After the economy adjusted to COVID-19, lending become a lot more profitable
The Royal Bank of Canada reported a 40 per cent profit growth in its 2021 year.
The bank's net earnings increased by roughly $4.5 billion, reaching $16 billion, according to its financial statements released in March.
Management said this was due to improving economic conditions as the world adjusted to the COVID-19 pandemic.
RBC's division that oversees personal and commercial loans in 2021 earned more than half of the bank's total profits.
It reported a 54 per cent growth year-over-year, increasing profits from $5 billion to nearly $8 billion.
Management said this was driven by the changing lending market between 2020 and 2021.
According to the bank's annual shareholder's notice, 2020 was a difficult year for lending, costing the Personal and Commercial Banking division.
The economic shift of 2021 allowed Personal and Commercial Banking to increase its profitability, according to management.
The division reduced its "provisions for credit losses," which represent how much a company expects to lose after loaning money.
According to RBC's annual shareholder's notice, this drove growth in RBC as a whole.
The bank's profit grew by 40 per cent, while its revenues grew by 5 per cent.
Acknowledging RBC's financial performance in 2021, its human resources committee awarded CEO David McKay a 24 per cent pay increase.
McKay received over $15 million in compensation, made up of just under $14 million in bonuses and a $1.5 million base salary.
Nearly $10 million of the award was offered in stock options and shares, which tie McKay's compensation to the future performance of RBC.
The 2021 growth put RBC back on its track of increasing profits year-over-year, a trend that previously carried since 2014.
RBC is one of the top 20 companies traded on the Toronto Stock Exchange.
In 2021, the bank paid CEO David McKay the highest compensation of any company on that list.
McKay's $15.5 million was taken from the bank's total earnings on the year, which brought a profit of $16 billion from its revenue of $49.7 billion.
McKay was not the highest paid CEO in 2020.
Brian Hannasch, CEO of Alimentation Couche-Tard, received the highest CEO compensation that year.
The multinational convenience store operator paid Hannasch just over $13 million from its profit of $2.3 billion.
At the time, the company had revenues of $54 billion.
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