Canaccord profit drops 58 percent on capital markets

Fri Aug 8, 2008 12:56pm EDT
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TORONTO (Reuters) - Canaccord Capital CCI.TO reported a steep drop in its first-quarter profit on Friday, hurt by weak capital markets and a tough comparison to record year-earlier results.

The Canadian investment bank said it earned C$16.5 million ($15.4 million), or 31 Canadian cents a share, down from C$39 million, or 80 Canadian cents a share, for the same period last year.

Analysts had expected earnings of 25 Canadian cents a share, according to Reuters Estimates.

The firm, based in Vancouver, British Columbia, said that revenue fell 30 percent to C$172.7 million, led by a 41 percent drop in investment banking revenue due to "significantly lower activity" in its Canadian and British capital markets operations.

Canaccord's results mirrored those of competitor GMP Capital Trust, which on Thursday reported a 30 percent drop in revenue and a 59 percent plunge in profit.

Canaccord's share price has tumbled 49 percent so far in 2008, faring slightly better than the 52 percent fall in GMP Capital's unit price.

Canaccord and hundreds of its clients, along with other investment dealers and investors, are awaiting an Ontario court decision on a planned asset-backed commercial paper restructuring plan.

This segment of the short-term debt market seized up nearly a year ago on heightened concerns about U.S. subprime mortgages.

Canaccord did not make any fair-value adjustment for its corporate holdings of ABCP in the latest quarter. At June 30, it held ABCP with a par value of C$42.7 million and an estimated fair value of C$29.9 million, and noted that "there is a significant amount of uncertainty in estimating the amount and timing of cash flows associated with the ABCP."

($1=$1.07 Canadian)

(Reporting by Lynne Olver and Scott Anderson; Editing by Peter Galloway)