Profit growth at Canada's securities dealers is cooling thanks to a slowdown in stock trading and income trust sales, but a surge in fees from advising on mergers and acquisitions still leaves investment banks and stock brokerages on track for a record year.
The Investment Industry Association of Canada, the industry group that represents the securities business, said that profit for member firms in the third quarter totalled $1.2-billion, 5.8 per cent lower than in the second quarter and well below the first quarter's record $1.6-billion.
Commissions on trading, the biggest generator of revenue for the industry, slumped 13.1 per cent in the quarter as “rising Middle East Violence, valuation concerns, the commodity correction and mixed economic data roiled the stock market for most of the summer,” the group said in a report released today.
Even with the slowdown in recent months, the country's investment dealers, which include behemoths such as RBC Dominion Securities Inc. as well as boutiques such as GMP Securities, have now piled up $4.1-billion in operating profit in the first nine months of the year. That's almost a third more than the first three quarters of 2005 and puts the industry most of the way to a yearly record with three months still to go.
“As we kick off the holiday season, there is little in the way to prevent the industry from easily surpassing last year's record $4.3-billion in operating profit,” the association said, noting that stock prices have rallied since summer. “Overall market conditions turned more favourable in the fourth quarter, although Ottawa's surprise Halloween announcement to levy tax on income trust revenue proved to be a major negative.”
© The Globe and Mail
