Who's Heading into Finance, 2012?

Over 85 Consortium first-year MBAs this year indicated an interest in finance or financial services. That is within the range of what CFN has observed over the past four years--typically a range from 80-90, about a quarter of the total number of Consortium first-year MBA students in 2012.

In the aftermath of the financial crisis and amidst the occasional turbulence since then, many would swear the numbers of those expressing interest in finance would have declined over the years. MBA students, we are finding out, continue to have varying levels of interest in financial services. But most of them are less eager to rush to Wall Street to become associates in mergers & acquisitions at a big bank. The opportunities they dreamed of while applying are not always evident when recruiting season starts. And some, after they learn the process and procedures to secure Wall Street jobs, are reluctant to play the hard ball it sometimes takes to get there:  lotteries, informational interviews, technical interviews, and rounds and rounds of sweltering sessions with senior bankers. 

That's not to say Consortium MBAs aren't adequately represented on Wall Street. Year after year, many do find spots within the investment-banking corridors of Goldman Sachs, Merrill Lynch, Barclays, and JPMorgan. They thrive there, too.

Among the 85 or so, interests this year, as in recent years, vary from private equity to community banking, real estate (yes, even after that debacle in recent years), corporate banking, financial consulting, private banking, asset management and energy finance. MBA students in finance in 2012 know they must evaluate opportunities carefully and always make sure they have plenty of options. The recruiting game changes too often, too quickly and too vigorously. Not even the best, most experienced MBA students can become too confident or comfortable.

In this year's first-year class, it's no surprise that 14 from NYU-Stern will explore finance. But NYU is not the finance leader this year, as it tends to be among Consortium classes. At Cornell, 16 have expressed an interest in finance, eight at Rochester, and five each at Yale, Virginia, and Emory. (At least two from each of the 17 Consortium schools said they intended to study, explore or pursue finance.)

These numbers will likely change, just as students' interests and ambitions change. Opportunities in 2013 and how they present themselves this fall will either boost these numbers or cause them to dwindle. Seemingly remote factors as Europe in crisis and a presidential election, believe it or not, can have a direct impact on how many MBA associates banks, insurance companies and industrial companies will hire for the summer, 2013. How students survive finance, accounting and capital markets courses will have impact, too.  The 85 could blossom to 100 or dwindle to 60 by graduation, 2014.

The same numbers above often tend to be under-stated, as some students have many interests and may not yet be comfortable selecting one concentration before school starts.  These are the large numbers of MBA students interested, for example, in both finance and marketing, finance and economics, finance and corporate strategy, finance and international business.

Stay tuned, as students discover what they really want to be and do and as the finance industry evolves and rumbles along.

Tracy Williams

See also:

CFN:  The Class of 2012 Heads Out

CFN:  Composing the Class of 2014

CFN:  First-year MBAs, Internships, Class of 2013

CFN:  Finance Hiring in 2010

CFN:  Composing the Class of 2013

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Big Banks: The Dreadful Downgrades

Moody's this week downgraded 15 banks, including top names such as Morgan Stanley, Citi, Bank of America, Goldman Sachs and JPMorgan Chase. This was not unexpected. Morgan Stanley's rating (Baa1) is now barely a notch above "high yield" status (or whatever the nomenclature today is for non-investment grade, "junk" or "non-prime" issuers).

Banks, analysts, and equity markets have tried--even until now--to determine and quantify the impact of the downgrade on each bank's profitability, ROEs, deployment of capital, liquidity, and access of funding, although banks all over are arguing they are stronger, better capitalized, more averse to risks and subject more to oversight and regulation than they were five years ago.

Ratings, for example, have impact on trading activity, as much as access to funding and the interest rate they pay on outstanding debt. When ratings decline, banks must pledge more in collateral for derivatives and trading-related activities (swaps of all kinds and forms, currency transactions, deposits at exchanges and clearinghouses, etc.).

That's collateral they pledge (normally in the form of low-yielding government securities) to support existing trading activity that could be capital deployed for more profitable purposes (corporate or small-business lending, international expansion, higher-yielding investments, etc.). Among the five large banks, estimates range from $1-3 billion in the amount of incremental collateral the ratings decline will force a bank to pledge for existing trades.

At each bank, that's $1-3 billion in capital that will be deployed for pledged securities earning less than 2% and capital not supporting incremental business in the form of more loans to support middle-market and small businesses, more investments in corporate projects, and more commitments for corporate- or municipal-bond underwritings.  And this doesn't include the impact of permitted leverage, where $1 million in extra capital can result in, say, over $5 million in actual business activity (loans, investments, etc.) because of the bank's ability to use debt and capital to fund activity.

Hence, banks squeal and squirm, when they hear about the threat of a ratings decline or experience the actual confirmation of one.

The ratings agencies rationalize banks are more interconnected to all the vagaries and turmoil in markets all over the world (including Europe). Others say these are downgrades that should have occurred long ago, even if the banks have stronger balance sheets and substantially more in capital today than in 2007.  When Greece, Spain and Italy cough, U.S. banks can get a cold, too--because of complicated lending, funding, and trading arrangements with institutions in every corner of the globe.

