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GMP Capital swings to Q1 loss as capital markets revenue falls 29%

Published: 14:30 03 May 2013 EDT

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Canada’s second-biggest non-bank brokerage GMP Capital (TSE:GMP) said Friday it swung to a net loss in its first quarter as revenue declined more than 26 per cent, citing the "ongoing malaise" in global markets. 

Net loss for the three months to March 31 came in at $0.4 million, or 2 cents per share, compared with a profit of $0.2 million, or a diluted loss per share of 4 cents, in the first quarter of 2012. 

Excluding special items, profit was $1.1 million in the latest period, or breakeven per share, versus net income of $4.4 million, or 3 cents per share, a year ago. The latest result beat the 1-cent-a-share loss average estimate of four analysts surveyed by Bloomberg.

Shares of the brokerage rose more than 1.1 per cent in Toronto in afternoon trade Friday, to $5.35, paring year-to-date losses to 8.5 per cent. 

Revenue declined to $48.8 million from $66.1 million. 

"As major shareholders ourselves, senior management is fully cognizant of the near-term impact of the ongoing malaise in global markets. That said, our role as managers is to focus our efforts where they can have lasting impact," said CEO Harris Fricker in the statement released Friday.

"Our firm's capital and liquidity position remains extremely strong and we have never been broader in scope or more diversified as a business.  Our franchise has proven itself sustainable through a prolonged and severe downturn and we remain confident in our ability to outperform in better markets."

The investment dealer said in the release that capital markets revenue fell 29 per cent to $42.1 million, on account of lower investment banking and commission revenues, which was somewhat offset by higher returns on principal transactions. 

The wealth management unit, which consists of the company's non-controlling stake in Richardson GMP and GMP Investment Management, reported income before taxes of $1.5 million, compared with a near breakeven result in the same period a year ago. GMP attributed this gain largely to dividend income recognized on its preferred share investment in Richardson GMP.

The financial services firm said its return on common equity was negative 2.3 per cent in the latest quarter, compared with negative 3.7 per cent in the same period a year earlier. 

The Toronto-based firm, through its capital markets segment, provides investment banking, including advisory and underwriting services, institutional sales and trading and research through offices located in Toronto, Montreal, Calgary, New York, Miami, Dallas, London, Perth and Sydney. 

GMP also declared a quarterly cash dividend of 5 cents per common share, payable on June 30 to the respective shareholders of record on June 10.

 

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