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Canada’s Bankers Face the Bleakest Bonus Year in Almost a Decade

December 6, 2019  

By Doug Alexander

For Canadian bankers, 2019 shaped up to be the worst year for bonuses in close to a decade.

The country’s six largest lenders set aside C$15.6 billion ($11.8 billion) for performance-based compensation, with the 2.4% increase from a year earlier marking the smallest jump since 2010’s 1.1% bump, according to data compiled by Bloomberg. Canadian Imperial Bank of Commerce and National Bank of Canada allocated less for their bonus pools in fiscal 2019 than in the previous year.

“Bonuses themselves were some of the bleakest in almost a decade,” said Bill Vlaad, president of Vlaad & Co., a Toronto-based recruitment firm that monitors compensation trends. “Financial professionals should count their blessings that it wasn’t worse. It could very well have been a bloodbath and a much more aggressively negative environment.”

Banks saw little change in annual revenue from their capital-markets operations, bringing in a collective C$25.4 billion for the year ended Oct. 31. Underwriting and advisory fees dropped 5.7% to C$4.61 billion in a challenging year for the industry worldwide, though that decline was countered by a 7.5% increase in trading revenue to a record C$11.7 billion.

The Canadian banks pay bonuses based on performance, with most of the variable compensation going to capital-markets employees such as investment bankers, research analysts and those in sales and trading. Variable compensation reflects the amount reserved, not paid out, and doesn’t include base salaries. Bonuses are typically distributed in December.

Senior investment bankers will see a 10% decline in compensation from last year, hurt by fewer financings and a decline in mergers-and-acquisitions activity, according to Vlaad & Co. Junior investment bankers will see little change in their payouts following three years of increases, while those in sales, trading and research will see compensation fall 15% to 25%, and fixed-income employees will face a similar decline, the firm said.

Bankers serving Alberta’s energy firms have had a miserable year, while mining also has been tough for most firms. Those working with diversified industries will see little change or a slight drop from prior years, while bankers in real estate and infrastructure may see some gains, according to Vlaad & Co.

“We now see the marketplace is on an aggressive readjustment of compensation, and it’s going to continue this way for the next three to five years,” Bill Vlaad said in an interview.

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