Two more of Canada's biggest banks are reporting slowdowns in capital markets results for their first quarters, but are dealing with it in different ways.
Both Toronto-Dominion Bank and Royal Bank of Canada said Thursday morning that their capital markets units experienced significant declines in profit in the three months ended Jan. 31 -- a stretch that included very quiet markets in December. RBC responded by reducing variable compensation. TD paid more in bonuses, but trimmed staff.
They join Bank of Montreal, which also reported a slowdown from last year. BMO has also cut staff slightly of late to cope.
TD reported that net income in its investment banking and trading operations fell to $194-million from $235-million because of "reduced investment portfolio gains, lower equity trading on decreased client activity, and reduced revenue from equity underwriting due to industry wide volume decline as compared to the first quarter last year. Partially offsetting these decreases were improved fixed income and credit trading due to strong client flow and increasing asset values as compared to the same quarter last year."
Net income at RBC's capital markets business dropped 30 per cent to $448-million as trading results declined along with the volume of deals. The bank's "global markets" revenue, which includes its trading business, dropped 16 per cent on lower trading revenue from both bonds and stocks. Investment banking revenue dropped 21 per cent to $146-million as companies slowed their issuance of new bonds and stocks, cutting RBC's underwriting fees.
TD trimmed its staff in the securities business, with the number of full-time staff dropping to 3,538 from 3,626 just three months prior. RBC doesn't break out staff numbers by division in its results.
RBC set aside less in pay for bankers and traders in the quarter, as the bank said that non-interest expense decreased $143-million or 13 per cent "largely due to decreased variable compensation on lower results." TD on the other hand reported an increase in bonus payouts that drove expenses in its capital markets business 2 per cent higher.