Canaccord capital markets revenue slumps but wealth unit is a bright spot

The firm will take a restructuring charge amid challenging times for revenue generation

Canaccord capital markets revenue slumps but wealth unit is a bright spot
Steve Randall

Market conditions have proved a challenge for Canaccord Genuity Group Inc. with mixed fortunes across its divisions including its global wealth management business.

The firm reported its first quarter results Thursday with revenue of $343.3 million, an increase of 8.2% over the same period in the prior year and net income before taxes (excluding significant items of $32.9 million), an increase of 19.8% or $5.4 million year-over-year.

But the firm said that its revenue was impacted by interest rates, reduced advisory fees revenue due to delays in completion of ongoing mandates, increased development costs in connection with the expired management-led bid, as well as higher general and administrative costs due to elevated conference and promotional expenses and professional fees.

The firm will take a restructuring charge of $10 million in Q2 fiscal 2024 and has recently reduced its headcount in Canada and the US by around 7%, mostly in its capital markets division.

Canaccord Genuity Capital Markets earned revenue of $145.7 million for the first fiscal quarter, a year-over-year decrease of 11.2% (on a consolidated basis) with a 41% slump for its US division and a 51% decline in advisory revenue across its US and UK divisions which both suffered from challenging conditions.

Wealth management gains

However, Canaccord Genuity Wealth Management was a bright spot with combined global wealth management operations earned revenue of $191.0 million, up 17.8% year-over-year while net income before taxes (excluding significant items) increased by 45.6% year-over-year, to $36.0 million.

In North America, revenue was in line with year-ago results at $72.6 million, while UK and Crown dependencies saw a 41% increase year-over-year with revenue of $103.2 million.

Overall, Dan Daviau, president & CEO of Canaccord Genuity Group Inc., sees better times ahead.

“Following a brief period of modest recovery, market conditions in our first fiscal quarter continued to be challenging for capital raising and M&A activities. Our wealth management businesses have continued to perform well, providing resiliency in our results,” he said. “The environment appears to be improving as our clients begin to anticipate recovery and we are hopeful for stronger business activity towards the second half of this fiscal year.”