Securities industry profits soar

The final quarter of 2009 capped off a massive recovery in earnings for the securities industry, according to data from the Investment Industry Association of Canada.

Operating revenues jumped 19% from the third quarter, to $4.8 billion, while operating profits shot up 30%, to just under $2 billion. Compared to the same quarter in 2008, the gains were even greater — revenues were 45% higher than in Q4 2008, and profits were up 266%.

Net industry profits were substantially lower, however, at $795 million for the final quarter.

Investment banking rebounded strongly, generating $1.2 billion in revenues, a 22.7% increase over Q3. Gross commissions for the industry were $1.34 billion (up 3.8% from Q3), with mutual fund commissions accounting for $464 million (up 11%). Fee revenues increased 16.3% to $691 million.

There were patches of weakness, however. Revenues from fixed income trading were down 34% quarter over quarter, to $363 million. Equity trading revenues were down 52.8%, to $126 million.

For the entire year, the overall industry generated $16.3 billion in operating revenues, an increase of 11.7% over 2008. The $2.87 billion net profit for the industry marked a 53% gain year-over-year.

At the end of Q4, there were 200 firms in the industry, employing 39,894 staff. In the prior quarter there were 201 firms, with 40,122 employees.

By sector… Integrated firms — those that are national in scope and have extensive retail and institutional operations — saw operating revenues climb 21.9% in Q4 to $3.56 billion, while operating profits climbed 34% to $1.6 billion. Net profits for the quarter fell 5.3% to $641 million.

For the full year, these firms generated operating revenues of $11.79 billion (up 20.3% from 2008), while net profits soared 61.3% to $2.4 billion.

On a full year basis, equity trading revenues were up 213.2% to $332 million, while fixed income trading revenues were up 116.1%, to $1.69 billion.

Institutional firms generated $617 million in operating revenues for the quarter, up 14% from 2008, and net profits of $141 million (up 25.9%). For the full year, revenues were $2.18 billion, a decline of 1.4%, while net profits were $444 million, up 16.2%.

On a full year basis, equity trading revenues were up 175.4% to $46 million, while fixed income trading revenues were up 164.9%, to $249 million.

Among retail firms, operating revenues for Q4 were up 10.1% from 2008, to $2.32 billion, and net profits rose 44.4% to $13 million. For the full year, revenues were $2.32 billion, a decline of 9.9%, while net profits were just $3 million, up 137.5%.

On a full year basis, equity trading revenues were up 376.5% to $81 million, while fixed income trading revenues were up 21.6%, to $169 million. Mutual fund commissions declined 14.8% year-over-year, to $375 million.

(03/15/10)