By Kevin Orland
Canada’s biggest banks shelled out 18% more
for bonuses, unleashing the biggest increase in data going back
nine years as the firms battled for talent to take advantage of
a boom time in capital markets.
The country’s six largest lenders set aside C$19.1 billion
($14.9 billion) for performance-based compensation in their 2021
fiscal year. The increase trounced the 6.3% average for the past
decade. Except for Toronto-Dominion Bank, all of Canada’s other
six largest lenders increased bonuses by the most in data going
back to 2013.
Canada’s banks are riding high on almost two years of
torrid activity in capital markets, starting with an early-
pandemic increase in trading that gave way to a surge in equity
and debt financings and more recently a flood of mergers and
acquisitions. That boom, and expectations that it will continue
next year, have heightened the competition among banks to
attract and keep top talent.
“The mood is jubilant, and bankers’ expectations are high,”
Lara Zink, chief executive officer of Women in Capital Markets,
said in an interview. “The war for talent is very real, and top
performers absolutely need to get compensated as part of these
firms’ retention strategies.”
National Bank of Canada and Scotiabank had the biggest
increases to their bonus pools, while Toronto-Dominion had the
smallest increase to its reserves for performance-based pay.
Banks saw a 3.3% increase in annual revenue from their
capital-markets operations to a combined C$32.7 billion in the
year ended Oct. 31. Underwriting and advisory fees rose 22% to a
record C$6.78 billion, and trading revenue fell 12% to C$14.6
billion.
The Canadian banks pay bonuses based on performance, with
most of the variable compensation going to capital-markets
professionals such as investment bankers, analysts, salespeople
and traders. Variable compensation reflects the amount reserved,
not paid out, and doesn’t include base salaries. Bonuses are
typically distributed in December.
This year’s increase in performance-based pay may in part
be meant to help make up for last year’s smaller bump, which was
held back by concerns that the firms would look bad paying
bankers a windfall in a year when much of the country was
suffering economically or out of work.
‘Pay Well’
“At the start of the pandemic, the messaging internally
was, ‘Let’s get through this and hopefully it will be a decent
year, but the goal here is survival,’” Adam Dean, president of
Dean Executive Search, an advisory and search firm focused on
senior-level positions in Toronto, said in an interview. “This
year, however, deal activity has reached record levels, people
are working incredibly hard and there’s an expectation among
dealmakers that if ever there were a year to pay well — all the
way from their senior bankers down to the juniors — it’s this
year.”
Total net income for the banks rose to a combined C$57.7
billion, up 40% from the previous year and 24% from fiscal 2019,
before the pandemic struck. Total revenue climbed 3.3% from
fiscal 2020 and 6% from 2019.
Banks are afraid to be too restrained on pay not only out
of fear that their talent will jump to a rival firm, but also
because workers are leaving the industry at a record clip, said
Bill Vlaad, president of Toronto-based recruitment firm Vlaad &
Co. The industry’s attrition rate this year could reach into the
double digits, up from a normal rate in the low single digits,
he said.
Some bankers may leave the industry after being ground down
by the drudgery of long hours of working at home without the
perks of travel and expense accounts, while others feel like
they can make it known that they’re open to moving firms and
find a new job demanding their skill set almost immediately,
Vlaad said.
“For all intents and purposes, they’re right,” he said.
“The power is definitely in the pockets of the employees this
year.”
Here’s a bonus breakdown by bank:
Toronto-Dominion
Canada’s largest lender by assets boosted incentive
compensation 10% to C$3.07 billion. That’s its largest
percentage increase since 2017.
“Our approach to incentive compensation is consistent year
over year,” Chief Financial Officer Kelvin Tran said in an
interview. “It is competitive with the market and is
performance-based. And this year, you saw higher incentive
compensation because we had higher revenue and better
performance for the bank versus last year.”
Royal Bank
Royal Bank of Canada, which has the biggest capital-markets
division among Canada’s banks, boosted variable compensation 18%
to C$7.15 billion.
“We take a holistic approach to compensation including base
salary, a broad range of benefits and other rewards, and
performance-based incentive programs that align the interests of
employees with shareholders,” Royal Bank spokeswoman Gillian
McArdle said in an emailed statement. “Our employees are paid
competitively based on personal performance, including
demonstrating alignment with RBC’s purpose and values, the
performance of the business or function they work for, and on
RBC’s overall performance.”
Scotiabank
Bank of Nova Scotia’s performance-based compensation
increased 20% to C$2.09 billion.
“This year’s performance-based compensation reflects the
bank’s solid performance in 2021,” CFO Raj Viswanathan said in
an emailed statement. “Scotiabank employees’ ongoing resilience
and continued commitment to our customers, fellow employees,
shareholders and other stakeholders enabled solid results from
all of our operating segments, reflecting the benefits of a
well-diversified business model.”
Bank of Montreal
Bank of Montreal increased performance-based pay 20% to
C$3.15 billion.
“The increase in performance based total compensation this
year is aligned with our strong business performance,” CFO
Tayfun Tuzun said in an emailed statement.
CIBC
Canadian Imperial Bank of Commerce, Canada’s fifth-largest
lender by assets, increased performance-based compensation 20%
to C$2.33 billion.
CFO Hratch Panossian said the bank ties compensation to its
progress in creating value for clients, shareholders, the
community and the environment, and its performance both an
absolute basis and relative to the industry.
“This was a fantastic year for us, and we were very pleased
with what our teams delivered for all of those stakeholders,”
Panossian said in an interview, adding that the bank also had a
“very strong” financial performance. “So with all of that, this
was a good year, and I think our compensation reflects that
performance.”
National Bank
National Bank, which gets the largest proportion of its
earnings from the financial-markets business, increased variable
compensation 29% to C$1.28 billion.
“Last year, we probably were at the lower end of the pay
scale on a relative basis versus the other institutions,” CEO
Laurent Ferreira said in an interview. The company also posted a
stronger pretax, pre-provision earnings performance, and “we pay
for performance.”
Originally Posted by Bloomberg
