Why do banks pay a premium for students? An Asia-pacific view.

For quite a few years now I have been curious to know why banks in Singapore are so keen to recruit Singapore Management University (SMU) graduates. In fact, this phenomenon was even more amazing about 2 years ago when banks even went to the extent of employing them as Investment or Private Bankers shortly before their graduation (and mind you, they don't come "cheap"!). I started to wonder and asked myself, "Are the SMU students that good and able to add much value to these banks?".

The answer became apparent after my meeting with one of the top Financial Advisors recently. I then got to know that this hyped up demand was not without business sense. Firstly, most students from SMU come from affluent background and, in general, most do not have problem in paying for the steeper tuition fees. Secondly, these students are likely to have parents or relatives who belong to the high net-worth category and have wide business connections. Hence, it is a strategic move for banks to employ these SMU students so as to capitalise on their affluence and connections in bringing in more investments and business.

This phenomenon continued in 2009, even though Singapore is still feeling the effects of the sub-prime crisis that shook the financial world, as shown in the Ministry of Education's (MOE) Graduate Employment Survey. Graduates from SMU have continued to perform better compared to their peers from National University of Singapore (NUS) and Nanyang Technological University (NTU). This in extremely interesting as 52.7% of SMU graduates are employed in banking, finance, auditing and accounting sectors. Those are the very sectors that had been the hardest hit by the global financial downturn. One possible hypothesis is that, the financial sector view Asia as having plenty of potential and are aggressively expanding in the region. Thus, they are not scaling back on employment in the region.

In addition, SMU graduates have generally secured higher starting salary, as compared to NUS and NTU. SMU information systems management graduates are the highest paid among all graduates from the local universities- SGD$3,754 (+2.7% from 2008). There are also 74 SMU graduates (among 1374) that managed to secure starting pay of SGD$4,000 to SGD$12,000. Another interesting statistic is that eight in ten (80%) secured job offers within one month of graduation with more than half (58.9%) receiving multiple (2-7) job offers.

Footnote:
1 http://www.moe.edu.sg/education/post-secondary/files/ges-nus.pdf
2 http://www.moe.edu.sg/education/post-secondary/files/ges-smu.pdf
3 http://www.moe.edu.sg/education/post-secondary/files/ges-ntu.pdf
4 http://www.smu.edu.sg/news_room/press_releases/2010/20100407.asp