March 24, 2010 / 12:25 PM / in 8 years

UPDATE 3-AGF earnings rise as markets strengthen

* EPS C$0.34 vs C$0.14 yr-earlier, just below expectations

* Assets under management rise more than 30 pct

* Shares rise 2.6 pct to 52-week high (Adds analyst, CFO, and CEO comments)

TORONTO, March 24 (Reuters) - AGF Management Ltd (AGFb.TO) said on Wednesday its quarterly profit more than doubled as financial markets improved, sending shares of the fund manager up 2.6 to a 52-week high in midday trade.

Toronto-based AGF said revenue and assets under management surged in its first quarter ended Feb. 28 compared with a year earlier, when global fund managers were struggling to cope with the financial crisis and market losses.

“Overall, (it’s) a solid start to fiscal 2010 for AGF,” BMO Capital Markets analyst John Reucassel said in a note to clients.

AGF said net income rose to C$30.6 million ($30 million), or 34 Canadian cents a share, from a year-earlier profit of C$12.2 million, or 14 Canadian cents a share.

That was just below average analysts’ expectations for a profit per share of 35 Canadian cents, according to Thomson Reuters I/B/E/S, and below the strong profit notched in the fourth quarter, when AGF also boosted its dividend.

A rise in assets under management and lower expenses helped drive shares of AGF up 2.6 percent to C$19.06 on the Toronto Stock Exchange. That set a 52-week high, more than double the 52-week low of C$7.70 set a year earlier.

Plunging stock markets and asset values sideswiped fund managers around the world early in 2009, but AGF, like its rivals, started to rebound late last year and has regained momentum.

Among other positives, AGF said it was seeing an improvement in loan arrears and expects provisions for loan losses, or the amount of money it sets aside to cover bad loans, to be stable over the rest of the year as long as the economy does not slide back into recession.

“The message is a good one here,” Chief Financial Officer Bob Bogart told analysts on a conference call.

“Barring a double dip recession the current level of income statement provisions is likely to be sustained over the remainder of the year.”

The company said assets under management rose 34.4 percent to C$43.8 billion as of Feb. 28 from $32.6 billion a year earlier, driven mainly by market improvements and the inflow of new institutional funds. Mutual fund assets were up 22.2 percent, while institutional and high-net-worth client assets climbed 49.4 percent.

Quarterly revenue increased to C$156.2 million from C$138 million a year earlier.

The fund manager also followed through on its strategy of reducing loan balances and boosting capital. AGF Trust loan assets fell 19.3 percent to C$3.5 billion in the quarter while its earnings rose 58.6 percent to C$11.1 million.

BMO analyst Reucassel said that while loans outstanding fell about 3 percent in the quarter, he expected loan growth to resume later in 2010, though at a more moderate pace than historical trends.

While AGF boasts strong capital levels, Chief Executive Blake Goldring said investors should not expect share buybacks or more dividend increases any time soon, given pressure from the national regulator to maintain a strong balance sheet.

“I think the regulator has been pretty clear across the industry with all financial institutions in terms of any change in dividend policy that would extract cash out of these deposit-taking institutions. And their message is that they don’t want to see that happen,” Goldring said.

Global banking regulators are mulling changes to minimum capital levels in a bid to prevent a financial meltdown like that of 2008 and early 2009, which forced some global banks to accept government bailouts or go bankrupt.

While Canadian financial institutions emerged from the crisis relatively unscathed, the national regulator has urged lenders to maintain conservative capital levels until there is more certainty about global regulatory requirements.

$1=$1.03 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway

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