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Canadian Bank-Bonus Increases Slow as Trading, Mergers Drop

Canadian Bank-Bonus Increases Slow as Trading, Mergers Drop
The Royal Bank of Canada, the biggest bank, set aside C$3.38 billion for variable compensation this year, 5 percent less than in 2009. Photographer: Norm Betts/Bloomberg

Bonuses at Canada’s six-biggest banks were little changed this year after a 16 percent gain in 2009 as revenue from trading, equity sales and mergers declined.

The country’s banks, ranked the world’s soundest for three straight years by the World Economic Forum, set aside C$8.9 billion ($8.9 billion) in incentive compensation, according to earnings reports this month. That’s a gain of 1.1 percent from the previous year’s combined total of C$8.8 billion.

“Last year, at a lot of places, people hit it out of the park,” said Jim Beqaj, founder of Toronto-based consulting and recruitment firm Beqaj International Inc. This year “you’re still looking at some pretty healthy numbers.”

Capital markets profits fell at five of the six banks this fiscal year, as trading revenue slid from record highs in 2009 and stock sales and mergers slowed. Canadian equity financings are down about a third to $26.3 billion this year, according to data compiled by Bloomberg. Completed takeovers involving Canadian companies fell 20 percent from last year.

Canadian Imperial Bank of Commerce, the No. 5 bank, boosted bonus payouts 11 percent for the year to C$1.1 billion, the highest increase among the banks, after a 5.6 percent increase in 2009. The pools reflect the amount reserved, not paid out, and don’t include base salaries and other compensation. Bonuses are typically paid out this month for the fiscal year that ended Oct. 31.

Royal Bank Bonuses

Royal Bank of Canada, the biggest bank, set aside C$3.38 billion for variable compensation this year, the highest among the country’s lenders. That’s 5 percent less than in 2009, which was 32 percent higher than in 2008.

“Our compensation plans are appropriate, market based and reflect the results,” Barbara Stymiest, group head of strategy, treasury and corporate services, said in a Dec. 3 interview.

Bank of Montreal set aside C$1.46 billion for bonuses, up 8.7 percent from 2009. Bank of Nova Scotia’s performance-based compensation rose 5.1 percent to C$1.09 billion, adding to last year’s 13 percent rise.

The bonus payouts for Toronto-Dominion Bank and National Bank of Canada were little changed at C$1.34 billion and C$535 million.

U.S. firms such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. cut the funds they set aside to pay bankers and traders at the end of the third quarter, partly due to a business slowdown, according to company reports. Wall Street traders suffered the biggest pay cuts.

Traders Decline

Overall, Wall Street financial-services professionals are forecast to receive “slightly” bigger year-end incentive payouts compared with last year, according to a Nov. 4 report by New York-based compensation consultants Johnson Associates Inc. Payouts are projected to rise by about 5 percent.

Staff in asset management, high net worth and alternative investments may get the largest increases, up to 15 percent, while traders will be hardest hit, with incentives forecast to fall by 20 percent or more.

Vlaad and Co., a Toronto-based recruitment firm, forecast in June that Canadian investment bankers, some of whom had pay raises of as much as 25 percent last year, would see little change in their compensation in 2010.

Royal Bank’s earnings from its investment-banking unit, RBC Capital Markets, fell 6.8 percent this year to C$1.65 billion, while at Bank of Nova Scotia’s Scotia Capital unit profit fell 7 percent. Investment-banking profits were also down this year at Toronto-Dominion and Bank of Montreal.

“All of the Canadian banks have had pretty solid performances from their wholesale banking operations,” Royal Bank’s Stymiest said. “Over the last three, four years we did pretty much miss the crisis.”

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