Canada-investment-banking

Investment Banking & Finance in Canada

In Investment Banking by Gaurav SharmaUpdated On:

Canada-investment-banking

Canada is an advanced, developed economy with a strong service sector as well as substantial natural resources. This mix of old and new industries makes Canada rather unique and perhaps comparable only to Australia in terms of its fundamental economic construct. This has a significant impact on Canada’s banking and finance sectors as well.

Investment Banking and other finance jobs offer remarkable opportunities for graduates and young professionals in Canada. It is still one of the highest paying sectors, with significant growth opportunities. Although, the size of the Canadian finance industry does not compare with its ginormous southern neighbour or even that island country it shares its Queen with, it is still one of the largest and most developed in the world.

1. Canada – The Resource Economy

Canada is well endowed with vast reserves of natural resources. Natural resource extraction (mining, quarrying, and oil and gas) is the third largest industry in Canada. This has a significant impact on the investment banking and finance sectors as a good chunk of transactions happen to support these sectors. Having experiences or interest in these sectors could mean more job opportunities for candidates.

These traditional industries also have noticeable different capital structures compared to, say, tech or other sectors. The operating margins are lower, regulations are tighter, debt is higher and so on. Consequently, the role that M&A, DCM or ECM teams play is also noticeable different. For example, equity issuances in Canada are substantially more popular than in the US while debt issuances slightly less so.

2. Investment Banking in Canada vs the US

The biggest differences of course is the size. The US economy and consequently US banks are far larger. This means that there are more job opportunities, but there are also far more competitors for the same job. The deals in Canada tend to be much smaller and fewer, but the teams are also proportionally smaller.

Another noticeable difference is the absence of independent investment banks like in the US (Goldman Sachs, Lazard etc.).  Investment banking in Canada is almost always a division within a large commercial and corporate bank. This is not unique to Canada though, it’s the same all around the worlds. It’s the US that is the outlier and even there the trend is changing with many independent investment banks now being merged or acquired by commercial banks.

It’s also worth noting that large Canadian corporations usually add some foreign investment banks to their list of partners as well. When they reach a size where they need access to more capital and trade globally, some American and European banks are added to the mix.

3. How to become an Investment Banker in Canada

As with top tier finance roles anywhere, you need to focus on the following:

  1. Academics
  2. Internships
  3. Networking
  4. Work Experience

3.1. Investment Banking Target Schools in Canada

These are the top target schools for investment banking in Canada.

Tier 1:  Richard Ivey School of Business, Queens Commerce, McGill University

Others: Waterloo University, UBC Sauder, University of Alberta, Rotman Commerce, University of Calgary

You will have a much higher chance of getting in if you graduate form one of the top tier target shocks. After that, it just gets progressively harder because you need to overcome that advantage of your target-school peers with something else.

Even though I have just mentioned the name of the schools, remember that you need good grades as well. Focusing on quanty subjects like finance, mathematics, economics, accounting and even physics is advisable.

3.2. Internships & Networking

Securing an internship with a bank is the next big step and an indispensable one. Getting a finance internship should not be that hard, however getting it with the bank that you want might. You will have to start preparing and planning from day one.

Networking is also key for securing both internship opportunities and full-time positions. Canadian investment banking teams are much smaller than the US and UK, so they care more about how well you fit in. Because of this reason, getting on their radars is pretty important.

Here is a guide to help you out with the internship process and strategy in general.

3.3 CV Building

In addition to academics and internships, there are plenty of other opportunities to make your CV stand out. Extracurricular actives of any sort are always welcome. Keep in mind that recruiters are not only looking for smart and hard workers, they are also looking for people they would be comfortable working with.

There are also certain courses and certifications that should help you stand out and prepare for the IB recruitment process. You can have a look at them here:

Best Investment Banking Courses ranked by Bankers (2020)

However, if you still need help getting your CV ready, here are some professional services to help you do just that:

Best Resume Writing Services – Investment Banking & Finance

4. Compensation

IB Compensation is Canada is slightly lower than the US but still very competitive compared to other jobs locally. As the financial hub, Toronto has the highest paying jobs followed by cities like Vancouver, Montreal and Calgary.

