As American banks lay off, their neighbors to the north are hiring.
Canadian banks, which brought on bankers displaced by the 2008 financial crisis, have accelerated staffing plans this year to capitalize on Wall Street's woes. The investment banking arms of the Big Five -- Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce -- plan hires for M&A, advisory, underwriting and other investment banking work, according to recruiters, analysts and bank spokespeople.
"Canadian firms are no longer looking at themselves as being a little firm north of the border," said Bill Vlaad, the founder of Vlaad and Company, a Toronto-based capital markets recruiter. "They have a defined presence in the U.S. and they're willing to look for good talent."
Vlaad said his firm has had more phone calls in the second quarter asking for U.S. professionals than in the previous seven quarters combined.
One reason for the hiring: Canadian banks emerged from the debt crisis in better shape than American banks. They took on less risk and were subject to tighter regulations.
The Canadian government required banks to meet a leverage test that maintained the ratio of total assets to total capital at 20 to 1. Many American banks, on the other hand, had been levered 30 to 1, or in the case of Merrill Lynch, 40 to 1, as a result of a 2004 Securities and Exchange Commission rule that allowed banks to more than double their leverage ratios.
Bank of Montreal Capital Markets is continuing to grow headcount after hiring during the U.S. financial crisis, said Perry Hoffmeister, head of U.S. investment and corporate banking, BMO Capital Markets.
"Our view was Wall Street's landscape is changing," Hoffmeister said. "There's an opportunity for a bank like BMO to build its wholesale business. Not only because there are great bankers who wouldn't be available otherwise, but there are fewer competitors. We believe we're taking share and on that basis we intend to keep growing."
Who They Will Hire
Admittedly, Canadian banks won't bring on thousands and provide a job for every laid-off Wall Streeter.
"The number of employees at U.S. firms dwarf Canadian headcount," Vlaad said. While the investment banking business at JPMorgan employs around 26,500 people, the average Big Five bank has between 1,000 to 6,000 employees in that division.
Firms are looking for bankers with specific knowledge of resource-based industries such as mining, oil and gas, pulp and paper and energy sectors, which are the bread-and-butter of Canadian banking, Vlaad said.
Banks are also focused on recruiting senior, seasoned talent. BMO's Hoffmeister said that of the 203 bankers added to his group since 2009, 134 have been senior bankers and traders at the director and managing director level.
"They want senior players who can gain client attention," Vlaad said. "They're looking for generals, not foot soldiers."
Hiring can be expected to take place across both the U.S. and Canada. BMO, for example, will recruit in Chicago and New York, its largest offices, as well as in Houston, Boston and San Francisco, Hoffmeister said. Nearly half of BMO Capital Market's staff is U.S.-based.
The demand doesn't look like it will abate any time soon.
"If you're in a strong position in Canada and right across the border there's an opportunity in the investment banking market to build out a capital markets business, it makes a lot of sense to do that," Hoffmeister said. "That's why BMO made a strategic decision to expand capital markets. The landscape had changed, and the quality of bankers willing to move was pretty great."
CIBC is thinking along the same lines. A source familiar with the matter said that the bank will continue to pursue a hiring strategy consistent with the growth opportunities in the investment banking arm the bank is currently experiencing. Over the past three years, CIBC has added talent to its offices in Canada, New York, London and Asia. The bank declined to comment.
Financial Crisis Hiring Surge
Having emerged from the financial crisis in relatively stable positions, Canadian banks were able to bring on staff.
Scotia Capital, the investment banking division of Bank of Nova Scotia, grew to 1,776 employees in the second quarter 2011, up from 1,553 in the second quarter of 2009, the official end of the recession, according to the National Bureau of Economic Research.
Toronto Dominion has added around 400 employees to its investment banking division since the second quarter 2009.
BMO grew to 2,043 employees in the second quarter 2011 from 1,821 in the second quarter 2009.
CIBC employs 1,144 in its investment banking division as of the second quarter 2011, compared to the 1,089 it had in second quarter 2009.
RBC Capital Market's U.S. investment banking staff has grown by more than 25% over the past three years, the most recent information that was available. The unit now has 370 bankers who work in the U.S.
Canadian Hiring Freeze
While Canadian banks have maintained a stronger position than their American counterparts coming out of the financial crisis, they haven't been immune to some of the market forces dragging down business this year.
Like U.S. and European banks, Canadian banks are experiencing low trading volumes, said Michael Goldberg, a financial services analyst and vice president at Desjardins Securities, the brokerage unit of Desjardins Group, the Quebec-based financial group. "They had been building up desks to grow the trading side of the business, but I don't think they will want to do that to the same extent now."
One managing director at a Big Five bank who did not want to be named said he had seen several trading teams imported from the U.S. over the past several years, but that he doesn't expect the trend to continue in light of the sluggish trading activity.
"The decline in [trading] revenue is prevalent on both sides of the border," he said. "It's a function of reduced hedging volume plus a general lack of risk taking, not to mention much narrower bid/offer spreads."
While banks won't add to trading teams, they will lay off lower-performing employees and replace them with top producers.
"If there's going to be any activity in sales and trading, it will be to increase the quality of existing teams," Vlaad said. "They're going to get rid of their bottom tier and upgrade their talent."
Canadian banks also won't be hiring tech bankers. "Canadians want the meat-and-potatoes businesses, things they can touch and feel," Vlaad said. "That's how they establish their business. They don't want high tech and you won't see Canadian banks with huge businesses in Silicon Valley. They don't have that risk appetite."
Write to Julie Steinberg