The banks have known since the beginning of the year downgrades were pending. Nonetheless, it  adds to a long list of headaches, as somehow they try to grow profits, remain stable, endure tricky economic times, and get ready for the flood of new Dodd-Frank and Basel III regulation. While regulators and many market watchers want banks to simplify their business models (engaging in old-time deposit-taking and community-based lending), running and managing a bank--particularly a giant, money-center institution--becomes mind-numbing complex every year.

Tracy Williams

Click also:

CFN:  Risk management at major banks
CFN:  Banks and regulation
CFN:  Basel III and Capital
CFN:  The Volcker Rules, Part II
CFN:  The Volcker Rules, Part I

Commencement, 2012: "Avoid Monday Decisions"

UVA Darden's Dean Bruner: "Moral Courage is an all-the-time thing."

Before they ventured into the land of consulting, banking, finance, and product management, MBA graduates sat through commencement--one last chance to gather noisily with classmates and then ponder what lies ahead.

They sat through an on-stage commotion of deans and queues of speakers--some from from the highest rungs of business, some students like themselves. What parting words did they hear?  What taps on the back did they receive, as they set off beyond the campus cocoon?

In 2012 during the MBA graduation season, some themes are prevalent everywhere. Most graduating classes endure orations describing frail economic times and the responsibility they have to clean up the messes in the financial system or to assist others who face hardships.

MBA graduates are often admonished to seek achievement beyond the corporate bottom line: Don't just rush out of here, they are told, to join a 10-year race to accumulate titles, prestige and net worth. Contribute to the community, speakers advise--including speakers who have accumulated titles, prestige and net worth in bundles. Appreciate the support of family, and be mindful of others, as you make the arduous journey to senior management.  Take a breather along the way, too.


Some graduates are offered a dare: Dare to be different. Look beyond Wall Street. Start a company. Work in manufacturing. Spend time on the operations floor. Take an assignment abroad. Dabble in non-profit activity. All graduates are reminded to keep their addresses up to date and make yearly contributions to the b-school fund.

Consortium business schools, just like the rest, welcomed speakers to tell them something they may recall years later or share one last parting bit of advice, wisdom, or funny, leg-shaking one-liner.

At Consortium school Berkeley-Haas, the CEO of Adobe, Shantanu Narayen spoke to the MBA graduates.  Students, especially those with interests in finance and accounting, had been buried in finance models, spreadsheets, balance sheets and cash-flow statements the past two years. He knew that. But at the podium, he spoke about how the answers are not always in the spreadsheets, the numbers, or the financial ratios--no matter how useful the tools are.  He reminded them to "trust their gut," not the numbers, when they confront tough business, personal, and career-related decisions.

Steve Roth, a Tuck alumnus and now the chairman of  Vornado Realty Trust, spoke to Dartmouth's MBA graduates.  He skipped some conventional commencement platitudes and provided a laundry list of astute, wise-beyond-years business advice. At the Tuck Graduation, he told the graduates to do the following:  (a) Avoid making major decisions on Mondays, (b) be mathematical in analyzing businesses, and (c) access the bond market and interest rates more than equity markets in assessing the economy.

"My career was marked by a few really good decisions," Roth said. "That's all it takes, three or four
good calls in a lifetime."  Many graduates hoped the first good call might have been their decision to return to school for the MBA.

Yale's new dean of its School of Management, Edward Snyder, spoke to the Class of '12. Few careers, he reminded them, will follow "straight lines."  Snyder is in his first year after leaving the business school, Booth, at the University of Chicago.


Yale MBA grad Dan Magliocco received the honor to speak to his classmates. "We've been taught that transparency is better than secrecy, and alliances are better than enemies," he said "It forms the backbone for a smarter way to compete. It's our greatest advantage."


Virginia-Darden's MBA ceremony was marred by rain. Its dean, Robert Bruner, avoided a lengthy speech as graduates dodged the threat of pelting rain. He posted his speech on "Moral Courage" in his own blog. "Moral courage is not a sometime thing," he wrote. "It's an all-the-time thing. You acquire moral courage by doing it. Moral courage is like physical conditioning. You must work at maintaining it.

"I wish you moral courage to get after the problems that really matter, whether they be in your companies, your communities or your nations," he told the Class of '12. "Whether you succeed or fail, make us proud of your efforts."

Robert Zlotnick, the CEO of StarTex Power, spoke to the MBA grads at Texas-McCombs. Zlotnick told them they should plan life with the same vigor they do in a business setting (in a deal, a project, a branch expansion, an analysis, or presentation to board members).  He urged graduates to have a strategic life plan that encompassed family, life, career, community service and health. "In a sense, I planned how I wanted my obituary to ready," he said.  "You should treat your life as an entrepreneurial venture."

At Cornell Johnson,  Dean L. Joseph Johnson told the assembled group of MBA graduates, "Go out into this messy world and manage that privilege with integrity and purpose."

From b-school campus at Berkeley to Tuck and from Michigan to Texas, what did MBA grads actually hear and absorb, as they jostled in their seats, in the rain in some places, in searing heat in others? Wonder confidently into the messy world, dare to be different, expect non-linear career trails, trust your gut, maintain moral strength and courage, have a plan for life, write the check annually, and, yes, please don't make big decisions on a Monday after a long weekend. 

Tracy Williams