Morning Coffee: JP Morgan finally stands up to its hardest-charging junior bankers. People are paying $35,000 to get a banking internship

The Wall Street bulge bracket have been annoyed for years about the private equity industry’s habit of recruiting junior bankers early in their first year of employment, but giving them offers deferred for a couple of years, so that they complete the analyst program and then move on to the buy side. Now, according to posters on Wall Street Oasis, JP Morgan is planning to do something about it.

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Apparently the offer letters going out to 2025 analyst class say that “we understand that the practice of interviewing and accepting a role at another firm… is happening even earlier in your career with us… to ensure we do first-class business in a first class way, we cannot take on client business where there is a conflict of interest. If you accept a future-dated offer of employment, you are obligated to disclose that acceptance to your manager immediately. This could impact the projects you are staffed on”. It even suggests that JPM is “reviewing” its policy on what to do when analysts accept deferred offers elsewhere and that doing so “could result in us reconsidering the status of your employment”.

What’s interesting here is that the straw that broke the camel’s back doesn’t appear to be the fact that private equity is free-riding off their training. (Which is perhaps surprising – it’s hard to think of any other company in any other industry that would tolerate this). The big problem for JPM is that with the rise of private credit and the tangled web of financing relationships between the banks and the big buyout shops, the potential danger has greatly increased. 

In a benign world with zero interest rates, it might not seem too bad to let young people sit around building relationships with your bankers before they head off to big clients. But in a complicated restructuring situation, it might be very awkward for a bulge bracket MD to go into a room unaware of how many of his team were actually getting ready to work for the people on the other side of the table.

Opinion seems to be split on the forums between those who fear that the rest of the bulge bracket are bound to follow suit, and those who believe that JPM will be forced to back down for fear of losing access to the best candidates. But those in the second camp might be somewhat overestimating their own attractiveness.

One of the main reasons why the whole “on-cycle” business got out of hand in the first place is that recruiters were overtaken by the mindset that you could identify the “best” junior bankers by looking for the most elite schools, the highest degree of ambition and the sharpest performance in interviews and modelling tests. But increasingly, the industry is beginning to realise that more everyday qualities like integrity, teamwork and simple “niceness” often matter a great deal more. If someone is prepared to get a job, then go out and interview with another firm in the same industry a few weeks later, get their second offer and keep it secret for years… is that really the sort of behaviour you’d associate with the very best bankers?

Elsewhere, how much would you spend on coaching to get an investment banking internship? Before answering, you might consider what the sum might be as a percentage of your expected earnings (including from the internship itself), whether your preparation and contacts would be good enough to get one anyway, and what the employment market is like where you live. 

An increasing number of ambitious Chinese students are getting an answer well into five figures. And some of them seem to be getting value for money; a 21-year-old interviewed by Bloomberg spent $35,000 with a careers agency but ended up going to 11 superdays and getting three offers from bulge bracket and boutique firms.

There are, however, much sadder stories of people spending even more and getting nothing. One thing to remember is that almost all claims to have “special contacts” inside the recruitment departments of big banks are false; campus recruitment just doesn’t work like that. And another important point of advice might be that while you can buy help and support to get you through the door, at some point you’re going to have to actually do the job; there’s nothing quite as desperately sad as a young person stuck in a banking career they’re not cut out for.

Meanwhile…

Oh No, Not Again – the Financial Conduct Authority has decided to open up another probe into bankers’ use of WhatsApp, with a new survey asking firms how they are monitoring their employees’ encrypted communications. Ominously, it’s pointed out that the UK regulator “hasn’t levied any US-style massive fines”… yet. (Financial News)

Tidjane Thiam’s time in Zurich seems to have been a quite perfect series of disasters. As well as the spying scandal that cost him his job as CEO of Credit Suisse, he ended up being sued by his housekeeper over an alleged “abusive working environment”. Thiam had countersued claiming that the housekeeper was trying to blackmail him, but this case has finally been lost.  (FT)

It's often said that it’s better to leave people wondering why you left than wondering why you didn’t. But this can be taken too far – if you never give investors and analysts a reason at all, as ABN Amro CEO Robert Swaak didn’t this week, it can spoil an earnings call. (Bloomberg)

One of the disadvantages of owning a huge British estate like that of Blackstone founder Steve Schwarzman is that you end up coming face to face with British planning regulations, and their strange obsession with not-very-endangered species of reptile life.  The workers on Schwarzman’s building project apparently spend a while every morning putting on gloves to gently and delicately remove newts. (FT)

Tan Shu San will be succeeding Piyush Gupta as CEO of DBS Bank in Singapore, the first woman chief executive in the bank’s history. (Bloomberg)

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