May 8, 2009 / 11:07 AM / in 8 years

UPDATE 2-GMP Capital profit sinks 66 pct in first quarter

* Q1 profit C$0.12 per unit

* Revenue falls 28 percent

* Unit price down 3.9 percent (Adds analyst comment, market reaction)

By Andrea Hopkins

TORONTO, May 8 (Reuters) - GMP Capital Trust GMP_u.TO posted a lower quarterly profit on Friday, as the Canadian investment bank was hit by a drop in revenue in its capital markets and wealth management segments.

GMP’s net income fell 66 percent to C$7.1 million ($6.08 million), or 12 Canadian cents per basic unit, in the quarter ended March 31. Revenue fell 28 percent to C$67.4 million.

One analyst expected the company to earn 15 Canadian cents a unit, before items, on revenue of C$73.7 million, according to Reuters Estimates.

But John Aiken, an analyst at Dundee Capital Markets, said while the headline number was slightly below expectations, some items in the quarter may not be replicable and investors should focus on future earnings potential.

“There are several positives in the quarter’s earnings, including effective cost-cutting measures and recovering capital markets activity,” Aiken said in a research note.

“Admittedly, all is not back to normal, but we continue to look towards GMP’s leverage to improving capital markets activity as huge potential,” he added.

Revenue from the GMP’s capital markets segment fell 33 percent to C$51 million, while the wealth management segment saw a 28 percent a drop in revenue to C$9.7 million.

The company has capital markets, wealth management and private equity operations.

GMP and its competitor Canaccord Capital Inc CCI.TO have been hit hard by tumbling stock markets and have announced layoffs and trimmed compensation.

Aiken said GMP was already benefiting from the expense reductions, including a nearly 4 percent drop in fixed compensation costs.

“This lower fixed cost base puts GMP in an excellent position to benefit even further from a recovery in market activity, which we believe will continue to gather steam, particularly on the (mergers and acquisitions) front through the summer and fall,” Aiken said.

GMP’s unit price is down more than 55 percent since this time last year, and was down 3.9 percent at C$8.36 at midday in Toronto.

$1=$1.16 Canadian Additional reporting by Isheeta Sanghi in Bangalore; editing by Rob Wilson

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