June 24, 2009 / 12:28 PM / 9 years ago

UPDATE 2-AGF profit falls on global market losses

* Q2 EPS C$0.19 vs year-earlier C$0.49

* Analysts had forecast EPS C$0.17

* Revenue falls 26.1 pct, EBITDA down 44.7 pct

* Assets under management fall 27.7 pct

* AGF shares ahead 6 pct at C$11.67 (Adds analyst comments, loan loss details, share price)

By Andrea Hopkins

TORONTO, June 24 (Reuters) - Mutual fund and wealth management company AGF Management Ltd (AGFb.TO) reported a drop in quarterly profit on Wednesday as the global downturn sent investment revenue lower and provisions for bad loans surged.

AGF, Canada’s third-largest publicly traded fund manager, earned C$17.2 million ($15.0 million), or 19 Canadian cents a share, in the second quarter, ended May 31, down from C$44.0 million, or 49 Canadian cents a share, a year earlier.

The results topped forecasts, however, and AGF shares were up 6 percent at C$11.67 on the Toronto Stock Exchange at midday. Analysts had expected a profit of 17 Canadian cents a share, according to Reuters Estimates.

Total consolidated revenue fell to C$143.5 million from C$194.3 million.

Assets under management (AUM) dropped 27.7 percent to C$37.4 billion as volatility rattled global markets. Mutual fund assets fell 27 percent.

Provisions for loan losses at AGF’s Trust unit rose to C$14.9 million from C$3.4 million a year earlier. The amount of money the company set aside to cover bad loans was also up from the first quarter, a rise that Dundee Securities analyst John Aiken said could signal more credit problems ahead.

“An area of disappointment in the quarter was the 33 percent sequential decline in contribution from the Trust segment. This largely relates to the 30 percent increase in provisions, growth that was above our expectations, and signals the potential for additional credit deterioration and provision growth,” Aiken said in a research note.

“In conjunction with AGF managing down its loan book, this will likely create additional earnings headwinds in future quarters for the segment,” he said.

The Toronto-based company said the second quarter did show signs of improvement over the first quarter but warned the global economy still faces “strong challenges” that would continue to rattle the industry.

“The second quarter saw an improvement in global markets, with higher indices contributing to our increased AUM levels and improved profitability compared to the first quarter,” Chief Executive Blake Goldring said in a statement.

“While encouraged by these trends, we remain committed to strengthening the business by rationalizing costs, improving our future operating capabilities and focusing on risk management to ensure we remain well positioned for future long-term growth,” he said.

$1=$1.15 Canadian Reporting by Andrea Hopkins; editing by Rob Wilson

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