Canadian investment bankers, some of whom had pay raises of as much as 25 percent last year, will see little change in their compensation in 2010 amid an equity markets slump, according to a survey by Vlaad and Co.
Employers in Canada are being cautious on compensation as a debt crisis in Europe lowers stock prices, curbs initial public offerings and threatens to derail a global economic recovery. At least 26 IPOs worldwide have been shelved in the last five weeks, including a C$120 million ($114 million) sale by the owner of Toronto-based Porter Airlines.
“The reason for the muted view of 2010 is the lack of market depth,” Vlaad said in a June 4 interview. “While resources are hot, everything else is quiet and you need more than one area of the market to be hot to give stability.”
Vlaad polled 600 investment bankers, research associates and analysts by phone over three months to measure pay at Canadian banks, foreign lenders and non-bank owned brokerages. The survey included professionals from Toronto, Vancouver, Calgary, Montreal, Winnipeg and Halifax.
Canada’s six-biggest banks set aside C$4.31 billion for bonuses in the first half of the year, according to company filings, up 16 percent from C$3.71 billion for the year-earlier period. The total reflects the amount reserved, not paid out, and doesn’t include base salaries and other compensation.
Financial firms boosted compensation, including base salaries, on average by 10 percent last year, compared with pay cuts of 15 percent to 25 percent in 2008, Vlaad said.
Among the group surveyed, senior-level investment bankers fared the best in 2009, with compensation up 5 percent to 25 percent from the year earlier. Managing directors had average raises of about 5 percent, Vlaad said, in part because many were put into long-term compensation plans.
Among investment bankers, RBC Capital Markets’ New York- based co-head Mark Standish was awarded C$14 million for 2009, his first year in the role, making him the highest paid Royal Bank employee. His Toronto-based co-head, Doug McGregor, was paid C$13 million in his first year.
Canadian banks including Royal Bank of Canada, Canadian Imperial Bank of Commerce, and Bank of Nova Scotia revamped their compensation policies last year to reduce risk as global leaders scrutinized bankers’ pay. The changes increased the amount of deferred compensation as well as “claw-back” policies in the event of fraud or misconduct.
As a result, Canadian banks paid less compensation in cash and more in long-term incentive programs, according to Vlaad. Base salaries rose at foreign banks, while independents such as Canaccord Financial Inc. and Cormark Securities Inc. paid bonuses in cash.
“The independents didn’t lose as many people as we thought, because although they’re paying lower levels they paid it in a form which is liquid,” Vlaad said.
In research, associates averaged increases of 15 percent, as many failed to get promotions to higher-paying analyst positions, Vlaad said. Junior analysts saw pay packages either stay unchanged or drop as much as 5 percent, he said.
“They were down because it was a tough year,” Vlaad said. “Usually these analysts are new to the role; they’re trying to build their name up and had to take it on the chin.”
Pay for senior analysts ranged between little changed and up 5 percent, with increases tied to sectors such as mining and energy, Vlaad said.