Big Banks, Big Bonuses

December 9, 2023

The Week in Review

Market returns were mixed this week, but for all intents and purposes things were basically flat. The top gainer for the week was the Nasdaq, up a modest 0.45%. The S&P500 eked out a gain of 0.14%, but both the Dow Jones Industrials and the TSX were down slightly on the week, -0.07% and -0.32% respectively.

The S&P500 closed at its highest level of 2023, and has now climbed nearly 12% over the past six weeks.

In the US job market, jobs growth came in a bit ahead of most economists’ expectations and we saw a drop in the unemployment rate.

Inflation fears are also on the decline and consumers now expect the annual inflation rate to be around 3.1% one year from today, down from 4.5% last month.

In this episode of Pulse:

  • The Big Banks pay Big Bonuses, then get Big Fines

  • Canada’s Unemployment Report

  • CBC Laying off 10% of its Workforce

  • The Bank of Canada Rate Decision

  • REITs are back in Favour with Investors

  • Record Consumer Debt in Canada

  • This week’s US Job reports, including Job Openings, Unemployment Rate & Non Farm Payrolls.

  • Food Price Report

  • Canadian Housing Crisis Update

  • Market Movers


Big Banks, Bonuses & Fines

If you think that just because the big banks have been struggling so far this year, and because half of them missed earnings expectations in the fourth quarter, there would be no year end bonuses, think again.

Collectively, the six biggest Canadian banks set aside $21.2 billion for bonus pay in the fiscal year that just ended on October 31st, an increase of 9% from 2022.

As is always the case, most of the compensation is paid to employees that work in the capital market group, including traders, analysts, and investment bankers.

Let’s see where the bonuses are going:

  • At the Royal Bank, they allocated $7.6 billion for compensation, which is a 6.7% increase year over year. At least with RBC, profit in the capital markets group was up 23% from last year.

  • Over at the Toronto Dominion Bank, $4.1 billion was set aside as incentive pay, up 23% from last year. In this case, profit in its capital markets division was down 42% from last year.

  • At the Bank of Montreal, $3.6 billion was allocated for performance based pay, up 12% from last year.

  • At CIBC, $2.5 billion was allocated for bonuses, up from 2.2% a year ago. In its capital markets segment, net income was up by 4%.

  • The Bank of Nova Scotia set aside $2.08 billion in performance based pay, which is an increase of 4% over last year. The bank’s capital markets profit fell 7% during the year.

  • And finally, National Bank of Canada set aside a paltry $1.3 billion for bonuses, which is up a slim 0.2% from last year.


In other banking news, the Financial Transactions and Reports Analysis Center of Canada (Fintrac) had a busy week, hitting two of Canada’s big banks with significant fines.

First off, it imposed a fine of $7.5 million on Canada‘s largest bank, the Royal Bank, for failing to submit suspicious transactions reports.

Banks, investment dealers and financial institutions in general have an obligation to report suspicious transactions to the regulator in an effort to combat money laundering.

In this case, Fintrac said that it found that RBC wasn’t filing suspicious transaction reports properly and that it lacked appropriate and documented governance for implementing AML procedures. According to the report, RBC failed to submit 16 suspicious transaction reports.

In response to the fine, RBC said:

"We chose not to appeal but believe the fine is not at all commensurate with an administrative matter where there is no connection to money laundering or terrorist financing offences,"

"Equally important, there is no finding that anyone exercised judgment in bad faith or knowingly contributed to violations."

In its second move of the week, Fintrac also imposed a $1.3 million penalty on the Canadian Imperial Bank of Commerce (CIBC) for non-compliance with money laundering and terrorist financing measures.

The penalty against CIBC is attributed to its failure to submit a suspicious transaction report when there were grounds to suspect it was related to money laundering or terrorist activity, as well as failures to report information regarding large money transfers from outside Canada.

CIBC has stated that the administrative matters are related to a relatively small number of transactions, and the bank remains committed to identifying, investigating, and deterring financial crimes.


Six Market Metrics that have for years forecast corrections and markets lows are the focus of this YouTube series. Check out the latest edition , updated with November data.

Canadian Unemployment

The latest employment numbers are out for Canada and, year to date, the number of unemployed people in our country has gone up by 197,000 people, currently coming in at roughly 1.2 million.

According to Statistics Canada, the unemployment rate is now 5.8% in November, a slight increase from 5.7% back in October.

There were almost 25,000 new positions last month, an increase of the 17,500 positions created in October. So far in 2023, the labor market has seen a net gain of 430,000 positions.

An obvious reason for the increasing unemployment rate is that jobs aren't being created at the same pace that newcomers are joining the labour force. So far in 2023, the population aged 15 years and older has risen by around 870,000 people. This is simply outpacing the supply of jobs.

