IDA members report strong profit growth

(June 9, 2004) Improving conditions in the securities markets helped buoy profits among Canada’s investment firms in the first quarter of 2004, with earnings topping $1.2 billion, according to data released today by the IDA.

Wealth management and the retail investment business helped propel earnings growth, as investors returned to the markets with renewed confidence. Investment banking operations did not contribute to earnings growth in any meaningful way, due to the timing of booking transactions, rather than any fundamental directional change in the business.

The first quarter of the year carries with it the seasonal boost in sales commissions from last minute RRSP investments. Profits increased by 21%, which is actually weaker than growth in the previous four quarters, which averaged 39%.

The IDA says mutual fund commissions “accounted for the lion’s share of retail revenue gains” as funds continued to recover from two years of poor sales. Sales of stand-alone products rose by one-third.

“Even abstracting from the seasonal pickup, however, it is clear from trends unfolding in mutual fund gross sales, and in revenues of the discount brokers, that the retail marketplace continues to experience buoyant growth,” the report read.

The improved profitability of investment companies has boosted hiring in the sector as well. Again, independent retail firms are leading the way, with many new hires coming from the integrated firms. Job growth at the smaller companies has been pretty much negated by the cuts at the larger operations, though, leaving overall employment levels stable.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com