Asia Inc

“IT IS a real relief to be offered an internship with a big US investment bank. Deciding to take an MBA is a big investment and I have been counting on a summer internship to help to pay the fees,” says Elena Novokreshchenova, a first-year MBA student at London Business School.

Banks have been in the headlines for the wrong reasons this year. After the collapse in the market for sub-prime mortgages, banks such as Citi, UBS, Morgan Stanley and Bear Stearns have had to write off billions of dollars in what were once deemed high-margin, acceptable-risk securities. All this is bad news for banks and possibly for MBAs looking to join them on a big salary.

The banks have been taking on employees with an MBA in growing numbers in recent years. A TopMBA.com recruiter survey last summer showed a 23% rise in demand for MBAs in financial services, the fourth successive year of strong growth. The sector accounts for 40% of MBA placements at some schools. If the banks switch off demand, this would leave a big gap in MBA opportunities.

What impact has the credit crunch had on the short-term outlook for banks? Negative equity in American property has lead to record numbers of low-income families and individuals defaulting on their mortgages. The resultant losses incurred by banks with large sub-prime mortgage businesses have led to a breakdown in interbank lending and liquidity. This has resulted in a sharp cut in the finance available for not only mortgages, but also for private equity deals and corporate borrowing.

The difference between this financial crisis and previous ones is that the depth of the problem is unclear. Combined with the threat of a US recession, this has fed into equity markets, which have fallen, exacerbating the billions of dollars of losses at some banks.

Chris Higgins, of the career service at Wharton, says: “I started working at Wharton in April 2001, just in time to experience the dot.com and consulting crash. Demand for MBAs has been great in recent times, but it is cyclical and you never know what is around the corner.”

However, Diane Morgan, director of LBS career service, says: “ I see a pretty good outlook. All the banks are coming on campus and hiring similar numbers to last year.”

Claire Hudson of career services at Manchester Business School says: “Banking intern opportunities for this summer are as strong as ever.”