This time last year, RBC Capital markets was bedding down lots of new recruits. Between January and June 2010 alone, it hired 530 people of whom 140 were in Europe. It’s done some more hiring this year, but not as much. In October it hired Johnny Vo of Goldman Sachs and James Eves of UBS for its ECM FIG team. In September, it hired Christiane Schuster from MF Global as an MD in high yield trading, plus a senior high yield analyst.
RBC doesn’t break out headcount figures for its investment bank, but it had 864 more employees outside Canada and the US in the third quarter of 2011 than in Q310 – although not all of them were in Europe and not all were in its Capital Markets (investment banking) business; many of the new hires have been in wealth management.
RBC’s recruitment is important, because hiring implies the paying of guaranteed bonuses to attract people. At the start of this year, there were rumours – denied by the bank – of immense generosity to new starters: large increases on previous packages, cash sign-ons etc. If you were hired into RBC in 2010, this may therefore be your first year without a guarantee. If you were hired at the start of 2011, your big guarantee might have depleted the bonus pool for everyone else.
RBC’s European employees will soon know their fate. The bank announces its fourth quarter results next Friday. Bonuses are expected to be divulged around the same time. The bag is expected to be mixed.
“MDs in M&A are expecting to get paid,” says the head of one advisory search firm, “They’ve had a good year.” RBC is focused on building its European M&A presence, and is likely to pay to retain its M&A teams.
In fixed income, however, the year hasn’t been so great and people are being let go. Bonuses are likely to reflect this. At the time of its third quarter results, RBC said: “The fixed income trading environment has changed in both the U.S. and Europe. Client volumes are moderating and margins are shrinking as competition stiffens, and we need to scale our fixed income businesses in response to markets.”
RBC’s fixed income bankers can at least console themselves with the thought that last year’s payouts haven’t suffered too much from a deteriorating share price: RBC’s stock has fallen a mere 21% since January; RBS’s has fallen 60% since March.
Last year, RBC changed its bonus payment terms. From equal vesting of 33% annually over three years, it switched to 25% in the first two years and 50% in year three. Its bankers need to hope the share price will hold up a little longer.