Bank bonuses increase at slower pace

PERFORMANCE

takeovers involving a Canadian company rose 13 per cent to US$314.8 billion for fiscal 2016, the highest amount in nine years, while domestic equity financing increased 17 per cent to US$46.9 billion, the most since 2009, according to data compiled by Bloomberg. Bond trading surged across the banks this year, countering a slowdown in stocks trading.

The country’s six biggest banks collectively reported a record $4.66 billion in underwriting and advisory fees, up 6.5 per cent from fiscal 2015, according to disclosures.

Royal Bank, Canada’s largest lender by assets, set aside $4.4 billion for variable compensation, or 2.8 per cent less than a year ago. Bonuses at the lender rose 3.3 per cent in 2015.

“The variable compensation decline is indicative of the fact that the pools are slightly down,” Royal Bank chief administrative officer Janice Fukakusa said in an interview. “If you look at areas like in capital markets, while we had solid performance year over year the earnings were actually flat to down.”

Royal Bank also adopted accounting methods for deferred compensation to align itself with industry standards, which affected bonuses. The firm paid out 34.9 per cent of its capital markets revenue to salaries, benefits and variable compensation, down from 37.2 per cent last year, Fukakusa said in a Nov. 30 earnings call.

“We are focused on improving productivity relative to compensation,” Fukakusa said. “The impact of what’s happening on compensation isn’t probably singularly RBC, it’s part of the industry.”

Toronto-Dominion Bank, the second-largest lender, set aside $2.17 billion, a 5.5 per cent increase. That compares with a 6.7 per cent increase in 2015.

“That is all subject to how the bank performs from year to year,” CFO Riaz Ahmed said. “If you look at our earnings performance, you’d see that it was very good this year.”

Bank of Nova Scotia, the third-largest lender, said performance-based compensation rose seven per cent to $1.54 billion from 2015, reversing last year’s 2.4 per cent cut. It’s the biggest increase in at least three years.

“Scotiabank’s incentive compensation programs are based on the premise of ‘pay for performance’,” Rick Roth, a company spokesman, said in an emailed statement. “Our business performance in 2016 was generally stronger relative to the various financial and non-financial targets upon which our incentive pools are based.”