Why It’s Much Better to be Receiving a Bonus on Bay Street than Wall Street This Year

Bonus season is looking a good deal better for Bay Street than Wall Street, a Toronto-based recruiter confirms.

Whether or not bankers’ and investment professionals' salaries will increase more than a couple of percentage points however, remains to be seen, she says.

“I think the Canadian banks have been holding steady for a while in terms of doing everything they can to retain their talent and not send negative messages to the marketplace,” observes Janice Detta Colli, a Boyden managing director in Toronto heading the recruiter’s financial services practice in Canada.

“There’s been some quiet selective restructuring as well as quiet selective recruiting” by Canada’s big banks, she says, noting that some of the recruiting has involved bringing back Canadian natives wanting to return home from finance posts in the U.S. and Europe.

Canada's cheerier bonus picture

Finance professionals and capital markets pros will be glad if they’ve been working on Bay Street—or still better, at one of the big Canadian banks, the Globe and Mail reported recently, given the cheerier bonus picture north of the border.

Johnson Associates reported last month that year-end incentives for U.S. investment bankers and traders—including cash bonuses and equity awards—are expected to decline by an average 20 to 30 percent this year compared to 2010. Fixed income traders stand to be hit even worse, according to those estimates.

While the Globe and Mail report suggests pay will rise at least a bit at some of the Canadian banks, Detta Colli says it’s too soon to know whether banks will be doling out anything other than cost-of-living increases of 2 to 3 percent this year. “People usually are finding out about their compensation between late November and the third week of December,” says the recruiter.

The good news for Canadians is that U.S. banks end their fiscal years on Dec. 31st, so slower markets in the second half of the year impact them more seriously. In Canada, the fiscal year ends for banks on Oct. 31st, and includes some fairly good performance during November and December of 2010.

Good Year for Mining Investment Banks

The Globe and Mail observes that several mining investment bankers had a good year, given all the merger and financing activity in that part of the market, while bond traders "didn’t fare quite as well.”

According to that report, average pay per employee rose at Royal Bank of Canada, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, which have all announced year-end results and have given little sign in the numbers of any major pay cuts.

“They simply don’t do that,” however, Detta Colli notes, adding that there are only four big banks in Canada (outside of Canada’s central bank) and none will want to be the first to announce a major restructuring. “Nor do the numbers indicate a need for large scale restructuring,” she adds.

Investment units of major banks like Royal Bank of Canada, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank also don’t break out compensation numbers for their investment banking and trading operations. But there are reasons to anticipate bonus news, Detta Colli agrees.

CIBC has been reporting a higher quarterly profit from its wholesale division, for instance. “That’s been fairly public,” says Detta Colli. “CIBC’s wholesale division has always been quite strong in terms of its talent base and relationships,” she says.

Moreover, Detta Colli acknowledges that in earnings reports, expenses for the securities divisions have been on the rise. “That may not all be bonus checks, but a big chunk of it is, and it suggests that at the very least, the average bonus is pretty close to holding steady,” says the Globe and Mail, and Detta Colli agrees with the assessment, as well as a report that Canadian investment boutiques have been struggling even where they’re tied to the local boom in natural resources. “The trend has been to approach the big banks” for things like I-bank mining experts, says the recruiter. “These organizations have more information to leverage and a wider variety of services to offer,” she says.