Investment Banking in Canada: Promising Career Launchpad, or Wintry Wasteland to Avoid?

We covered investment banking in Canada a long time ago on this site, but things have changed over time – and the original article was light on details and numbers.

Although there are some advantages to IB in Canada, it’s almost always better to start a finance career in the U.S. or U.K.

I can already hear Canadian readers screaming and proclaiming the benefits of free healthcare, so I’ll acknowledge that Canada does have some advantages over the U.S.

You could also argue that finance careers there beat most other careers in Canada, especially as a recent graduate.

But when you consider the recruiting landscape, compensation, and exit opportunities, Canada comes up short in most areas.

Let’s start with a quick industry overview before moving into the more controversial areas:

Investment Banking in Canada: Top Banks, Locations, and Industries

Canada is significantly smaller than the U.S. in terms of population, economy, and capital markets, and this one difference explains everything else.

It means the capital markets and banking systems are less developed and that the average deal size and volume are both lower.

It also means fewer investment banking positions within the country, making recruiting more challenging.

The Big 5 Canadian banks – the Royal Bank of Canada (RBC), the Bank of Montreal (BMO), the Toronto-Dominion Bank (TD), the Bank of Novia Scotia (Scotiabank), and the Canadian Imperial Bank of Commerce (CIBC) – tend to dominate domestic equity and debt deals.

You could also include National Bank to make it the “Big 6.”

M&A activity, as measured by dollar volume, is more of a mixed picture, and the bulge bracket banks tend to do very well because of many cross-border deals.

The Big 5/6 Canadian firms all have centers in Toronto with regional offices in places like Calgary, Montreal, and Vancouver.

Among these banks, most people would say that RBC is the strongest one internationally, followed by TD or BMO.

RBC’s M&A and BMO’s M&M (Metals & Mining) groups are usually viewed as the “best teams,” or at least the best-known ones internationally.

The bulge bracket banks also operate in Canada, but they tend to be more active on M&A deals – especially larger, cross-border ones – and on larger debt and equity offerings (over $1 billion).

Since the domestic capital markets are smaller, larger Canadian borrowers often issue in USD or other currencies to market to a larger investor base.

The standard “ranking” of BB banks is similar; GS, MS, and JPM still tend to be viewed as the top firms.

The elite boutiques have a presence in Canada, but they’re less active than in the U.S.

You’ll see the likes of Evercore, Rothschild, Lazard, and Greenhill advising on deals, along with Perella Weinberg Partners (PWP) via its merger with Tudor, Pickering & Holt (TPH).

Then there are the Big 4 investment banking / corporate finance groups, which tend to focus on much smaller deals, such as ones in the middle-market range and below.

Interestingly, many U.S.-based middle-market banks do not have offices in Canada, which leaves the market to other firms.

You could make a long list of Canada-specific middle-market and boutique investment banks, but a few names include Agentis Capital, ATB Capital (FKA: Altacorp), Canaccord, Capital West, Casgrain, Cormark, Desjardins, Eight Capital, Fort Capital, Haywood, iA Capital Markets (Industrial Alliance), Laurentian Bank Securities, Macquarie (operates more like a boutique), Maxit Capital (mining and merchant banking), Paradigm Capital, Peters & Co (energy), Research Capital (FKA: Mackie), Stifel FirstEnergy, and Stifel GMP.

Investment Banking in Canada: Toronto vs. Calgary vs. Montreal vs. Vancouver

Toronto is the biggest financial center, but it still has fewer IB jobs than places such as New York, San Francisco, or Chicago in the U.S.; it might be on par with LA.

After Toronto, either Montreal or Calgary tends to have the most deal activity, but Calgary is highly cyclical because of its oil & gas focus.

Montreal, like Toronto, covers diversified industries, but caters to companies in Quebec.

And Vancouver has a mining and forestry focus, with some bankers covering other companies that happen to be based in British Columbia.

Besides the industry focus and languages (French in Montreal), other differences between these locations and Toronto include:

• Office Size: The regional offices are all smaller, with ~10-15 up to a few dozen people in each, so there are fewer new hires.
• Target Schools: Students at “target schools” place well country-wide, but in some of these locations, you’ll also have a good shot coming from schools that are in the “semi-target” category, such as the University of British Columbia (UBC) [PMF] and Simon Fraser University (SFU) in Vancouver.
• Advancement: It can be more difficult to advance in regional offices because the teams are smaller and there’s less turnover at the mid-to-top levels.
• Deal Flow: It tends to be less consistent due to the focus on specific industries, regions, or company types in these other offices.

