Banker Bonus Pools Rise 15% at Canada’s Big Lenders in Busy Year

(Bloomberg) — Canada’s biggest lenders set aside 15% more money for banker bonus pools in fiscal 2025, when firms’ capital markets divisions are more active on deals and U.S. President Donald Trump’s policy swings keep trading desks busy.

Bank of Nova Scotia, National Bank of Canada and Canadian Imperial Bank of Commerce were the ones that increased the amount they set aside for incentive payments the most, with increases ranging from 17% to 24% compared to last year.

Meanwhile, Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal have allocated about 13% to 14% more this year, according to their fourth-quarter financial reports.

The increase in stimulus payments follows an average increase of 12% in fiscal 2024 and an average increase of just 9% the year before.

“If you were to predict what the year would look like in February or March, I don’t think we’d be saying that right now today,” Mark Stipe, president of Toronto-based financial recruiting firm Vlaad and Co., said in an interview.

“It seemed like when the tariff noise was loudest was when we saw the most activity and performance from trade groups,” he said.

Canadian banks also benefited from deal activity, particularly in the mining and natural resources sectors, and strong performance in fixed income desks, according to Stipe.

Net income of capital markets units in the Big Six increased by an average of 29% this year. That performance fuels bonus expectations, he said, with most people he’s spoken to recently expecting at least a 10% increase over last year’s incentive pay.

Variable pay at Canadian banks is performance-based, and the figures firms report in their quarterly statements reflect the amount set aside, not paid. The fiscal year ended on October 31, but bonuses are typically distributed in December.

Incentive pay is especially vital for capital markets professionals, including investment bankers, analysts, salespeople and traders, who rely on it for the bulk of their compensation. Employees in other departments, such as asset management, insurance and wealth management, also receive bonuses in addition to their basic salaries.

With all the activity in the capital markets, demand for talent is high, both for senior leaders at the managing director level and for younger bankers, Stipe said. Hiring takes place at Canadian institutions, global banks and boutique firms. “We have witnessed an absolute increase in new opportunities in the last three weeks,” he said.

The country’s largest lender, Royal Bank, allocated almost C$10 billion ($7.2 billion) for the stimulus payment; That’s nearly twice as much as its closest competitor in Toronto-Dominion. RBC’s capital markets franchise is a juggernaut, posting record revenue and earnings of C$5.4 billion in fiscal 2025, up nearly 18% from last year.

Growth in the business “is enabled by continued investments in talent, accelerating the hiring of senior coverage and relationship managers in global markets, and investment banking across the United States and Europe,” Chief Executive Dave McKay said in an earnings call Wednesday. The bank also added 90 new financial advisors to its wealth management unit in the U.S. and plans to continue hiring there, he said.

All three lenders are going through some type of transition. Toronto-Dominion is reorganizing its business in the wake of the U.S. anti-money laundering agreement, Bank of Montreal is on track to rebuild its return on equity, and Scotiabank is still trying to prove that the North America-focused strategy it announced two years ago will pay off.

All have announced restructuring programs to cut costs by reducing workforces. But the trio also delivered strong results in its markets-related units this year, with the bulk of incentive payments directed there.

Scotiabank spokesman Clancy Zeifman said the bank takes into account “our ability to serve shareholders and customers, our relative performance compared to peers, and individual performance” when calculating bonus pay.

At Toronto-Dominion, incentive payments reflect “stronger financial performance for the bank,” spokeswoman Gabrielle Sukman said, adding that there are “higher business-specific incentives reflecting strong performance” in its wealth management and capital markets units.

Spokesperson Jeff Roman said Bank of Montreal’s bonus pay structure reflects business results and is competitive with the market.

The nation’s fifth-largest lender has outperformed analyst estimates for two years running and has earned a reputation for “clean” results with few surprises. It continued this on Thursday with forecast-beating earnings and a strong performance in capital markets.

“We pay competitively and have a pay-for-performance philosophy that aligns compensation based on our bank’s financial and non-financial performance,” spokesman Tom Wallis said.

National Bank, the smallest of Canada’s Big Six banks, has gotten a little bigger this year, having completed the acquisition of Edmonton-based Canadian Western Bank in February. (It will grow even further next year after Laurentian agreed to buy Bank of Canada’s retail and small business deposit and loan books.)

National Bank’s capital markets division saw earnings rise more than 34% in fiscal 2025, and bonus payments were also affected by the CWB deal, according to spokesman Alexandre Guay.

“Our variable pay reflects revenue growth and the strong performance of our teams across our business lines and has been increased further to account for the integration of CWB employees joining National Bank during the year,” he said.

More stories like this available Bloomberg.com