OTTAWA: 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.”
The nation’s lenders pay bonuses based on performance, with a lion’s share going to capital-markets 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. The six lenders collectively had $5.12-billion in investment-banking fees, up 9.9 per cent from last year. Revenue from trading also soared to a new peak of $11.1-billion, a 1.8 per cent increase.
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 couple years, will get smaller bonuses than before, and that may continue next year. Analysts also face pressure on pay and a tougher year ahead as compliance costs and regulatory changes erode research revenues. Investment bankers fared better in 2017, though they shouldn’t anticipate huge increases.
“It has been a good year generally for investment bankers,” Vlaad said. “The last couple years has been challenging so it’s nice to get a reprieve, a little bit of a breather.”
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.
