VANCOUVER, British Columbia (Reuters) - The chief executive of National Bank of Canada won’t be paid an annual bonus for 2007, after the country’s sixth biggest bank fell short of its financial targets because of debt market troubles, National Bank said on Friday.
Bank President and CEO Louis Vachon, who took the top job at the Quebec-based financial institution last June, will receive a base salary of C$675,074 plus stock options, but no bonus, for an estimated total 2007 package of almost C$3.9 million ($3.9 million).
That is down 40 percent on Vachon’s earnings in 2006, when he was National Bank’s chief operating officer, figures in the bank’s management proxy circular show.
Michel Tremblay, who was National Bank’s chief operating officer last year but has since left the bank, also did not receive a bonus. But Real Raymond, the bank’s former CEO until he stepped down on May 31, 2007, received a bonus of C$756,233 in addition to his salary.
National Bank’s diluted earnings per share fell 37 percent to C$3.22 in the year ended October 31, well short of its target of growth of between 5 percent and 10 percent.
Its return on equity, a measure of how efficiently a bank uses its capital, at 11.5 percent for 2007, also missed the bank’s target range of 16 percent to 20 percent.
The poor results came mainly on the back of the collapse in Canada’s non-bank asset-backed commercial paper (ABCP) market, which froze up in August on fears the securities were invested in U.S. subprime mortgages.
The bank agreed to buy C$2.1 billion worth of troubled ABCP from the retail and small business customers it had sold the paper to, resulting in a C$575 million pre-tax charge in the fourth quarter because of a drop in the value of the ABCP.
National Bank also revealed that 48 company officials, including CEO Vachon, collectively held C$7.8 million of the ABCP that the bank purchased. It argued in the proxy circular that, as bank clients, they had to be included in the deal.
“They could not be treated differently from other retail clients and penalized for doing business with their bank,” Andre Caille, chairman of the board committee set up to deal with this issue, said in a statement.
National Bank did not buy ABCP from corporate clients with holdings of more than C$2 million, a decision that has angered some of those affected.
Reporting by Nicole Mordant; Editing by Rob Wilson