Sunday, April 7, 2013

Royal Bank

Royal bank is in a PR catastrophe. It wants to outsource the IT Dept to an off-shore company and wants those who will be fired to train those who will take over!

Of course record profits never stops a company from looking for new ways to cut costs, but this one may have been a step too far. I suspect the Royal sees the end of the RE/HELOC/CHMC feeding frenzy, and is looking for some quick savings to try and shore up earnings. The executive suite have a lot of  their compensation tied to the earnings and stock price. 

The CEO owns $33 Million of shares in the company and the rest of the executive suite isn't hurting:

G.M. Nixon
President and Chief Executive Officer 
2009- $12 Million 2010 $11.8 Million 2011 $$11.1 Million and 2012 $12.6 Million

J.R. Fukakusa
Chief Administrative Officer and Chief Financial Officer 
2009 $4.4Million 2010 $3.4Million 2011 $4.5Million

D.I. McKay
Group Head, Canadian Banking 
2009 $3.6 Million 2010 $4.3 Million 2011 $4.8 Million

A.D. McGregor
Co-Group Head, RBC Capital Markets 
2009 $12.9 Million 2010 $10 Million 2011 $8.2 Million

M.A. Standish
Co-Group Head, RBC Capital Markets 
2009 $14 Million 2010 $10.3 Million 2011 $8.3 Million

This does not include severance or pension benefits which will run into many Millions for each of the above.

A few things that I find interesting:

The CEO is not even the most highest paid executive. It is always the head of trading that garners the biggest pay-cheques. In fact there may be RBC traders that make even more that these folks and are not on the reporting list.

In 2009, the executives got the highest pay 12 + 4.4 + 3.6 + 12.9 + 14 = $46.9 Million for the five of them. You remember 2009, the year of the fiscal crisis. 

That was the year that the Government came to the rescue of the big banks, big time. Interest rates where slashed, and CMHC was doubled (I believe late 2008) allowing banks to pass off risk to the tax-payer, and portfolios of consumer debt were purchased to free up bank funds.

SO...while $47 Million is not a huge sum in the self-entitled corporate world, were a single US CEO will pay himself that much in a bad year, the Canadian banks are different. 

Public policy is changed so that they CAN make huge profits, even if that means the risk is moved off their balance sheets to that of the Government (ie us!), so they have some degree of social responsibility. That means not pushing debt to the degree that Canadians are in trouble. It also means not going for the cheapest option at every turn, if it effects the incomes of ordinary employees. I would say they have failed in both capacities.

If things are THAT bad at the bank, how about the capping everyone's salary and benefits at say $3 Million. I mean that is a good chunk of money, unless you are trying to build a dynasty. Then the recipients of pink slips might feel less violated. 

BTW the way all the Executive suites justify their income, is to say.."we have 76,000 employees and so we run highly complex organizations"

For comparison:

The PM of Canada earns about $317 K
The President of the US $450K
The Head of the Salvation Army $130K


  1. They pull in 40-50 big ones a year, year in year out. They dont really need the golden handshake or gold plated pension.

  2. I have to reiterate what frank said in the last post. Fraser is definately down 5%+ Year on year and much more the further East you go.

  3. yeah, those amounts are mind boggling...How much more money do you need?
    How much is enough? Those guys are psychopaths indeed.
    I have no issues with people making money, but the bankers are real parasites if one look at how much they contribute to society.
    You know the system is rigged when a Mark Carney or Ben Bernank, the most powerful bankers in the world make 400k a year and all the other bankers make millions, yet entirely depend on the central bankers to stay in business. Why a RBC or TD banker makes more than the central bankers, I dont get it. Pls enlighten me!

    1. This is how it goes. Many years ago when everyone worshipped an imaginary God and went to Temples, the priests made out like bandits.

      Now our God is money, and the Temples are banks and brokers and the bankers are the High priests.

  4. No numbers tonight, the matrix is down

  5. RE: Royal bank wants to outsource the IT Dept to an off-shore company.

    Both sides of the border just released Hiring Expectation Surveys for 1Q 2013 and both are negative.

    CAD - BoC Chart:
    USD - NFIB Chart:

    Wage destruction means deflation; which will affect the corner suite in time as assets get marked to market.

  6. numbers (I posted them last night but they didn't show up for some reason)

    514 new
    219 price change
    220 sold

    7030 detached
    8759 attached

  7. someone is still buying


    482 new
    212 price reduced
    261 sold

    7091 detached
    8779 attached

  8. I could have thrown this comparison in too, Vancouver cops make about $60k to get going.

    So the two trading Co-heads Mc Gregor and Standish in 2009, the year the Government bailed them ou,t made as much as 420 new cops!

    If you don't think that is obscene then what is??

    And some on the bear blogosphere think it is just the Mainland Chinese oligarchs who have money to throw around.

    1. And the next year they made as much as 350 cops and the next year 300 cops and the next...

    2. Those two alone make a Lotto Max win every three years! WTF?!

      Do they cure cancer, bring world peace, what do they do to deserve it?

  9. numbers

    209 new
    113 reduced
    88 sold

    7116 detache
    8783 attached

  10. You guys are probably sick of the robo-spam blog comments. I could put up an entry wall but then it makes legit comments more cumbersome. FWIW- I checked and the system removed 23 comments today alone that it identified as spam! These robots are sure active.

  11. numbers

    432 new
    187 price change
    189 sold
    7149 detached
    8783 attached

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