In its second quarter ended Sept. 30, Canaccord Genuity Group Inc. posted adjusted revenues of $530.4 million, up 24% from the same quarter last year.
Adjusted net income totalled $44.9 million for the quarter — up 41.3% year over year — for diluted earnings of 27 cents per common share.
That was driven by record quarterly revenue of $269.4 million in its global wealth management business, Canaccord said.
At the same time, Canaccord increased its provision related to a regulatory enforcement matter in the United States to US$75 million from US$55 million.
In 2023, Canaccord disclosed the business was facing a regulatory investigation that could lead to “significant penalties.”
The increased provision reflects the company’s current estimate of total monetary penalties, Dan Daviau, Canaccord chairman and CEO said in a conference call on Friday.
While Daviau said he could not discuss details as the matter is ongoing, he said the firm is “cooperating fully” with the regulators and expects to reach a “global resolution in the coming months.”
“First and foremost, I want to acknowledge how seriously we are taking these matters. Compliance and integrity are fundamental to the trust you place in us as shareholders,” he said.
“I want to reaffirm that over several years, our U.S. business has substantially invested in a comprehensive compliance transformation aimed at aligning with regulatory standards and remediating its existing program.”
He added the firm has known for three years that it had to set capital aside for the provision and has enough capital to continue with its U.S. operations and to invest in the business.
In addition to the increased legal provision, the company also recorded a $110-million, non-cash goodwill impairment in the quarter related to its U.S. capital markets business.
After accounting for both, in non-adjusted International Financial Reporting Standards terms, Canaccord reported a net loss of $186.8 million for the quarter and a diluted loss per common share of $2.04. In a release, it said the goodwill charge reflects “reduced business activity driven by an operating environment affected by evolving market dynamics and trade-related uncertainties, impacting revenue and profitability for this business.”
On the call, CFO Nadine Ahn said the company continues to see substantial long-term value in its U.S. business.
“However, accounting standards require fair value assessment at what we believe to be the bottom of the cycle,” she said. “The goodwill charge is a non-cash accounting adjustment and does not result in any current or future cash outlay. I’d like to emphasize that this adjustment has no impact on the ongoing operations or our capacity to continue to invest in our U.S. business …”
Wealth business
Total client assets in Canaccord’s global wealth management division rose by 21% year over year to a new record of $133.6 billion, the firm reported. Growth was strongest in Australia (up 34.9%), followed by Canada (up 23.7%) and the U.K. at 17.6%.
In Canada, client assets are now $49.4 billion, compared with $74 billion for the U.K. and $10.1 billion in Australia.
Reuters reported last month that Canaccord had received an offer for its U.K. wealth business. Daviau said he couldn’t comment on that, but that the firm is “incredibly pleased” with the performance of all of its wealth businesses.
“Last time we had revenues like this … two thirds of them were capital markets, and a third of them were wealth,” Daviau said on a conference call. Now, more than half of its revenues and “way more than half” of its earnings are coming from wealth, he added.
The firm set out to grow its wealth business six years ago, Daviau noted. It sold its U.S. wholesale marketing business and acquired Brooks Macdonald International Ltd. and Australia’s Wilson Advisory this year.