(September 29 10:15 ET) — The Investment Dealers Association of Canada says that at its current pace the booming securities industry will re-write performance records from the past five years, despite a slowdown in the second quarter.

The first six months of the calendar year are outstanding despite a 20% drop in second quarter operating profits from the first quarter. First half profit is sitting at $2 billion, more than double the same period last year, and close to the record $2.1 billion earned in the full year total of 1997. Total revenues for the first half of 2000 are up to $6.7 billion, up 55% from the first six months of 1999.

For the first half of 2000, commission revenues were $3.4 billion, up 59% from the first six months of 1999. In the second quarter, commission revenues were down by one-third compared to the previous quarter, at $1.3 billion. The IDA says some retail investors were frightened off in the second quarter by a short-term market correction in the high-tech sector, which recovered by mid-June.

During the first six months of this year, mutual fund commissions reached $786 million, up 31% from the $598 million earned through the first half of 1999. Mutual fund commissions accounted for 23% of total commission revenues, down from 28% for the first half of 1999 and well below the peak of 31.5% in 1998. In the second quarter, mutual fund commissions generated $333 million in revenues, down 27% from the previous quarter. Although mutual fund commission revenue is an important contributor to total commission revenues, online/discount trading and other mutual fund products have been eroding mutual fund’s share of total commission revenue.

In just over half a year to July 31, the three Canadian exchanges traded $656.7 billion worth of equities, easily surpassing the 1999 combined total of $578.7 billion. Retail investors reduced their cash holdings in the second quarter by 7% to stand at $16.7 billion. Client margin debt outstanding stood at $9.8 billion, down 5% from the $10.3 billion at the end of April 2000. July margin numbers showed total client margin debt outstanding rebounding to $10.9 billion, an increase of nearly 11%.

Investment banking was the only major line of business that showed an increase in the second quarter in revenues to $604 million from $535 million in the first quarter. Through the first half of the year, investment banking revenues are up 44% versus 1999 to $1.1 billion.

Principal equity trading revenues were $260 million, bringing the six month total to $625 million, more than double the six month total of 1999 and higher than any full year total on record. Fixed income trading revenues were $162 million, down 18% from the previous quarter and the lowest total since the third quarter of 1998. Turnover activity in the domestic bond market fell again in the second quarter, down nearly 8% versus the previous quarter. Through six months of 2000, fixed income trading was down 3% against the first six months of last year.
-IE Staff