Canada's two biggest independent brokerage firms reported quarterly results that were hammered by the disruptions in capital markets, with Canaccord Capital Inc. suspending its dividend because of a loss and GMP Capital Trust saying profit declined 82 per cent.
Canaccord said it had a fiscal second-quarter loss of $5.4-million, or 11 cents a share, after reporting a profit of $12.4-million, or 26 cents, a year earlier. Revenue fell 30 per cent amid a lack of stock sales and merger deals.
GMP, which has already slashed its monthly payout twice this year, said profit slumped to $6.95-million, or 11 cents a share, from $39.3-million, or 62 cents a share. Revenue fell about 42 per cent.
The firms rely on busy markets in small to medium-sized oil, gas, technology and mining companies, and all of those sectors have gone dormant as world stock prices have plunged. As a result, the firms aren't arranging many mergers or stock sales for companies in those businesses, and they are trading fewer shares of the companies on behalf of clients.
Both firms have been reducing expenses, including cutting staff, to cope. However, both companies warned shareholders who have already endured big drops in their stocks that the end of the troubles may not yet be at hand.
“Given all of the factors that make the current market situation truly unprecedented, we cannot reasonably predict the timing of a turnaround in transaction volumes,” Canaccord chief executive officer Paul Reynolds said in a letter to shareholders.
There are other knock-on effects of the crisis. Canaccord, for example, said it had to increase provisions for bad debt because some clients may not repay loans. GMP had losses of $8.8-million in its business of principal trading, reflecting declines in the values of securities the firm holds.