Investment banking pay remains a major pull for new entrants to the industry

A major reason why so many graduates are interested in making their career in investment banking is the remuneration. Although salaries have fallen in the present recession and bonuses are much harder to come by, investment banking pay remains attractive when compared with compensation packages in other business sectors.

A couple of years ago a graduate starting their first job at an American investment bank could expect to receive a starting salary of around $65,000 per year, and once bonuses were taken into account they could increase their annual earnings to as much as $150,000.

Although it is estimated that combined salaries and bonuses may have fell by an average of 60% over the last two years, these reductions have also affected many other sectors of the economy. Even taking this fall into account investment banking pay looks as though it is going to continue to maintain an edge over pay in comparable professions.

Some have argued that if you convert investment banking pay into an hourly rate and take into account the ninety or a hundred hours working weeks that junior level bankers are commonly expected to work, the salary no longer sounds so impressive. Calculations have even been made that show that if you divide these huge salaries with the amount of hours worked you may find that some manual jobs pay higher hourly rates.

Nevertheless, as a first wage for an impecunious graduate it would be hard to find a more attractive package in terms of pay levels and future prospects. Although this profession is certainly not suitable for those who value plenty of free time with their family or for leisure activities, the amount of extra hours required while learning the basics of the job declines with the banker’s increased experience. 

Although currently the downward trend in pay continues forecasts suggest that in the next two years wages and bonuses should start to increase again and reach their previous levels if not higher. Estimates available online include anticipated salaries for first year banking analysts in the United States rising to as high as $150,000 per year and an associate investment banker in their third year earning as much as $450,000.

If these salary levels are still insufficient to satisfy the ambitious young banker who wants to be able to support a certain high standard of living they can pin their hopes on becoming a department head earning a couple of million dollars a year, including bonuses.