hire and there is constant pressure on analysts and associates to work longer hours. There is a lot more weekend work than there has been for a long time."
The situation has been exacerbated by banks hiring juniors from each other, leaving departments under staffed. One M&A analyst at a European bank in London said he was considerably overworked as a result of the pick-up in bids and deals and the departure of a colleague several months earlier.
"I do the job of two people. A good week for me is 70 hours, but a bad week can easily exceed 100. We're squeezed in terms of resources and I'm working much harder because of that," he said.
Nairn said overworked analysts were more prepared to switch employers, either for higher remuneration at a rival or for an easier lifestyle at a smaller bank. However, he said high workloads made it difficult for junior staff to manage the logistics of a move.
James Heath, managing director of recruiter Greenwich Partners, another recruitment firm specialising in junior roles, said: "Even if you line up interviews, they don't have time to attend." Time pressure has seen a resurgence in early morning interviews: "Interviewing between 6.45 and 7am has become commonplace," Heath said.
This year's graduate intake, which is about to arrive at desks after several weeks of preliminary classroom training, should go some way to filling the junior-level gap, as should a higher intake of graduates next year.
However, junior staff take two years to get up to speed and with M&A forecast to rise, the shortage of younger bankers looks set to persist. Long hours could remain an issue for some time.