Return Offer Rates During a Reccession
The economy clearly isn't in the best of shape although the stock market seems to show that we're holding up pretty well. We already have 30-year inflation highs, the Russia-Ukraine war, and the fed wants to raise rates 5-7 times this year. I personally think this is going to slow growth in the economy and companies won't hire as much as they did during the pandemic. Wages have already shot up almost 15% and I don't think firms are going to overhire moving into a possible recession. This worries me because I think return offer rates are going to be a lot lower than in previous years at firms.
Is this true from what you have seen and from people that have had experiences going through the GFC or other downturns in the economy, what would you do to hedge if you were going to be a college graduate in the next year or interning at a firm this summer? This is really a question pertaining to markets but I'm posting on the IB forum because there's more traction.
Bump
You're correct. Return rates will absolutely be lower, especially if dealmaking continues to continue along at its stalled pace. That being said, banks definitely overhired for the intern class and there were definitely the fair share of those who got offers as a result of more leniency. End of day, the intern>FT program is the firm's largest feeder for staffing up it's most populous ranks so while offer rates may not be as generous as the last few years, if you perform then you shouldn't worry too much.
Be smart though, if you feel like things are clicking at your summer firm, make sure you are vigilant and put out feelers and connections at other firms so that you are well-positioned if and when FT recruiting becomes necessary. Good luck and focus on performing, not the potential outcomes.
Thanks for sharing your insights on this! Was wondering if you have any insights on whether this would also apply to the Corporate / Commercial Banking division of BBs? My line of thought was that interest rates going up would be a positive for Corp / Commercial Banking since it's likely that the net interest income (profitability) would increase (which has been indicated in my BB's 2022 forecast).
Curious to hear whether current deal and market trends are primarily affecting just IB / IB Return offers or other FO divisions as well.
Thanks!
No opinion on return offer rates for corporate or commercial banking, but I don't necessarily agree with your logic with rising interest rates.
Yes, for the bank rising rates is good and net interest income will go up. But for corporations who are borrowing, which is how you as a commercial or corporate banking analyst have a job, rising rates will absolutely discourage them from borrowing and therefore deal flow in your role will go down. So it's good for the bank's profitability but bad for your deal flow. And if the bank can make more money off a smaller quantity of deals there is no reason why they would need to keep you around if it is not justified by deal flow.
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