The Canadian flag flutters in the wind at the TD Centre in Toronto’s Financial District, on March 15, 2023.Fred Lum/the Globe and Mail
Banks at the top of the leaderboard this year in share price performance are handing out the largest bonus increases, rewarding employees for a year of higher profits and returns.
Performance-based compensation at Canada’s biggest banks jumped 12 per cent to $23.75-billion this year, up from a 9-per-cent increase in 2023. But the bonus-pool increases range widely between banks, from a 4-per-cent rise at Bank of Nova Scotia to a 19-per-cent hike at Canadian Imperial Bank of Commerce.
“This is one of the cloudiest years we have seen,” said Bill Vlaad, chief executive officer of executive recruitment firm Vlaad and Company. “Most of the time we have strong confidence that bonuses are going to be up or down fairly definitively. This year it is a little less certain. I think part of that is because different parts of the business have performed extremely differently.”
Even as incentive pay pools grow, many bankers may not receive higher payouts.
“This is a year where investment banks will pay $1 more – and only $1 more – to keep their teams intact,” said Adam Dean, founder and president of Dean Executive Search.
“Top senior people and stars will always be appropriately compensated,” Mr. Dean said. “However, from the discussions we’ve had with group heads and senior investment bankers around the street and across regions, I would say that this will be an incrementalist year in terms of how they pay their people to retain.”
Bonuses are usually based on performance, and most of that compensation is paid to capital markets employees, including traders, analysts and investment bankers, whose pay is typically more variable depending on performance and market conditions. There are also disparities among different capital markets teams.
“You’ve got areas like equity capital markets or the sales and trading desk on the equity side, which has laid a goose egg for the last year,” Mr. Vlaad said. “But you’ve got their brethren in the debt capital markets and the fixed income side who have done well.”
Canadian Imperial Bank of Commerce CM-T increased its bonus pool by 19 per cent to $2.99-billion, a jump from last year’s 2.2-per-cent increase and the largest percentage increase among the country’s top lenders. The increase in variable-based compensation was driven by growth across the bank as CIBC posted higher revenue, said the bank’s chief financial officer, Robert Sedran.
CIBC’s stock has surged 47 per cent since the start of 2024 as revenue jumped 13 per cent and profit rose to $7.2-billion from $5-billion in the 2023 fiscal year. While capital markets in 2024 saw only a slight uptick in net income, Mr. Sedran said the division performed well in a tough market as tax changes and market volatility put pressure on its global markets unit.
“When we look at the performance of our capital markets business, they had a good year with our core clients, deepening client relationships, expanding internationally and navigating through some pretty volatile markets,” Mr. Sedran said in an interview Thursday discussing fourth-quarter results.
Shares of Royal Bank of Canada RY-T and National Bank of Canada NA-T both climbed more than 30 per cent so far this year.
Royal Bank of Canada allocated $8.8-billion for variable compensation, a 16-per-cent jump year-over-year compared with a 6.7-per-cent increase in 2023. Capital markets profit rose 10 per cent from last year to $4.8-billion.
National Bank of Canada boosted variable compensation by 14 per cent to $1.5-billion. Last year, the lender increased bonuses by a slim 2 per cent.
Toronto-Dominion Bank TD-T share price tumbled more than 14 per cent so far this year, plagued by anti-money-laundering failings that prompted heavy penalties from U.S. regulators. On Thursday, the bank suspended its medium-term financial targets for 2025.
While the bank’s total net income fell to $8.8-billion in the 2024 fiscal year, compared with $10.6-billion last year, profit in its capital markets unit jumped 20 per cent year-over-year.
TD allocated $4.48-billion for incentive pay, a 10-per-cent increase compared with 2023. In 2023, it increased incentive pay by 23 per cent over the year before.
Bank of Montreal BMO-T posted $3.74-billion in performance-based pay, a 5-per-cent increase year-over-year, as capital markets profit declined.
Bank of Nova Scotia BNS-T set aside $2.17-billion in performance-based pay, a 4-per-cent increase year-over-year, as capital markets profit fell 5 per cent to $1.69-billion. In 2023, the bank also increased bonuses by 4 per cent.
“It is not like every bank had a similar year,” said Mark Stipe, Vlaad and Company’s president.
“Each bank made their money in different spots. RBC had a huge year in fixed income, TD last year had a big year in M&A. But if they don’t get [bonuses] right, you’re going to see large exoduses off of a couple of firms.”