TORONTO, Oct 21 (Reuters) - Independent investment bank GMP Capital Trust GMP_u.TO said on Tuesday it will cut its monthly distribution in half, citing the severity of market conditions.
Its distribution will drop to 5 Canadian cents a unit, from 10.42 Canadian cents. GMP had cut its distribution by 26 percent in August, but some analysts still expected a deeper cut would have to be made.
“The severity of prevailing volatile market conditions is the worst seen in several decades in the Canadian capital markets and has been more prolonged than we and most industry participants have expected,” Kevin Sullivan, GMP’s chief executive, said in a release.
“The distribution rate is being lowered to what we believe is a sustainable level over the medium term in light of these challenging times,” he said.
The company, which has investment banking, wealth management and private equity units, has cut staff and reduced fixed salaries by 10 percent in certain senior level positions. Discretionary spending has also been reduced, it said.
Units of GMP closed at C$6.01 on the Toronto Stock Exchange on Tuesday, down 10 percent. They have tumbled 76 percent year to date.
Earlier in the day, Merrill Lynch analyst Sumit Malhotra said GMP would probably have to cut its distribution. Even so, he noted that investor sentiment tends to be driven by the company’s revenue, not costs, and Malhotra cut his price target to C$6.00 a unit from C$13.50 previously.
The company will report quarterly results on Nov. 6. ($1=$1.21 Canadian) (Reporting by Lynne Olver; editing by Rob Wilson)