As of November, we have seen a 37% drop in job vacancies compared with the most recent peak levels in 2022. The current total number of vacant positions, which is around 632,000, is the lowest since February 2021.

If we take a quick look at specific sectors in November, we saw 28,000 new jobs in manufacturing and 16,000 in construction.

We saw declines of almost 27,000 positions in the wholesale and retail trade sector, and a loss of roughly 18,000 jobs in finance, insurance and real estate, which has now seen four consecutive months of declining jobs.

From a demographic perspective, Canadians aged 15 before have seen a sharper increase in unemployment than people in any other age bracket.

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CBC Layoffs

It’s been a tough year for Canadian media companies, who have been suffering through hundreds of layoffs because of advertising revenues shrinking rapidly.

With this as context, CBC/radio Canada has announced it will be cutting around 10% of its workforce and also cutting back on production as it tries to address $125 million budget shortfall.

CBC’s government funding totaled $1.27 billion in fiscal 2023.

CBC President and CEO Kathryn Tate said in an interview with CBC’s Adrienne Arsenault that the value we as Canadians get from the CBC is well worth the money we spend.

As far as these job cuts are concerned, Tate said on Monday that a total of 800 jobs would be cut, including 200 vacant positions which will not be filled.

The cuts will see 250 positions lost at each of the CBC and Radio Canada, with the remaining 300 coming from technology and infrastructure and other corporate divisions.

The layoffs will include both union and non-union layoffs, will begin immediately, and are expected to take about 12 months for the entire process to complete.

Bank of Canada Holds Rates

CT No big surprise here. This week, the Bank of Canada this morning held its overnight rate at 5% for a third consecutive meeting. As I say, odds were pretty much overwhelming that the bank would leave borrowing costs at this level, which is a 22-year high last seen back in the early 2000’s.

The bank’s news release noted that there are further signs that monetary policy is moderating spending and relieving price pressures, but it remains concerned about risks to the outlook for inflation and are prepared to raise the policy rate further if needed.

  • In Canada, economic growth stalled through the middle quarters of 2023.

  • Real GDP shrunk by 1.1% in the third quarter, and that followed growth of 1.4% in Q2.

  • Higher interest rates are clearly restraining spending.

  • Consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year.

Other takeaways from the Bank’s announcement

  • The labour market continues to ease

  • Job creation has been slower than labour force growth

  • Job vacancies have declined further

  • The unemployment rate has risen modestly.

The Central Bank said it wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.


Investors are showing renewed interest in office Real Estate Investment Trusts (REITs), despite the lingering risk of high vacancies.

Some office REITs, such as Allied Properties and Dream Office in Canada, along with Boston Properties in the U.S., have rebounded by around 26% from recent lows. That said, these gains don't fully offset the losses experienced in the past two years due to rising interest rates, increased borrowing costs, and higher office vacancy rates caused by remote and hybrid work trends.

Office vacancy rates in Canada reached 18.2% in Q3 2023, up from 10.4% in early 2020.

Despite the recent rally, there are still concerns about the sustainability of the attractive distributions paid in the sector, and the long-term impact of hybrid work on office demand. The continued shift to more hybrid work may impact the need for office space.

The future appeal of office REITs will depend on various factors, including the trajectory of interest rates, inflation, and the evolving nature of work arrangements.

Canadian Debt reaches All-time High

Consumer Debt Record

If you’re struggling to make debt payments, you’re certainly not alone. According to a new report by Equifax, there is a trend of missed payments in all types of credit products across the country.

In the third quarter, over 139,000 consumers across Canada missed at least one payment. The hardest hit provinces, no big surprise here, are Ontario and British Columbia where housing costs remain extremely high.

Vice president of advanced analytics at Equifax, Rebecca Oaks, said:
“Increasing rental costs are the norm. Mortgage holders are starting to miss payments, particularly first-time homebuyers and those who renewed their mortgages during the peak interest rate periods over the last 12 months. With many upcoming mortgage renewals, consumers need to prepare for potential payment shocks.”

Total consumer debt in Canada reached $22.4 trillion in Q3 2023 up $80.9 billion from the same last year, and total credit card balances have now reached $113.4 billion, an all-time high. That’s a 16% increase from last year.

Another sign of financial stress? Over the past year, more than 6 million new credit cards were issued, up 13.7% year over year.

A few other notable takeaway from the report:

  • The average balance of credit card holders grew to $4,119, an increase from $3,727 a year ago.

  • Credit card delinquency rose by 15.8% in the third quarter, with consumers in the 36 to 55 year old age bracket seeing a 20.8% increase.

  • As is noted in the report, credit card payment behavior can be a major indicator of financial stress.

  • The percentage of card users were only making minimum payments rose 3.4% in the quarter.

The report points to the rising cost of housing, higher interest rates and the economic slowdown as contributors.

