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Darryl White, CEO for Bank of Montreal.Fred Lum/the Globe and Mail

Total pay awarded to the chief executive officers of Canada’s five largest banks rose by 23 per cent last year, as financial institutions blew past lower profit targets set at a time of uncertainty about the COVID-19 pandemic.

The five bank CEOs earned a combined $70-million in total compensation, compared with $57-million in 2020, according to company filings. The banks reported pay for their CEOs and four or five other top-paid executives in their annual proxy circulars.

“Variable pay,” which includes cash bonuses and stock awards, surged for virtually all top executives. Senior bankers were rewarded for a year of robust profits even as economies around the world grappled with lockdowns and other public-health restrictions.

Volatile markets kept trading desks busy, boosting revenue from them. And banks had unusually low levels of losses on loans as massive government stimulus programs backstopped many households and businesses. In some cases, banks were able to release some of the reserves against loan losses they had built up early in the pandemic, adding a further lift to earnings.

But there is another factor that helped fatten pay packets in 2021: lower targets for financial performance. The previous year, banks set their targets for fiscal 2020, which began Nov. 1, 2019, before COVID-19 was discovered. After a wave of public-health restrictions in 2020 sapped economic growth and drove up unemployment, banks missed those targets.

As boards reset those targets for fiscal 2021, which started Nov. 1, 2020, they were still facing considerable uncertainty about the pandemic, and vaccines against COVID-19 were not yet available. Most banks set profit goals that were close to the lower levels they had just earned.

Instead, profits soared across the industry in 2021.

Royal Bank of Canada RY-T set a target to earn net income of $11.7-billion, slightly above the $11.4-billion it earned in 2020, when it had missed its goal by nearly $1.9-billion. Instead, the bank earned nearly $16.1-billion in 2021, significantly beating its benchmark in an area it weights heavily when determining bonus pay.

RBC’s Dave McKay earned the biggest bank CEO paycheque: $16.7-million in total compensation, up from $13.5-million a year earlier. His bonus of $4.10-million was nearly three times his prior-year bonus of $1.41-million. Stock and option awards of $9.9-million were up from $9.45-million in the prior year.

Toronto-Dominion Bank’s TD-T financial performance target for 2021 was to earn $10.1-billion in net income after tax (NIAT), slightly more than the $10-billion it earned in the previous year. That target was still well below the $12.8-billion NIAT target TD set before the arrival of COVID-19. In fact, TD earned $14.7-billion in NIAT in 2021 – a 47-per-cent increase year over year.

That helped boost performance pay and CEO Bharat Masrani earned $13.5-million, compared with $10.5-million the year before. He received a bonus of $2.37-million, up from $1.79-million in the prior year, and stock and option awards valued at $9.55-million, up from $7.20-million.

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At several banks, the board and its compensation committee used discretion to adjust performance pay to better reflect that bank’s actual performance, sometimes tempering what would otherwise have been even larger increases to bonus pay.

Bank of Nova Scotia’s BNS-T compensation committee “made a material adjustment” to two key measures of performance – profit attributable to common shareholders, and the ratio of revenue to expenses – to offset “favourable impacts on performance” from the pandemic.

Scotiabank’s target for net income attributable to common shareholders (NIACS) was $7.4-billion, and the bank recorded $8.5-billion in earnings for compensation purposes. That number was reduced from the bank’s actual NIACS of $9.6-billion at the compensation committee’s discretion, and there were further tweaks to the bonus formula to make pay raises more modest.

Brian Porter, the bank’s CEO, earned $12.2-million in 2021, which was about the same as 2020. His bonus of $2.52-million was up from $2.14-million, and stock and option awards of $7.55-million were up from $6.43-million.

When Bank of Montreal BMO-T calculates performance on two key metrics – adjusted earnings per share and return on equity – it excludes some impact from loan loss provisions, which held back pay increases. The bank still beat its key earnings target by a wide margin.

For 2021, BMO set a target that earnings per share would shrink by 3.9 per cent. In fact, adjusted earnings per share, for compensation purposes, was up 32.5 per cent (actual adjusted EPS was up 68 per cent).

BMO CEO Darryl White earned one of the largest pay increases, with $14.9-million in total compensation, up from $11.1-million a year earlier. His $3.38-million bonus was up from $2.39-million in the prior year, and stock and option awards of $8.30-million were up from $5.87-million.

Among the major banks, Canadian Imperial Bank of Commerce CM-T stood out by setting a 2021 target for adjusted earnings per share of $11.22 that was well above the $9.69 it earned in the previous year. Even so, CIBC beat its target by 29 per cent, earning $14.47 a share on an adjusted basis. The bank also used its judgment to reduce the factor that determines performance pay by two percentage points.

CEO Victor Dodig’s total compensation was $12.8-million, compared with $9.7-million the year before. His bonus of $2.14-million was up from $1.60-million, and stock and option awards of $8.55-million were up from $6.41-million.

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