Canada’s biggest banks set aside 3.9 per cent more for bonuses, a relatively small increase in a year when record revenue from trading and dealmaking helped firms weather the COVID-19 pandemic.
The country’s six largest lenders set aside $16.2 billion (US$12.6 billion) for performance-based compensation in the 2020 fiscal year. The increase improved upon the previous year’s 2.5 per cent gain — the smallest in nine years — though it fell short of the 6.3 per cent average for the past decade.
“This year is going to be very challenging when it comes to bonuses,” said Bill Vlaad, president of Vlaad & Co., a Toronto-based recruitment firm that monitors compensation trends. “The rest of Canada has had a really challenging year, so the banks can’t then go out and pay investment bankers crazy bonuses. They just can’t do that optically.”
Toronto-Dominion Bank and Royal Bank of Canada, the two largest lenders, had the biggest increases to their bonus pools, while Bank of Nova Scotia — which sold businesses and operations through the year — was the only company to shrink its reserves for performance-based pay.
Banks saw a 22 per cent surge in annual revenue from their capital-markets operations, to about $31.1 billion collectively for the year ended Oct. 31. Underwriting and advisory fees rose 23 per cent to a new peak of $5.66 billion, and trading revenue soared 41 per cent to a record $16.5 billion.
Overall, the Big Six banks had $41.2 billion in annual net income, down 12 per cent from the previous year’s record.
Canada’s bonus reserves may hint what’s ahead for U.S. and European banks. Wall Street traders are poised for handsome bonuses in their best year in a decade, though their investment-banking peers may be less fortunate. Traders at JPMorgan Chase & Co. may see a 20 per cent bonus boost.
In Europe, Deutsche Bank AG signaled in October that it’s planning bonus increases for top-performing investment bankers. UBS Group AG plans to raise fixed salaries for some employees by as much as 20 per cent, allowing the company to lower its bonus pool.
The Canadian banks pay bonuses based on performance, with most of the variable compensation going to capital-markets employees such as investment bankers, research analysts and those in sales and trading. Variable compensation reflects the amount reserved, not paid out, and doesn’t include base salaries. Bonuses are typically distributed in December.
“There aren’t a lot of bonuses to go out when you divide it by the number of people that are still on at the firms,” Vlaad said. “The banks have an unnatural, invisible hand that is coming in and has restricted them from having any material layoffs, so they haven’t been able to be as efficient as they’d like to be because of their promises to the Canadian public.”
The six banks’ workforce totals about 378,400, down 3 per cent from last year, with Scotiabank shrinking the most after selling operations in the Caribbean and winding down other businesses. Bank of Montreal’s and Canadian Imperial Bank of Commerce’s ranks also shrunk after the two companies announced cost-reduction measures before the pandemic. Job cuts across the industry could have been higher if not for COVID-19, with chief executive officers vowing that employees wouldn’t lose their jobs due to the pandemic.
Here’s a bonus breakdown by bank:
Toronto-Dominion
Canada’s largest lender by assets set aside $2.89 billion for incentive compensation, with its 6.2 per cent increase the highest since 2017. The pool reflects employees’ ability to keep the bank serving customers and running efficiently throughout the pandemic, Chief Financial Officer Riaz Ahmed said in an interview.“Bonuses are linked to performance, and overall some of our businesses have done very well,” he said. “We’ve also made sure we’ve continued to look after all of our people through the pandemic.”
Royal Bank
Royal Bank, which has the biggest capital-markets division among Canadian lenders, set aside $6.04 billion for variable compensation, a 5.9 per cent increase and the highest total for the Big Six.
“We take a very balanced approach to compensation with consideration of the external environment in the long-term interest of both our employees and our shareholders,” CFO Rod Bolger said in an interview. Market-driven businesses such as wealth management and capital markets will see rates “according to what the market pays, and both of those businesses had strong performance this year.”
Still, overall earnings at Canada’s second-largest lender were down, “so a lot of our employees will see lower variable compensation this year,” Bolger said.
Scotiabank
Scotiabank’s performance-based compensation pool fell 1.3 per cent to $1.74 billion, its first decline since 2015, even as Canada’s third-largest lender posted record revenue from its capital-markets operations as trading reached an all-time high.
“It’s not all about ‘eat what you kill’ because we want them to be good corporate citizens,” CFO Raj Viswanathan said in an interview. “We want to compensate them appropriately when they have a good year,” but employees won’t necessarily receive a specific percentage of the business they generate.
Scotiabank’s compensation calculations take into account the company’s performance relative to its projections, and that’s weighing on compensation this year because of how the pandemic hurt business, he said.
“The overall variable compensation of the bank is down because the bank’s performance has been lower” in the second and third quarters, Viswanathan said.
BMO
Bank of Montreal raised its set-asides for variable compensation 0.8 per cent to $2.63 billion, its smallest increase in at least eight years.
“We’re committed to the principles of paying for performance and providing market-competitive compensation for our employees,” CFO Tom Flynn said in an emailed statement. “This year, we are comfortable with how well we have adhered to those principles, for both bonuses and total compensation.”
CIBC
The fifth-largest Canadian lender allocated 4 per cent more for performance-based pay, reserving $1.95 billion, a reversal from the previous year’s 4.7 per cent contraction.
“We believe in paying competitively and paying for performance, and that philosophy is applied,” CFO Hratch Panossian said in an interview. “This year, the level of compensation we’ve landed on we believe reflects the performance of the bank both from a financial perspective as well as doing the right thing for our clients and supporting clients through a very tough environment.”
National Bank
National Bank of Canada set aside 4 per cent more for bonuses, with the Montreal-based lender allocating $990 million for variable compensation, rebounding from a 1.3 per cent contraction in fiscal 2019.
“We’re trying to balance a good year with the fact also that our loan losses did go up during the year and that has to be reflected,” CEO Louis Vachon said in an interview. “In the context of a pandemic, I think our approach to compensation does need to remain relatively sober. So that’s how we’re balancing things out.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
