September 24, 2008 / 1:00 PM / 10 years ago

UPDATE 2-AGF Management profit rises, but revenue down

(Adds details, executive comments, share price)

TORONTO, Sept 24 (Reuters) - Third-quarter profit rose 4 percent at money management firm AGF Management (AGFb.TO) as expenses declined, but global market volatility dragged down the value of assets and associated revenue.

AGF said on Wednesday that net income was C$41.1 million ($39.9 million), or 46 Canadian cents a share, in the quarter ended Aug. 31, up from C$39.4 million, or 43 Canadian cents a share, in the year-earlier period.

Analysts had expected the company, which manages retail mutual funds as well as portfolios for institutional and high net worth investors, to earn 47 Canadian cents a share before items, according to Reuters Estimates.

Earnings before interest, taxes, depreciation and amortization from continuing operations fell 10.7 percent to C$81.5 million from C$91.3 million.

Total AGF revenue fell 7.3 percent to C$184.7 million in the quarter, while expenses declined 4.4 percent to C$103.2 million, led by cost-cutting in investment management operations.

AGF said total assets in its key investment management segment dropped to C$48.7 billion at the end of the quarter, from C$53.8 billion a year earlier, as stock markets and gross fund sales declined.

In its AGF Trust Co operations, real estate and investment loans jumped 31 percent year over year to C$4.4 billion. The provision for loan losses increased 42 percent to C$3.4 million, due partly to growth in the loan portfolio and the mix of loan types, it said.

Executives told a conference call that the credit quality of the loan portfolio has remained consistent, with impaired loans as a percentage of total loans at 0.5 percent.

Its investment loans are secured by a client’s underlying mutual funds, and they are demand loans — not margin loans — that can be called any time the borrower stops making payments, said Mario Causarano, president of AGF Trust Co.

Shares of all Canadian publicly traded fund managers have slumped in 2008 as volatile stocks and the credit crisis have made investors leery of putting new money into the markets.

AGF’s class B shares were down 6 Canadian cents at C$19.94 on Wednesday after the results came out, and have fallen about 32 percent year to date.

Canadians directed almost all new mutual fund investments into short-term money-market funds in the year ended Aug. 31, according to an industry group.

Assets in Canadian money market funds surged 51 percent from August 2007 levels to C$72.9 billion, while net assets of long-term funds had fallen 4 percent to C$622.6 billion, the Investment Funds Institute of Canada said. ($1=$1.03 Canadian) (Reporting by Jennifer Kwan and Lynne Olver; Editing by Peter Galloway)

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