Royal Bank, Canada’s biggest by assets, and National, the sixth-largest lender, boosted variable compensation by 11 percent in the year ended Oct. 31, the biggest increases among the country’s main banks. Canadian Imperial Bank of Commerce was the only one among the group to pare its bonus pool, trimming 2 percent from last year’s allocation.
“The Canadian bonuses are not remarkable, but relative to what their peers are getting in London and the U.S., it’s great,” Bill Vlaad, president of Toronto-based recruitment firm Vlaad & Co., said in a telephone interview. “We never saw the true upside of the glory years in the bull market, but we’ve reaped the rewards now by not having the abysmal downside in the tough years.”
Wall Street workers are facing reduced pay or job losses this year as revenue growth wanes and shareholders demand higher returns. JPMorgan Chase & Co. (JPM), the largest U.S. lender, and Citigroup Inc., the third-biggest, may shrink average bonuses for investment bankers and some other employees by as much as 2 percent and 10 percent, respectively, people with direct knowledge of the matter said last week. Bankers and traders in Europe can expect at least a 15 percent cut in pay as bonus pools may be reduced by half.
Canadian banks, ranked the world’s soundest for five straight years by the Geneva-based World Economic Forum, collectively set aside C$10.3 billion ($10.4 billion) for bonuses this year. The country’s lenders posted record profit for the year, with growth partly lifted by trading and gains from investment banking.
The pools reflect the amount reserved, not paid out, and don’t include base salaries and other compensation. Bonuses are typically awarded this month. Canadian banks set aside C$9.5 billion for bonuses last year, about 7.8 percent above 2010 levels, according to financial statements.
Royal Bank’s variable compensation rose to C$3.65 billion from C$3.3 billion a year ago. That reversed two years of declines after 2009, when payouts were C$3.5 billion. Toronto- Dominion Bank (TD), the second-largest lender, raised incentive compensation 7.8 percent to C$1.56 billion.
“RBC delivered record earnings and achieved all of our financial objectives for the year,” said Rina Cortese, a spokeswoman for the Toronto-based bank. “Our variable compensation reflects our employees’ contribution to this success.”
National had the second-highest jump, earmarking C$690 million for variable compensation compared with C$624 million a year earlier at the Montreal-based bank.
“It’s going to be a reasonable year” for bonuses, Jean Dagenais, a senior vice president at National, said in a telephone interview. “What we have seen so far is good results for the industry in Canada, so bonuses should be good everywhere.”
Bank of Nova Scotia, the third-largest lender, raised performance-based compensation by 9.4 percent to C$1.48 billion, the third-highest percentage increase of the group. Bank of Montreal, the fourth-biggest bank, increased performance-based compensation by 5.2 percent to C$1.64 billion.
“I’d say it was a good year,” Bank of Montreal Chief Executive Officer William Downe, 60, said in an interview. “Our shareholders did extraordinarily well this year and I think the compensation is good, reflecting good operating business performance.”
CIBC, the fifth-biggest bank, trimmed performance-based compensation by 2 percent to C$1.24 billion.
“If you look at the performance of the banking industry up until the end of the third quarter, you can see slower equity markets, less volume in the equity markets on the trading side, less volume on the IPO side and new issue side, slower M&A activity,” Richard Nesbitt, 57, who oversees CIBC’s investment- banking business, said in an interview. “On the wholesale side of the bank you’ve seen, up to the end of the third quarter, a slower level of activity.”
Canadian stock sales, including convertible debentures, have fallen 12 percent to $27.3 billion this year, according to data compiled by Bloomberg.
Canadian companies were involved in $200 billion in announced takeovers this year, up 14 percent from a year earlier. Two of the largest deals -- Cnooc Ltd. (883)’s $15.1 billion takeover of Calgary-based Nexen Inc. (NXY) and Petroliam Nasional Bhd’s C$5.2 billion bid for Progress Energy Resources Corp. (PRQ) of Calgary -- won approval from the Canadian government on Dec. 7. They represent as much as an estimated $150 million of bank fees.
Scotiabank led Canada’s six-biggest banks in Toronto trading today, climbing 0.7 percent to close at C$55.94. CIBC rose 0.5 percent, followed by Bank of Montreal (BMO) at 0.1 percent. Royal Bank was almost unchanged, while Toronto-Dominion fell 0.1 percent and National slid 0.3 percent.
In Canada, fixed-income traders and bankers who arrange bond sales will fare better than investment bankers working on takeover deals or arranging stock sales, and equity traders, Vlaad said.
“The fixed-income side of the business is going to have a very cheery Christmas,” Vlaad, 42, said. Sales and trading employees “aren’t going to be very happy with this year.”
Still, Canadian bankers are faring better than their global peers. The bonus pool for bankers in London’s financial district, known as the City, may fall by one-third to 4.4 billion pounds ($7 billion) in 2012 from a year earlier, the Centre for Economics & Business Research Ltd. said last month.
In the U.S., almost 20 percent of bank employees won’t get year-end bonuses, according to Options Group, an executive- search company that advises banks on pay.
U.S. firms are struggling to earn the returns shareholders demand amid higher capital requirements, a proprietary trading ban and lower deal and trading volumes. Wall Street employees may see payouts of 10 percent less than last year or increases of as much as 20 percent, depending on the job, compensation consultant Johnson Associates Inc. said in a Nov. 5 report.
JPMorgan’s bonus pool for its corporate and investment bank may shrink as much as 2 percent this year, three executives with direct knowledge of the process said. Citigroup plans to reduce bonuses by as much as 10 percent, excluding top performers, at the trading and investment-banking division, while trimming 150 more jobs, people with direct knowledge of the decisions said last month.
Goldman Sachs Group Inc. (GS) and the investment-bank divisions of Morgan Stanley, JPMorgan, UBS AG (UBSN), Credit Suisse Group AG and Deutsche Bank AG set aside $37.9 billion for pay in the first nine months, down 7 percent from a year earlier, according to data compiled by Bloomberg Industries. The compensation figures include money allocated for paying salaries and bonuses as well as costs from deferred bonuses in previous years coming due.
“Years of conservative financial measures in Canada are paying off,” Vlaad said. “We didn’t have the crazy upsides in the early 2000s, but we also are able to save our jobs and keep manageable bonuses year over year.”
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org