Morning Coffee: The students who scoff at sad graduates earning <£250k in banks. Citi's M&A veteran says he's never been busier

It's been a while since big banks like Goldman Sachs and JPMorgan increased salaries for graduates. Base salaries for investment banking analysts, for example, have been stuck at £65k-£70k in London and at $100k+ in New York for at least three years. 

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This has not gone unnoticed. The Financial Times reports that elite students at Oxford University's quantitative finance institute expect to earn £250k-£800k ($328k-$1.1m) when they leave and are sniffy about anyone who goes to work for a bank. “If you get offered a salary less than £250K, you’re kind of the sad guy,” Alvaro Cartea, director of the institute informed the FT: “Nobody I know interviews for JPMorgan, Goldman Sachs . . . not once do I hear anybody entertain any of these traditional investment banking jobs.”

This may sound extreme, but the Oxford Institute of Quantitative Finance is for PhD students only, and has long had some of the most sought-after students in the UK. Six years ago, its head told us his students were mostly all poached before earning their PhDs. Instead of banks, they join hedge funds like Millennium or electronic trading firms like Jane Street, Citadel Securities, XTX or G-Research. Here, starting salaries in London are closer to £200k with bonuses paid on top. 

While the most elite quantitative finance students are earning £250k+ and aspiring investment bankers are earning £65k+, the Financial Times observes that there's another sort of ex-student working in financial services in the UK who's earning £26k and that they may not wish to bother with it. 

Data from the UK Institute of Student Employers (ISE) says that the median starting salary for graduates working in banking and finance in the UK is only £33k, while the range is £26k-£65k. The ISE clearly hasn't spoken to anyone at the Oxford Institute of Quantitative Finance, but its findings about low-end salaries are problematic: the FT points out that you can now earn the same working a 40-hour week on the UK minimum wage as you can in some graduate banking jobs.

“Why would young people take on £45,000 of student debt if they can earn the same stacking shelves?,” observes one chief executive. The answer is clearly that long term earning power is higher in banking than in shelf stacking. Nonetheless, with even ex-banking MDs struggling to get their children into financial services jobs and AI eroding the industry anyway, it's good to know that there's an equally lucrative alternative. 

Separately, Leon Kalvaria, the global chair of banking at Citi, has worked for Citi since 1995 and has been in banking since 1980. Kalvaria says he has never, ever been busier. 

“It’s probably one of the busiest times I’ve ever seen in my long career,” Kalvaria told the FT. Blair Effron, co-founder of boutique bank Centerview, said current conditions are "just right" for dealmaking: firms are anxious because growth is modest, but there's no collapse; sellers think this might be the moment; buyers are emboldened and prices are easier to negotiate. Morgan Stanley says M&A activity was up 43% year-on-year in the third quarter, the strongest rebound for a decade. 

Hiring should surely follow. - Unless AI mitigates the need for more junior bankers and only Kalvaria's and Effrons are needed to bring in deals.

Meanwhile...

Tricolor always had a dubious business model - an advert on its website still says '“Do you have bad credit? Don’t worry.” And yet JPMorgan and Barclays had exposure to it. (Bloomberg) 

Structured credit is becoming ever-more opaque. Take Beignet Investor LLC, the recently formed joint venture between Mark Zuckerberg’s Meta and Blue Owl which has $145bn in assets and wants to build a data centre called Hyperion. (Alphaville) 

Beware zombie private equity firms. Per Franzén, chief executive of Sweden’s EQT, says only about 5,000 of the 15,000 or more private capital firms that exist today had successfully raised funds in the past seven years. (FT) 

JPMorgan has a new training program. It's called 'AI made easy' and is about getting the most out of datasets. (Business Insider) 

KPMG is rating its people on how much they use AI. (Bloomberg) 

Silicon Valley companies are spending $400bn on artificial intelligence this year. (WSJ) 

David Solomon says Goldman Sachs hasn't got enough senior women: "We've made a bunch of progress, especially in the senior ranks, but candidly not enough, and we continue to be focused on creating opportunities." (Business Insider) 

Mike Sherwood, the ex-head of Goldman Sachs International who's now on the Revolut board, says there won't be an IPO for at least two years. (FT)

Sherwood thinks high-end council tax should rise in the UK. “If you have more expensive homes, you should pay more for them.” (FT)

UK banks are worried that their tax surcharge will rise from 3% to 8% again in the coming budget. (Bloomberg) 

Munir Nanji, Citi's head of Central Europe, ate and drank too much as a banker in Asia. Aged 50 he took up running, and he now he spends a fortune on personal training, regular blood tests, massage treatments, a climate-controlled Eight Pod mattress topper, green powders, sports gels, saunas and ice baths. (Bloomberg) 

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