Investment Banking in Canada: Recruiting and Interviews

The IB recruiting process in Canada is similar to the one in the U.S.: it starts with online applications and HireVue interviews and proceeds to in-person interviews if you perform well (unlike EMEA, there are no assessment centers).

They ask similar interview questions, but some technical questions may differ because Canadian companies follow IFRS rather than U.S. GAAP.

As a specific example, lease accounting differs substantially under IFRS, so accounting questions about this one could come up.

Bankers still look for the same qualities in candidates: high grades, a well-known university, finance internships in your first and second year, and strong technical skills.

The main differences are:

• Timing: While the IB recruiting timeline has moved up in both the U.S. and Canada, it’s still a bit slower in Canada, with the Canadian firms starting and finishing a few months after the earliest start dates in the U.S.
• Number of Positions: Each Big 5 bank might hire a dozen or so Analysts for its Toronto office each year, and if you add the other cities, the bulge bracket banks, and the boutique and middle-market firms, there are maybe ~100 – 200 new IB Analyst hires across Canada each year.

I can already predict that someone will argue with this number in the comments, but the order of magnitude is correct (i.e., the number of new IB Analysts hired each year is closer to 100 than 10 or 1,000).

• MBA Recruiting: This is much less developed, so it’s harder to make a career change. Most Associates are Analysts who accept promotions.

Most of these differences sound negative, but there is one positive point: traditionally, getting a work visa in Canada has been easier than in the U.S. because there are more immigration pathways.

Investment Banking Target Schools in Canada

Western University (Ivey) and Queen’s University (Smith) are the top two schools for investment banking in Canada.

After that are McGill (Desautels), Waterloo (stronger for S&T / markets roles), and the University of Toronto (Rotman).

Below them are others such as the University of British Columbia (specifically, the Sauder Portfolio Management Foundation [PMF] program), Wilfrid Laurier, the University of Calgary, York (Schulich), HEC Montreal, the University of Alberta, and Concordia.

You could say these are “semi-targets” or “targets for specific locations.”

Why is Recruiting into Investment Banking So Hard in Canada?

Many people complain online about the difficulty of recruiting for IB roles in Canada.

It is more difficult to win offers there, but the main issue is that there aren’t that many new hires each year.

If you consider the top few schools, there might be ~1,500 graduates each year, but not all of them are interested in banking, and not all of them stay in Canada.

Perhaps one-third of this total – a few hundred candidates – target IB roles in Canada.

Source: The Ivey HBA employment report cites 575 graduating students, with 12% accepting IB roles, so it’s reasonable to assume that some multiple of this 12% applied for these roles.

Students from semi-target and other schools also compete, so the annual pool might be ~500 – 1,000 candidates for ~100 – 200 spots.

With these numbers, the success rate could be anywhere from 10% to 40%, but something in the middle (20 – 25%) is probably closest to the truth.

These are not terrible odds, but they’re modestly worse than the ones in the U.S. and U.K.

Investment Banking in Canada: Salaries and Bonuses

The general pattern here is:

3. Banks tend to pay similar base salaries and bonuses to the U.S., but in Canadian dollars (CAD) rather than USD, which means a 20 – 30% discount depending on FX rates.
4. Sometimes, the absolute numbers in CAD are also lower because Canadian banks tend to match pay increases in the U.S. more slowly (e.g., they might be 6 – 12 months behind).
5. And to make things even more confusing, some U.S.-based firms, such as Evercore and Greenhill, do pay in USD, in which case compensation is about the same as in the U.S.

If you go by 2022 investment banker compensation numbers and apply this 20 – 30% CAD/USD discount, it’s roughly $110K – $190K USD for Analysts and $225K – $410K USD for Associates.

I don’t have specific numbers for MDs and other senior bankers, but bonuses are likely lower because deals tend to be smaller.

The Lifestyle and Hours in Canada

Now we arrive at one bright spot: on average, the hours and lifestyle are slightly better in Canada.

