RBC leads big bonus parade for Canadian banks

Canada’s banks have set aside $10.3 billion for bonuses, a 7.5 per cent increase over last year, bucking the global trend toward pay cuts and even job losses on Wall Street and in London.

From tellers to investment bankers, the individual payouts in Canada can range from a few hundred dollars to millions, according to industry experts.

Still, the days of the really big payouts followed by year-end spending binges may be moderating, some industry experts said.

Since the financial crisis of 2008, more bonus money is given in deferred shares and bank culture discourages flashy displays of wealth that might put off some clients, compensation and recruiting experts said.

“Porsches? That’s more of a Hollywood dramatization. I think Canadians are very aware our household debt is at record levels. I think most bankers go out and pay off their mortgages,” said Bill Vlaad, president of Toronto-based recruitment firm Vlaad & Co.

Two of Canada’s banks tied for the biggest increase in what’s called “variable compensation” for the year ended Oct. 31, according to their reports.

The largest bank by assets, Royal Bank of Canada, tied with sixth-largest lender National Bank of Canada, each boosting their bonus pools by 11 per cent.

Royal Bank spokesperson Rina Cortese said the increase reflects the bank’s strong performance this year.

The only bank that trimmed its bonus pool was Canadian Imperial Bank of Commerce, down 2 per cent from last year.

CIBC blamed a slower equity market, fewer initial public offerings and less merger and acquisition activity.

As a group, the country’s lenders posted record profit for the year, with growth partly lifted by trading and gains from investment banking.

The size of the bonus pool didn’t surprise Ken Hugessen, a principal in Hugessen Consulting, an executive compensation advisory firm in Toronto.

“They generally try to manage these pools to track the earnings and stock prices,” he explained. “They’ve had a respectable year. They’re a little bit concerned about how next year is going to look. So, it’s a gentle up.”

Bank earnings and bonuses don’t swing as wildly as they did in the pre-Recession era, Hugessen said, partly because the financial crisis of 2008 has led to tighter controls.

Still, most investment bankers receive up to 75 per cent of their compensation in the form of a bonus, he said, and $1 million payouts aren’t unusual in that group.

“The Canadian bonuses are not remarkable, but relative to what their peers are getting in London and the U.S., it’s great,” Vlaad said. “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.”

In comparison, Wall Street workers are facing reduced pay or job losses this year as revenue growth wanes and shareholders demand higher returns.

JPMorgan Chase & Co., the largest U.S. lender, may shrink average bonuses by 2 per cent, while Citigroup, ranked third largest, may cut the bonus pool by 10 per cent, according to people familiar with the situation.

Bankers and traders in Europe can expect at least a 15 per cent cut in pay as bonus pools may be reduced by half.

Among Canada’s banks, here’s how the bonus pools look for 2012:

 • Royal Bank’s variable compensation rose nearly 11 per cent to $3.65 billion, reversing two years of declines.

 • National Bank’s rose just under 11 per cent to $690 million.

 • Bank of Nova Scotia rose 9.4 per cent to $1.48 billion.

 • Toronto-Dominion Bank rose 7.8 per cent to $1.56 billion.

 • BMO rose 5.2 per cent to $1.64 billion.

 • CIBC fell 2 per cent to $1.24 billion.

Original Article
Source: the star
Author: Dana Flavelle