Canada expected to buck trend of big investment banking layoffs

Canada expected to buck the trend of big investment banking layoffs Financial institutions in the financial district of Toronto are expected to be laid off.

Some of Canada's top investment banks plan to maintain staff levels in order to meet client expectations for the same level of coverage through the ups and downs of business cycles, head hunters and industry executives said.

On January 11th, the US investment banks, including Goldman Sachs, cut more than 3,000 employees citing a challenging macroeconomic environment, raising fears that Canadian banks may follow suit. Many Canadian investment banks had staffed up during the pandemic, only to see dealmaking slow last year.

The headcount at the capital markets division of Royal Bank of Canada increased by 71% over the two years ending Oct. 31, 2022, to 6,887 employees, according to the country's biggest lender.

The Canadian dealmaking fell 39.7% last year to $89.7 billion. According to data from Dealogic, that is more than 36% drop in global deal values to $3.8 trillion after a stellar 2021.

Canadian banks have not announced layoffs and some even say they may increase headcount, but dealmaking in the new year is down nearly 50% to $3.2 billion from a year ago, according to Dealogic.

There is a sense that there isn't a need for cuts in the system, according to Dominique Fortier, partner at Heidrick Struggles' Toronto office.

When there was an upswing in 2021, it happened so quickly that there was no corresponding increase in hiring, so I don't see that we'll have the same decrease in headcount coming. Toronto Dominion Bank, which bought New York-based boutique investment bank Cowen Inc last year, expects to grow its global investment banking business as it works towards closing the deal, a spokesman said.

A spokesman said Desjardins, another Canadian lender, will continue to invest in its growing capital markets division.

Bill Vlaad, a Toronto-based recruiter who specializes in the financial services sector, said Canada is unlikely to see U.S.-level redundancies aside from the annual cull of poor performers called maintenance layoffs. The U.S. is very nimble. They will go in and out of hotspots very quickly. Canada doesn't have that luxury and has to stay relatively consistent in coverage, said Vlaad.

You have a group of people working. They don't change much year to year, decade to decade. Another down year for dealmaking could see bonuses take a hit.

RBC was ranked No. According to Dealogic, Canada's equity capital markets, and debt capital markets, have no layoff plans for investment banking in Canada, a source with knowledge of the matter said.

Spokespeople for JP Morgan, which topped the M&A league table last year, did not respond to the Canadian Imperial Bank of Commerce and Scotiabank. BMO did not respond to requests for comment.

It's less expensive to lay off bankers in the United States than in Canada, according to headhunters and lawyers.

Howard Levitt, senior partner at Levitt Sheikh, said Canadian investment banking employees would be entitled to four and 27 months of service with full remuneration based on their status, age, and length of service.