Deal flow is lower, transactions tend to be simpler, and financial sponsors (private equity firms) usually account for a low percentage of all M&A deals (~20 – 30% range).

There’s also less travel because many client companies are concentrated in or near a few major cities.

It’s still investment banking, so don’t expect “normal hours,” but you’re less likely to get crushed by 90-100-hour workweeks in most groups.

The average week at the junior level might involve ~10% fewer hours than an equivalent group in the U.S. (e.g., a Big 5 Canadian M&A team in Toronto vs. M&A at a bulge bracket in NY).

Investment Banking in Canada: Exit Opportunities

The main exit opportunities in Canada are:

1. Move into private equity, usually at a middle-market or smaller fund (with a few seats at the mega-funds and the large domestic firms).
2. Join a pension fund in a direct investing role.
3. Join a corporate development team at a normal company or move into another industry role.
4. Accept an Analyst-to-Associate promotion.

There is very limited hedge fund activity in Canada, so hedge funds are not a common exit option.

This might sound like a reasonable set of exit opportunities, but the problem is the smaller market size.

If there are ~100 – 200 new IB Analysts hired within Canada each year, there are not even close to that many new private equity and pension fund positions.

Firms might hire a few dozen new Associates, so ~70% of IB Analysts will stay in banking or move to a corporate role.

Within private equity, there are some large, independent funds like Onex, Brookfield, Catalyst, Birch Hill, and Altas.

However, all of these – except for Onex and Brookfield – are closer to mid-sized firms in the U.S. if you judge them based on AUM or average deal size.

There are also many lower-middle-market (and smaller) firms, such as DW Healthcare, Fengate, Forum, Georgian, Inovia (more of a VC), Northleaf, NovaCap, Sagard, and TorQuest.

As with smaller firms in the U.S., compensation tends to be lower at these firms, and advancement is sometimes tricky if the firm is extremely small and Founder-led.

Outside of the dedicated private equity firms, the biggest PE investors are the pension funds: Canadian Pension Plan Investment Board (CPPIB), Caisse de dépôt et placement du Québec (CDPQ), Ontario Teachers’ Pension Plan (OTPP), British Columbia Investment Management Corporation (BCI), Ontario Municipal Employees Retirement System (OMERS), and a few others.

Of these, CPPIB and OTPP are the most active in private equity – by far – and tend to compete with the mega-funds for large deals worldwide.

A long time ago, pension funds operated more like private equity funds of funds, but they have built their direct investing teams over time.

Besides the relatively few positions, the other problem with exit opportunities in Canada is that compensation tends to be lower than at similar U.S. firms, even though cities like Toronto are quite expensive.

Salary and bonus numbers differ between direct PE firms and pension funds and depend on the firm’s AUM, but the broad range for Associates is $150K – $350K CAD.

If you ignore the “CAD” part, it doesn’t seem that much different from compensation in the U.S., but it’s a 20 – 30% discount with that factored in.

Also, pension funds pay less than firms like Onex and Brookfield, and (lower)-middle-market PE firms pay less than pension funds.

Pension funds pay lower bonuses and do not offer carried interest, so the pay is also lower at the top levels.

So, do not expect to see the top-end of this range unless you’re at one of the top two firms.

One Final Note: If you want to recruit for PE and other roles outside of Canada, you’ll have a better shot if you work at one of the top U.S. banks.

For exit opportunities within Canada, one of the Big 5/6 or other domestic firms is fine.

Investment Banking in Canada: Final Thoughts

I don’t think investment banking in Canada is terrible, but it is worse than starting in the U.S. or U.K. if you can win sponsorship there or you’re already a citizen or resident.

The compensation is lower than in the U.S., the industry is smaller, and there are fewer exit opportunities.

There are some benefits, such as slightly better hours and easier work visas in some cases, but I’m not sure these offset the negatives.

So, if your goal is to maximize compensation and exit/advancement opportunities, go to the U.S.

If you want a better work/life balance, you’re fine with reduced compensation, and you want broader exit opportunities, go to the U.K.

And if you have other priorities, such as family/personal motivations, and you want to earn a lot even if you’re not maximizing your compensation, maybe investment banking in Canada is just fine.

It could always be worse – at least you’re not in Australia!