After another tough quarter in a two-year string of downbeat reports, Canaccord Genuity Group Inc.’s top executive said he sees some hopeful signs for the firm’s capital-markets business.
The Canadian investment-banking and wealth-management company saw revenue drop by 11% to C$337.3 million ($247 million) in its fiscal second quarter, ended Sept. 30, according to a statement late Tuesday.
“It’s probably been the longest, worst new-issue market in my career,” Canaccord Chief Executive Officer Dan Daviau said in an interview. “You’ve always had bad quarters, but rarely do you have bad successive years.”
The firm was break-even, excluding special items, below analysts’ expectations for a profit of 10 Canadian cents a share, according to a Bloomberg survey.
Capital-markets revenue plunged 30% to C$144.8 million amid a dearth of initial public offerings and new equity issues and a lack of transactions in the firm’s key sectors, which include cannabis and mining.
“Hopefully we’re at a low point in our business,” Daviau said on a conference call with analysts Wednesday morning.
Daviau said he’s already seen an improvement in mergers and acquisitions activity at Canaccord and believes new issues have hit a bottom and should start to rebound in the coming months. “I’m cautiously optimistic that we’re through it now,” he said in the interview.
This week, legal software provider Dye & Durham Ltd. announced it hired Canaccord and Goldman Sachs Group Inc. for a strategic review that may lead to a large divestiture.
Canaccord’s wealth-management business, which is focused mainly on the UK, Canada and Australia, remained a stabilizing force for the company, with revenue up 11% to C$187.2 million.
“Thank God that we had a wealth business that we had invested so much in over the last five, six years,” Daviau said in the interview.
Wealth-management revenue was up 25% at C$101 million in the UK division, Canaccord’s largest, but slipped slightly to C$70.8 million in North America.
Canaccord shares rose 3.6% to C$7.75 at 11:01 a.m. in Toronto. They’ve dropped 7.3% this year, compared with a 3.9% increase in the S&P/TSX Composite Index.
The firm’s results included C$10 million in restructuring costs incurred for about 100 job cuts in the investment-banking business made in August. Daviau said he doesn’t see the need for further reductions in staff.
Canaccord revealed in June that it’s facing an investigation related to its wholesale market-making activities and could be required to pay a “significant penalty” to settle it. The firm hasn’t said what jurisdiction is conducting the probe, and Daviau said during the conference call that there have been “no material developments either way” to disclose.
(Updates with comments from earnings call starting in sixth paragraph.)
