The Canadian securities industry displayed an impressive rebound in 2009, and the strongest performance occurred in the fourth quarter, the Investment Industry Association of Canada reported on Monday.

In the last three months of the year, operating revenues for the industry totaled $4.8 billion, up 44.9% from $3.3 billion in the same quarter of 2008. Net profits for the quarter was $795 million, up 183% from $281 million the previous year.

For the year, operating revenues rose 11.7% to $16.3 billion, and net profits surged 53% to $2.87 billion.

The IIAC noted that improved market sentiment was a leading contributor to the turnaround in global equity markets. Credit markets also improved with credit spreads narrowing considerably during the year and borrowers increasingly tapping both debt and equity market for capital, the association said.

Within the industry, integrated firms largely led the turnaround in 2009. Integrated firms witnessed a 20% increase in revenues and a 76% increase in profits from the prior year, and accounted for more than 70% of total industry revenues and nearly 80% of total industry operating profits in 2009, the IIAC said.

Retail introducer firms and foreign institutional firms, meanwhile, continued to face struggles, with operating profits plunging 74% and 16% respectively from 2008.

Benefiting most from the resurgence in capital markets were the investment banking and principal trading businesses – two areas especially hard hit the previous year. The industry earned $3.9 billion from investment banking services in 2009, representing a 27% increase from 2008.

Underwriting activity picked up considerably with almost $300 billion of capital raised in 2009, a 50% increase from 2008. As a result, the industry’s underwriting revenues were nearly $1 billion higher than the prior years and in line with the 2006’s levels.

Fixed-income trading desks had a record-setting year, earning more than $2 billion in revenues – more than double 2008’s levels. Equity trading desk, which were plagued by losses in 2008, fared much better in 2009 but still fell well short of their 2006 performance.

Retail investors remain cautious

While much of the institutional business flourished, the IIAC noted that retail investors appear to have taken a cautious approach to the improved market condition, which delayed the recovery of the wealth management business. On the year, commission revenues fell a further 10% from 2008’s levels, including a 14% decline in mutual fund commission and trailers.

Industry fee based revenues, largely derived from discretionary managed and other fee-based retail accounts, fell 9% in 2009, its largest ever annual decrease. Fee revenue, however, totaled $2.4 billion on the year – its third highest level on record.

Additionally, wealth management areas gained momentum in the final months of the year with commission revenues, mutual fund revenues and fee revenues all noticeably higher than prior months.

IE