Based on personal experience at big 4: They do mean it in these firms when they say they hire with a view to retention, but the situations which might make them not want to are usually personal attributes like laziness, difficult personality, not a team player etc.

Being bad at the work does not usually disqualify you. Trainees are there to learn and making mistakes is part of the process. However, I do recall one case where the trainee was so inept and submitted research which was blatantly wrong that s/he was not retained.