Year-End Bonuses At Canada’s Banks Rise 18% Amid Record Profits

Canada’s largest banks are paying 18% more in year-end bonuses amid record profits and as they battle to retain workers in a red-hot labour market.

The country’s six biggest lenders set aside $19.1 billion for performance-based compensation in their 2021 fiscal year. The increase trounces the 6.3% average over the last decade. Except for Toronto-Dominion Bank (TSX:TD), all of Canada’s big lenders increased their annual bonuses by the most on record going back to 2013.

Canada’s banks are riding high on almost two years of record activity in capital markets, starting with an early-pandemic increase in trading that gave way to a surge in equity and debt financings, and, more recently, a flood of mergers and acquisitions.

That boom, and expectations that it will continue into next year (2022), have heightened the competition among banks to attract and keep talent.

National Bank of Canada (TSX:NA) and Scotiabank (TSX:BNS) had the biggest increases to their bonus pools, while Toronto-Dominion had the smallest increase to its reserves for performance-based pay.

Banks saw a 3.3% increase in annual revenue from their capital-markets operations to a combined $32.7 billion in the fiscal year ended October 31. Underwriting and advisory fees rose 22% to a record $6.78 billion, and trading revenue fell 12% to $14.6 billion.

The Canadian banks pay bonuses based on performance, with most of the variable compensation going to capital-markets professionals such as investment bankers, analysts, salespeople, and traders. Bonuses are typically distributed in December each year.

Total net income for the banks rose to a combined record of $57.7 billion, up 40% from the previous year and 24% from fiscal 2019, before the pandemic struck. Total revenue this year climbed 3.3% from fiscal 2020 and 6% from 2019.