Canada’s biggest banks set aside $14.3B for bonuses

It’s a very good year to TORONTO be a Canadian banker.

The country’s six biggest lenders set aside $14.3 billion for variable compensation — up 11 per cent from 2016 — as a record year in trading and investment banking swelled bonus pools. That’s the biggest jump since 2014 and stands in contrast to last year, when a 3.4-per-cent increase was the lowest since 2010.

“The banks have done well,” said Bill Vlaad, president of Vlaad & Co., a Bay Street recruitment firm that monitors compensation trends. “But just because they had one good year doesn’t mean they’re going to give it all away.”

National Bank of Canada and Royal Bank of Canada had the biggest increase in performance-based pay from the year earlier, while Bank of Nova Scotia had the smallest, according to disclosures. Variable compensation reflects the amount reserved, not paid out, and doesn’t include base salaries or other compensation.

The lenders pay bonuses based on performance, with a lion’s share going to capitalmarkets employees including investment bankers, traders and analysts. Bonuses are typically distributed this month.

Canada’s banks set new benchmarks in their securities operations in the fiscal year ended Oct. 31, helping the group reach a record $25.2-billion revenue from capital markets. Bankers worked hard at strengthening their domestic and cross-border businesses in the last year, and it’s paying off, Vlaad said. Still, banks are being conservative in payouts this year to “keep the powder dry” for what they anticipate may be a challenging 2018, he said.

Traders will probably see downward pressure on compensation this year and that trend should extend into 2018, Vlaad said. Those in fixed income, who had “a really good run” in the last few years, will get smaller bonuses than before, and that may continue next year.

Royal Bank, which has the biggest capital-markets operations among Canadian lenders, set aside $5.2 billion for variable compensation, up 14 per cent from a year ago. Bonuses rose 1.1 per cent in 2016.

Toronto-Dominion Bank, the country’s largest, earmarked $2.45 billion for incentive compensation, up 13 per cent and more than double the percentage increase in 2016.

Scotiabank, the third-largest lender, said performancebased compensation rose four per cent to $1.6 billion. That compares with a seven-percent increase in 2016.

Canadian Imperial Bank of Commerce lifted its performance-based pay 10 per cent to $1.75 billion. The firm raised it 0.8 per cent in 2016.

Bank of Montreal lifted its bonus pool 4.7 per cent to $2.39 billion for 2017. Last year, the lender had the biggest jump among Canadian banks at 8.4 per cent.

National Bank reserved $915 million for variable compensation, a 17-per-cent increase. That reversed a 3.3-per-cent decline in 2016.

The banks have done well. But just because they had one good year doesn’t mean they’re going to give it all away.