February 12, 2009 / 12:33 PM / 9 years ago

UPDATE 2-Canaccord posts loss on deteriorating markets

* Third-quarter loss C$1.27/shr

* Excluding items, loss is C$0.33/shr

* Shares drop 2.6 percent to C$4.19 (Adds details, quote from conference call, updates shares)

TORONTO, Feb 12 (Reuters) - Canaccord Capital Inc CCI.TO reported a second straight quarterly loss on Thursday, as the Canadian investment dealer was hit by charges and a sharp fall in revenue as capital markets deteriorated.

A sharp fall in business volumes due to a “breathtaking” drop in equity markets last autumn “had a “material and negative impact on our financial results,” Chief Executive Paul Reynolds told a conference call with analysts.

“‘Avoid risk’ became the mantra for investors of all types,” he said.

Reynolds said the cost-cutting measures that Canaccord put in place were insufficient to deal with the market decline, and business volume fell faster than the company was able to reduce expenses.

Net loss for the third quarter ended Dec. 31 was C$62.4 million ($49.9 million), or C$1.27 a share, compared with net income of C$15.0 million, or 31 Canadian cents a share, in the year-ago period.

Excluding items, the loss for the quarter was C$16.2 million, or 33 Canadian cents a share. Analysts had expected the company to post a loss of 23 Canadian cents a share, excluding items, according to Reuters Estimates.

Vancouver-based Canaccord said the quarter included “significant items” totaling C$51 million before tax, or 94 Canadian cents a share.

Those items included adjustments related to its exposure to asset-backed commercial paper, impairment of goodwill and intangibles and restructuring costs.

In January, Canaccord announced the completion of its repurchase program for restructured third-party asset backed commercial paper.

Earlier that month, a plan was implemented to restructure billions of dollars worth of commercial paper, allowing small investors to get their money back after the ABCP market had seized up in 2007.

Total revenue for the quarter fell 52.4 percent to C$87.2 million from C$183.4 million, missing one analyst’s forecast of C$95.8 million. Revenue from the company’s investment banking business sank 76 percent to C$20.2 million from C$84.9 million.

Canaccord, which has operations in Canada, the United States and Britain, focuses on advising small to medium-sized resource companies.

Going forward, Reynolds said 2009 will be difficult in most of the businesses, but beyond that horizon “we see a tremendous opportunity to be smart buyers of distressed assets.”

“We intend to be buyers, not sellers when the time is right,” he said, noting that is why the company is intent on protecting its capital base.

Shares of Canaccord were down 2.6 percent at C$4.19 Thursday afternoon on the Toronto Stock Exchange.

$1=$1.25 Canadian Reporting by Sweta Singh in Bangalore and Jennifer Kwan in Toronto; editing by Rob Wilson

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