The Investment Dealers Association of Canada, in its quarterly publication, “Securities Industry Performance”, reported a slower second quarter for the Canadian securities industry. Operating profit in the second quarter ending June 30 totalled $879 million, down 21% from the first quarter.

The weaker bottom line in the quarter reflected the double-digit declines in the industry’s key revenue drivers, trading, commissions and investment banking. Undoubtedly, worries over surging energy prices and interest rate hikes heightened volatility in the period. While operating profit was lower in the quarter at $879 million, it was not far off from the $930 million quarterly average posted during the record-high 2003-04 period.

Despite the weaker profit performance in the second quarter, the big picture for the industry remains solid with most revenue categories up during the first half of the year. In the first six months this year, operating profit was $1.9 billion, up 7% over the robust first half of 2004. Looking ahead, the Canadian securities industry appears to be off to a good start in the third quarter with the TSX and trading activity up in July-August. While these advances are encouraging, the impact of skyrocketing oil prices and Hurricane Katrina on the economy will likely be the biggest uncertainty for the market in the coming months.

Other highlights:
– Commission revenue was $1.1 billion in Q2, down 17% quarter-over-
quarter. For the first six months, commissions were unchanged from the same period last year.
– Investment banking revenue was $867 million in Q2, down 11% quarter-
over-quarter. Year-to-date, investment banking was up 18% over the first half of 2004.
– Fixed income trading revenue was $149 million, down 16% quarter-over-quarter. Year-to-date, fixed income trading was up 3% over last year.
– Equity trading in Q2 was just $62 million, down 40% quarter-over-quarter and 55% year-to-date.
– Industry employment expanded 2% quarter-over-quarter. For the first six months, total employment was up 1% over the same period last year.