Industry beaten up in 2008: IIAC

The securities industry took a hit in the final quarter of 2008, as a massive stock market sell-off swept the sector, according to the latest quarterly report from the Investment Industry Association of Canada (IIAC).

Operating revenues fell by 7% in the final three months, while operating profits were beaten down by 46%, to $3.9 billion. Year over year, operating revenues and profits declined 15% and 39%, respectively.

“The industry downturn comes as little surprise given the sharp collapse in global equity markets, vulnerabilities in the global financial system and a weakened economic and financial outlook,” said Jack Rando, director, Capital Markets, IIAC. “Industry performance will strengthen as market and economic conditions recover and confidence in the global financial system is restored.”

Investment banking and equity trading were the hardest hit segments of the industry, with profits down 32% and 102%, respectively, year over year.

Wealth management was also hit hard, with mutual fund commissions falling 31.4% from Q4 of the previous year, to $369 million industry-wide. Integrated firms collected $284 million in fund commissions, which represented a decline of almost 21%.

Only $50 million in fund commissions landed in the hands of full-service firms, which saw these revenues fall by 18% from Q4 of 2007. Overall commissions among these companies fell 27% to $142 million.

Equity trading revenues collapsed at full-service retail firms, which as a group posted a loss of $30 million, a decline of 1,600% from the same quarter a year earlier. Staffing levels declined by 499 people since the end of 2007, to 6,018.

Not all segments of the industry were beaten up, however. As with clients’ portfolios, bonds helped smooth out the rough patches for well-diversified firms. Fixed income trading revenues for Q4 totalled $387 million, up 133% from the previous quarter and 307% from the fourth quarter of 2007.

(03/16/09)