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Canadian Banks Grow Amid Cutbacks in London-New York

Banks Grow Amid Cutbacks in London-New York
Pedestrians pass in front of RBC Royal Bank signage outside the company's office near Bay Street in Toronto, Ontario. Photographer: Brent Lewin/Bloomberg

Royal Bank of Canada is among lenders bucking job-cutting trends in the U.S. and Europe as acquisitions help swell head count at Canada’s biggest banks.

The nation’s eight publicly traded lenders added 8,512 full-time employees in the three months ended July 31, a 2.5 percent increase, regulatory filings show. Most came from the takeover by Toronto-based Royal Bank of RBC Dexia Investor Services, representing the bulk of the 6,938 staff added by Canada’s biggest lender in the fiscal third quarter.

Workforce increases at Canadian banks, ranked the world’s soundest for five consecutive years by the World Economic Forum, contrast with more than 62,000 jobs lost at U.S. rivals between September 2008 and the end of June. Canada’s lenders have expanded their ranks through more than 100 acquisitions in the wake of the financial crisis.

“They’ve been very disciplined from a cost standpoint, so if they’re hiring, obviously they have some confidence in their business,” said Bruce Campbell, who helps manage about C$100 million ($102 million) in assets at StoneCastle Investment Management Inc. in Kelowna, British Columbia, including Canadian bank shares.

Bank of Nova Scotia, the country’s third-largest lender, will add about 1,100 employees after it completes its C$3.13 billion takeover of the Canadian unit of ING Groep NV, announced last month.

Dexia Deal

Royal Bank Chief Financial Officer Janice Fukakusa said in an Aug. 30 interview that about 6,000 employees came from its C$1.1 billion takeover of 50 percent of RBC Dexia from partner Banque Internationale a Luxembourg SA. Royal Bank isn’t planning significant changes to its ranks across the company, she said.

Royal Bank and Toronto-Dominion Bank haven’t mentioned job reductions even as they say expense management is a focus.

“When you look at our costs from a workforce perspective, there are no major moves planned,” Fukakusa said. “It’s about improving the efficiencies of deploying the staff, not necessarily gaining efficiencies to take them out.”

Toronto-Dominion, Canada’s second-largest lender, added 778 jobs to its workforce in the third quarter, a 1 percent increase, with almost two-thirds of the additions coming from Canadian and U.S. operations.

Scotiabank, the third-largest lender, added 349 jobs, or 0.4 percent of its workforce, including 140 employees for international banking.

National Bank of Canada, the sixth-biggest bank, added 242 employees, a 1.4 percent increase to the ranks of the Montreal-based lender.

CIBC Hiring

Canadian Imperial Bank of Commerce, the fifth-largest lender, boosted headcount by 113 people, as it added three branches to its Canadian network in the period. The Toronto-based lender expects to hire more full-time employees as it opens 90 branches on Saturday and 50 on Sunday, according to David Williamson, CIBC’s head of consumer and business banking.

“The returns in those branches and where we’re going to add the hours would cause us to forecast that it will be helpful to revenue,” Williamson said on an Aug. 30 conference call.

Bank of Montreal, Laurentian Bank of Canada and Canadian Western Bank each added less than 50 employees in the quarter, according to financial statements.

“The banks’ businesses are expanding, nationally and internationally, and they’re going to need to bring on more bodies,” Bill Vlaad, president of Toronto-based recruitment firm Vlaad & Co., said in a telephone interview.

Lehman Bankruptcy

Canada’s Standard & Poor’s/TSX eight-member banks index rose 8.3 percent in the past 12 months and 3.2 percent in the past five years while the KBW Banks Index of 24 U.S. banks rose 35 percent and dropped 53 percent respectively over the same period. The Bloomberg Europe 500 Banks and Financial Services Index rose 17 percent in the past 12 months and fell 68 percent in the past five years.

Canada’s eight biggest banks reported an 11 percent increase in profit excluding items in the third quarter from the year-earlier period, Robert Sedran, a bank analyst with CIBC, said today in a note. He forecasts the banks will post adjusted profit growth of 6 percent in fiscal 2013.

U.S. banks lost more than 62,000 jobs after the bankruptcy of Lehman Brothers Holding Inc. in 2008, according to data from the U.S. Federal Deposit Insurance Corp.

The cuts come as banks try to comply with new capital requirements, known as Basel III, that start to take effect next year. The Basel Committee on Banking Supervision has agreed on rules requiring lenders to increase available capital to bolster the cushion against potential losses and better measure and control risk.

U.S. Banks

Among U.S. financial firms, Bank of America Corp., the second-largest U.S. lender, announced plans a year ago to cut more than 30,000 employees in the next few years. Citigroup Inc., the third-biggest U.S. bank, has also announced job cuts. Morgan Stanley CFO Ruth Porat said in a July 19 interview that the firm’s head count will fall by about 700 in the second half, bringing total 2012 staff reductions to 4,000.

In Britain, banks, insurers and other financial-services firms may eliminate about 3,000 jobs across greater London while companies in the New York region add 9,000, U.K.-based researcher Oxford Economics Ltd. said last month.

HSBC Holdings Plc, Europe’s biggest bank by market value, said in April it plans to eliminate 3,167 positions in its home U.K. market, mostly in senior and middle management, to rein in costs. Frankfurt-based Deutsche Bank AG, Germany’s largest lender, said in July it will cut 1,900 jobs, including 1,500 in its investment bank, which has operations in London and New York.

Canadian banks may end up trimming their workforce in the fourth quarter, if history is any indicator, Vlaad said.

“That’s what happens every year,” Vlaad said. “They always get rid of a few bodies, they trim the tree here and there in the fourth quarter, prepping for the end of the year.”

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