Analysts can usually expect to earn around CAD 80,000- 140,000 with Associates earning CAD 120,000- 220,000 (these numbers include variable pay). This obviously depends on the bank, location, and sectors you cover.

The numbers also vary between the Canadian Big Five, the satellites of the US Bulge Bracket firms and the local Boutiques. Compensation at the analyst level is quite on par with the US, if slightly less. But the gap begins to widen at the VP level and higher because of the difference in deal flow. Managing Directors should still expect to make north of a million though.

5. Career Path & Exit Options

The Career path and exit options in Canada are pretty similar to other places with a few notable differences.

The main point of differences is that more investment bankers choose to continue with their jobs rather than move to the buy side. Part of this has to do with the fact that there are less options to move to while some just chose to move to the US. That is not to say that there aren’t good private equity funds in Canada, its just that it is less obvious of a move than it is in the US.

5.1. Natural progression

If you choose to stay, you will rise through the ranks and your compensation will also increase proportionality. Personally, I think it’s a perfectly viable option. You would mostly be doing grunt work as an Analyst which gets markedly better as an Associate along with almost doubling of your compensation.

Things start getting even better at the VP/ Associate Director level as you start having some client interactions. From this is inflection point, you will increasingly start focusing on client interactions and business development and leave the number crunching to juniors.

If you work for one of the Big Five Canadian banks, you also have the option to moving into leadership positions as these are full-service commercial banks as well.

5.2. Moving to Industry

There are plenty of opportunities of moving into corporate development or other finance roles in Canada’s large and varied industry. While this career options is available everywhere, Canadian oil and gas firms are usual up for matching your pay or even bumping it up.

In addition to corporate development roles, there are also trading roles available at some firms. That is a benefit of being in a resource rich economy.

5.3. Moving to Private Equity/ Hedge Funds

Toronto has plenty of Private Equity firms that you can choose to move to. Birch Hill, TPG, Crestview, Onex, Brookfield etc. are some of the best among dozens of other PE shops in Canada.  It might also be worth mentioning that Canadian pension funds are also perfectly viable options with only slightly lower compensation but much better quality of life.

5.4. Moving to the US/ UK

A decent percentage of Canadian bankers to move to the US because of higher compensation and a much larger market. Such a move is far more likely for those working at the Canadian satellites of the bulge bracket US banks.

The is of course personal preference and staying in Canada is also a perfectly viable career option with plenty of opportunities fore growth. It’s just that being location agnostic can help speed your career along especially if you operating in a smaller market.

6. Largest Canadian Investment Banks

The “Big Five” Commercial Banks in Canada are also the largest investment banks:

  • Royal Bank of Canada (RBC)
  • Toronto-Dominion Bank (TD)
  • Bank of Nova Scotia (Scotiabank)
  • Bank of Montreal (BMO)
  • Canadian Imperial Bank of Commerce (CIBC)

Other than the big five, you also have:

  • National Bank of Canada
  • Canadian Western Bank
  • Laurentian Bank
  • HSBC Bank Canada
  • Tangerine Bank (owned by Scotiabank)

If you plan on working in the investment banking in Canada, it is highly likely you would be working with either one of the Big Five or with a foreign bank. There are several boutique banks as well (like Canaccord, GMP, Cormark) but working for a boutique in Canada is far less likely than in the US.

About the Author

Gaurav Sharma

Gaurav started his career as a Corporate and Investment Banking intern at Citi in 2009 and eventually ended up as an Associate Director at Standard Chartered Bank’s Wholesale Banking division a few years later. By 2016, Gaurav was consulting FinTech start-ups in London with product development in the institutional banking space. He also advises mid-market Private Equity/ Asset Management firms and Banks in North America and Europe with investments in the financial services and FinTech sector. Gaurav writes on topics ranging from European Union banking regulations and FinTech to Blockchain startups and the inevitable rise of our AI overlords! He has an Engineering degree in Computer Science and an MBA with a double major in Finance and Marketing. He is also a Certified Financial Risk Manager.