Canuck bank bonuses surge

Canadian bank bonuses surge as Wall Street cuts

Total to be given out by Canadian banks is $10.3 billion with RBC leading the way

Royal Bank of Canada and National Bank of Canada led a 7.5 per cent surge in bonus awards among the country’s lenders this year, bucking a global trend of pay cuts on Wall Street and in London.

Royal Bank, Canada’s biggest by assets, and National boosted variable compensation by 4.3 per cent and 11 per cent respectively in the year ended Oct. 31. Canadian Imperial Bank of Commerce was the only one among the group to pare its bonus pool, trimming 2 per cent from last year’s allocation.

“The Canadian bonuses are not remarkable, but relative to what their peers are getting in London and the U.S., it’s great,” said Bill Vlaad, president of Toronto-based recruitment firm Vlaad & Co.

“We never saw the true upside of the glory years in the bull market, but we’ve reaped the rewards now by not having the abysmal downside in the tough years.”

Wall Street workers are facing reduced pay or job losses this year as revenue growth wanes and shareholders demand higher returns. Bankers and traders in Europe can expect at least a 15 per cent cut in pay as bonus pools may be reduced by half.

Canadian banks, ranked the world’s soundest for five straight years by the Genevabased World Economic Forum, collectively set aside $10.3 billion for bonuses this year. The country’s lenders posted record profit for the year, with growth partly lifted by trading and gains from investment banking.

The pools reflect the amount reserved, not paid out, and don’t include base salaries and other compensation. Bonuses are typically awarded this month. Canadian banks set aside $9.5 billion for bonuses last year, about 7.8 per cent above 2010 levels, according to financial statements.

Royal Bank’s variable compensation rose to $3.65 billion from $3.5 billion, reversing two years of declines. TorontoDominion Bank, the secondlargest lender, raised incentive compensation 7.8 per cent to $1.56 billion.

“RBC delivered record earnings and achieved all of our financial objectives for the year,” said Rina Cortese, a spokeswoman for the Toronto-based bank. “Our variable compensation reflects our employees’ contribution to this success.”

National had the secondhighest jump, earmarking $690 million for variable com- pensation compared with $624 million a year earlier at the Montreal-based bank.

“What we have seen so far is good results for the industry in Canada, so bonuses should be good everywhere,” said Jean Dagenais, a senior vice-president at National. Bank of Nova Scotia raised performancebased compensation by 9.4 per cent to $1.48 billion, the thirdhighest percentage increase of the group. Bank of Montreal increased performance-based compensation by 5.2 per cent to $1.64 billion.

“I’d say it was a good year,” Bank of Montreal chief executive William Downe said in an interview. “Our shareholders did extraordinarily well this year and I think the compensation is good, reflecting good operating business performance.”

CIBC trimmed performance-based compensation by two per cent to $1.24 billion.

In Canada, fixed-income traders and bankers who arrange bond sales will fare better than investment bankers working on takeover deals or arranging stock sales, and equity traders, Vlaad said.

“The fixed-income side of the business is going to have a very cheery Christmas,” he said. Sales and trading employees “aren’t going to be very happy with this year.”

Still, Canadian bankers are faring better than their global peers. The bonus pool for bankers in London’s financial district, known as the City, may fall by one-third to $7 billion in 2012 from a year earlier, the Centre for Economics & Business Research Ltd. said last month.

In the U.S., almost 20 per cent of bank employees won’t get yearend bonuses, according to Options Group, an executive- search company that advises banks on pay.

“Years of conservative financial measures in Canada are paying off,” Vlaad said. “We didn’t have the crazy upsides in the early 2000s, but we also are able to save our jobs and keep manageable bonuses year over year.”