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GMP Capital Q4 profit plunges on weak capital markets

Published: 09:43 14 Mar 2012 EDT

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Canadian investment bank GMP Capital (TSE:GMP) said Wednesday its fourth quarter profit plunged 95 percent, as the company said its revenues were hit by challenging market conditions, particularly in its capital markets business.

Net income during the quarter was $2.4 million, or $0.02 per share, down 95 percent from $46.0 million, or $0.50 per share, a year ago.

Adjusted for certain one-time items, like a $1.3 million impairment charge, and $1.7 million related to the share-based compensation recorded in connection with GMP's acquisition of Miller Tabak Roberts (MTR) Securities, earnings were $4.3 million, or $0.05 per share, down 91 percent.

Total revenues for the period fell 53 percent to $72.7 million, from $153.4 million in the same period last year.

"Our financial results in fourth quarter 2011 were adversely affected by the continued challenging market conditions which dominated much of the year," said CEO, Harris Fricker.

"Our financial results do not reflect the many operational and strategic accomplishments achieved in 2011 and it's here that I am most pleased with GMP's resilience."

Revenues from the company's capital markets business fell 49 percent to $67.1 million. Investment banking revenues fell 37 percent to $43.9 million, largely on lower underwriting revenues, while commissions dropped 51 percent to $15.6 million on a 63 percent decline in trading volumes. However, M&A advisory revenues rose by 59 percent, GMP said, despite the weak market conditions.

Lower performance fees and unrealized losses on fund investments sent revenues from GMP's alternative investments unit, which includes private equity firm Edgestone Capital Partners, down 93 percent, to $1.3 million. The company said the year-ago period was bolstered by $9.6 million in performance fees, compared to just $300,000 in fees in the latest quarter.

The $689,000 fourth quarter loss it recorded under its wealth management business reflected lower results at Richardson GMP, which was also impacted by the weaker capital markets activity.

GMP has a non-controlling interest in Richardson GMP, which comprises its wealth management segment. At year-end, assets under administration stood at $13.3 billion.

Assets under management, which are recorded under GMP's alternative investments division, rose 33 percent, to finish 2011 at $589.0 billion.

Fricker continued: "In 2011, we accelerated the build out of our fixed income capabilities through the acquisition of Miller Tabak Roberts Securities, LLC and we continued our international expansion with further enhancements to our European capabilities and the launch of new operations in Australia.

"We strengthened our balance sheet and capital position through the issuance of preferred shares, the redemption of all outstanding long-term debt and the return of significant capital back to our shareholders under our normal course issuer bid.

"We believe that, collectively, these initiatives have made us stronger and better positioned to withstand prolonged economic headwinds, and have added notably to GMP's global reach and product expertise to better serve a growing global client base."

In other news, the company said it repurchased and cancelled 5.48 million shares of its common stock, at an average price of $13.15 per share, for a total of $72.0 million.

The company also said its board of directors approved a new normal course issuer bid, for the buyback of up to 4.7 million common shares, or 10 percent of its stock.

As of February 29, the company had 70.02 million shares outstanding.

GMP's board also approved a quarterly cash dividend of $0.10 per share, payable on March 31.

The Toronto-based company's stock fell 1.13 percent on Tuesday, to close at $7.82.

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