Deferring compensation is working out nicely for staff at Scotiabank if the January quarter is any indication. While a new incentive plan multiplied stock-based pay, the total for salaries and other cash compensation also rose for the investment banking unit's 1,568 employees and dipped just slightly for the company overall.
In a table accompanying its earnings release Tuesday, Canada's third-largest bank recorded C$105 million (US$98.1 million at the Jan. 31 exchange rate) expense for stock-based compensation for the first fiscal quarter ended Jan. 31. That's more than the preceding five quarters combined. As a result, company-wide compensation and benefit expense climbed 5 percent compared with the same period a year ago to C$1.187 billion despite a smaller workforce.
Within Scotia Capital, the investment banking arm, total non-interest expenses also climbed 5 percent from the year-earlier quarter, to C$307 million. Compared with the fourth quarter ended Oct. 31, non-interest expenses rose 8 percent. "The increase reflects higher performance-based and stock-based compensation due to incentive plan changes," Scotiabank says. "Salaries, pension and benefits costs and computer expenses also increased, offset by lower legal provisions."
Last spring Scotiabank announced a new compensation scheme for investment bankers, emphasizing deferred payments after three years. The company doesn't break out compensation numbers for Scotia Capital or its other business segments.
Revenue for Scotia Capital grew 28 percent from the year-earlier period but slipped 1 percent from the fourth quarter, as lower credit fees outweighed higher trading revenues.
Mike Durland, group head of global capital markets and Scotia Capital's co-chief executive, drew a mixed picture for the remainder of this year. He said loan volumes are contracting and loan loss provisions, while better than expected, might not maintain recent levels. In a conference call, Durland said the investment bank will remain focused on energy trading, fixed income and global wholesale banking, and expects strong performance in both fixed income and FX segments.