On a slightly positive note, mortgage delinquencies remained below pre-pandemic levels. That said, regional differences are becoming more prominent with delinquencies in Ontario up 122.2% and British Columbia up 46.2% year over year.

The report points to population growth exceeding new housing volumes as a factor in preventing home prices from dropping despite higher interest rates.

U.S. Jobs

On Tuesday this week, the US labor department released its October JOLTS report, which is the Job Openings and Labor Turnover Survey. The data show that US job openings fell to a 2 1/2 year low, with labor demand dropping 617,000 for the month. This now sees the total labor demand at 8.733 million, the lowest level since March 2021, and down from 9.35 million in September.

In the US, job openings refer to all positions that are open (not filled) on the last business day of the month.

United States Job Openings | October 2023

This was a larger than expected decline in unfilled jobs, and analysts had forecasted 9.3 million openings in October, far higher than the 8.7 million that was actually reported.

The way I see it, this data is a very strong sign that higher interest rates are dampening the demand for workers. It also plays right into the hands of the Federal Reserve policy makers, where it is largely anticipated that they have peaked out at their interest rate hikes, and will begin cutting rates in 2024.

Then, in other job related news, the Bureau of Labor released the latest Non Farm Payroll numbers on Friday.

United States Non Farm Payrolls | November 2023

In November, the U.S. saw accelerated job growth with an increase of 199,000 nonfarm payrolls, contributing to a drop in the unemployment rate from 3.9% to 3.7%.

United States Unemployment Rate | November 2023

The labor force participation rate also rose slightly to 62.8%. Average hourly earnings saw a 0.4% gain, marking a 4.0% year-on-year increase.

Despite the positive job market indicators, the report did not alter expectations that the Federal Reserve's rate-hiking cycle was complete.

The employment gains were led by the healthcare sector, government payrolls, manufacturing, and leisure and hospitality, while retail employment declined.

The strong labor market is seen as a positive factor for economic growth, dispelling concerns of a recession and the overall upbeat employment report is expected to contribute to improved fourth-quarter GDP prospects.

Food Prices

The annual Canada Food Price Report predicts that food costs for a typical family of four will rise by $700 in 2024.

The report, now in its 14th year, anticipates a 2.5-4.5% increase in grocery prices, with certain items like bakery, meat, and vegetables potentially seeing a 7% rise. While the overall cost of groceries is expected to go up, the rate of increase is slower than the previous year.

Factors contributing to the price hike include interest rates, energy costs, climate change, transportation expenses, and geopolitical risks. Despite these challenges, falling commodity prices like wheat, corn, and soybeans may lead to a slight drop in the prices of some staples.

The report suggests that grocery chains may have wider profit margins to offer promotions on basic items.

In 2023, families chose to spend less on groceries than the previous year, reflecting added financial pressures from housing costs, higher interest rates, and debt levels.


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Housing Prices

In a talk given in Windsor, Ontario this Thursday, Bank of Canada Deputy Governor Toni Gravelle highlighted that the country's high immigration rates are contributing to housing inflation.

While immigration helps in the long run by expanding the workforce and increasing potential growth, the short-term impact includes rapid population growth without a proportional increase in home building, driving up housing costs.

In an effort to help with the problem, Gravelle urged all levels of government to collaborate in reducing barriers to home construction, such as zoning restrictions and permitting delays.

The mismatch between housing supply and population growth, particularly driven by immigration, has led to a surge in shelter inflation, impacting rental and housing prices, according to Gravelle.

The deputy governor emphasized the need for policy changes to address these issues and prevent continued upward pressure on inflation related to housing costs.

Gravelle acknowledged the positive impact of newcomers on economic growth and workforce sustainability in the long run but stressed the importance of balancing immigration policies with housing supply.

The speech comes amid concerns about deteriorating housing affordability and calls for government intervention in addressing housing supply challenges.

Market Movers

S&P 500 Weekly Overview

TSX Weekly Overview


It was a good week for the cruise lines, with both Carnival and Norwegian seeing strong gains. Here are some of the best gainers of the week.

The Top Gainers were:

Carnival Corp (CCL), up 14.91%
Norwegian Cruise Lines (NCLH), up 13.76%
Walgreens Boots Alliance (WBA), up 11.40%
Bath & Body Works (BBWI0, up 10.86%
IDEXX Laboratories (IDXX), up 10.10%
CVS Health (CVS), up 9.67%
Canadian Apartment Prop REIT (CARUN), up 6.65%
AMD (AMD), up 6.20%


Here are the biggest losers of the past 5 trading days.

The Biggest Loser were:

Alaska Air Group (ALK), down 10.37%
First Solar (FSLR), down 9.30%
Old Dominion Freight Line (ODFL), down 8.94%
Charter Communications (CHTR), down 8.54%
Pan American Silver (PAAS), down 8.10%
Cenovus Energy (CVE), down 8.02%