THESE are tense times for the financial sector. In America, the credit crisis has led to JP Morgan buying stricken fellow investment bank Bear Stearns for a fraction of what it was once worth.

How the uncertainties in glo-bal capitalism will affect undergraduates considering a career in banking remains to be seen, but it is unlikely JP Morgan will have any trouble finding candidates for its British student internships – now running in the spring, winter and autumn as well as in their traditional summer spot.

An internship with a top investment bank is regarded by many as a passport to a lucrative and successful career, offering high salaries and breathtaking bonuses. It is estimated there are up to 50 applicants for each place on the most sought-after schemes.

For their part, the banks are just as keen to skim the cream of the undergraduate crop. The competition for the most talented students is fiercer than ever, despite the expansion of higher education.

Although there seem to be many more students, the number of really talented ones remains the same and the trend is to woo them at ever earlier stages in their academic careers.

Esther Oxenbury, JP Morgan’s head of graduate recruitment, said the focus now was on identifying talent early on. “We invest a huge amount in our internships,” she said.

“We run four programmes a year and the numbers taking part have increased. We take students as interns in the penultimate year of their degree course and we also have feeder schemes into the internships at even earlier stages of the degree. For example, first-years are invited on short taster courses that introduce them to different areas of the business and to the trading floor.”

Oxenbury said there was a 50%-65% conversion rate from intern to graduate-recruitment scheme – a nice talent pipeline. She said that everyone benefited from this early engagement: the students were given opportunities to see how investment banks worked, and whether the job was for them, and the bank could see how the students performed and whether they wanted to employ them.

This sign-them-up-quick approach is spreading beyond the investment banks. The high-street bank HSBC introduced internships for first-year students last year – and it is making job offers at the end of that first-year internship.

This year there are 60 HSBC internships for first and second-year students. Of the 17 first-year students who took part in HSBC internships last year, 10 are coming back for their second year and five have already accepted places on HSBC’s graduate-recruitment scheme when they finish their studies.

“You have to get in early,” said John Morewood, HSBC’s senior manager for graduate recruitment. He said one of the surprises of the first-year internships was that they had attracted so many applicants from top universities.

But aren’t there risks for both students and employers in such an early engagement? Are young people experienced enough to accept job offers in their first and second year at university?

Oxenbury said the career focus of many students ought not to be underestimated and pointed out the advantage penultimate-year students had when they entered their final year: with a job already in the bag, they could focus on their studies.

Morewood said that shifting the internship focus to first-years was not a decision taken lightly by HSBC. “We agonised about it,” he said. “But we are impressed by the quality of the interns.”

One professional-services company has developed a degree in accounting and finance with Lancaster University. Students on the Ernst & Young course do their internships and placements with the company and, though the students are not bound to join when they graduate and the firm is not bound to employ them, its management expects to recruit between 40 and 50 graduates a year through the programme.

Price Waterhouse Coopers, the accountant, has started a similar scheme at Newcastle University.

Ernst & Young’s head of graduate recruitment, Stephen Isherwood, said the motivation behind the Lancaster degree was to secure the best talent and create a mix of routes into its internship programmes, which cater for some 400 students a year. Again, engagement occurs early.

So with competition for the best so keen, what do employers compete on? Money? JP Morgan and other investment banks are coy about how much students earn during internships, but it is thought to be in line with graduate-recruitment salaries.

Isherwood said Ernst & Young paid about £300 a week and made a contribution towards intern accommodation. Morewood said HSBC paid interns the equivalent of £18,500 a year.

Employers play down the importance of hard cash to interns, despite the loans and debts they now shoulder for their education. Most say they compete on the quality of the intern experience. The British arm of the law firm Allen & Overy has just introduced 12 international summer internships for UK students at its offices in Amsterdam, New York, Dubai and Hong Kong. The overseas internships are open to the 75 penultimate-year students who have accepted a place on the firm’s summer internship (a further 25 to 45 students attend winter and spring internships).

“Students have had to make a short written application for the posts and then they have had video interviews with partners at the firm,” said Zoe Gordon, graduate-recruitment manager. “It has been great fun. Working in an international environment is important to this age group.”

This internship business can be pretty heady. But James Underhay, commercial director with the human-resources con-sultancy Chiumento, warns talented undergraduates not to lose their heads as companies vie for their attentions. He also wonders whether all the money and effort lavished on internships and graduates is justified when graduates are estimated to spend an average of just two-and-a-half years in their first job.

But JP Morgan’s Oxenbury said internships and early engagement were the best option. “Internships build loyalty,” she said. “We see the graduates we hire as future leaders and we provide thorough training. We expect them to stay for much longer than two years.”

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