By James Langton

(September 2 – 10:10 ET) – The securities industry posted slightly improved results through the second quarter of the year, says the Investment Dealers association. However, retail is the only business which looks healthy.


The retail business has been the beknighted profit driver over the past couple of years, thanks to decent markets and a fundamental increase in investor interest. The IDA says the discount business accounts for about 10% of the retail business. That is hitting retail margins. Yet, the iDA predicts the retail advisory and share execution business “will remain buoyant.”


The mutual fund business is suffering. Gross sales are down 50% year over year. In fact, apart from the retail business, the industry is generally suffering. Investment banking earnings are down 21% through the first half, due to a lack of underwriting business. Revenues from the M&A advisory business is keeping investment banking alive, although the IDA is anticipating greater cost cuts. That likely means there’ll be a few unemployed rainmakers, since people are the first thing to go when the industry cuts.


Fixed income trading revenues were down10% year over year in the first half, and were particularly weak in the second quarter due to rising interest rates.


With all this weakness in the industry overall, Canadian firms have been hit even harder by the fact that foreign dealers are moving in to grab the sweetest plums. The IDA is expecting record results for foreign dealers this year. Their revenues are collectively up 23% for the first half, while they are down 11% for Canadian firms.


Globalization in the securities business, particularly on the M&A side, appears to be driving their growth. Through the first half, foreign firms have acquired more than $20 billion worth of Canadian firms, while Canadians have bought $13 billion worth of foreign firms. This marks a 27% jump in acquisitions by foreigners and a dramatic falloff in Canadian buying. The weak dollar is at the core of the story here.


For more please see:

www.newswire.ca