Canaccord Capital Inc. today reported a drop in profit for the second quarter of fiscal 2005 even though revenues rose.

Net income for the quarter ended September 30, was $6.1 million, or 13¢ a share, down by $2.5 million from $8.6 million, or 11¢ a share from the same period a year ago.

Revenues rose to $85.6 million, up 5%, from $81.4 million in the year ago period. However, expenses jumped 12% to $72.6 million from $64.9 million last year.

Operating income before other items of $13 million declined by 21%, from $16.5 million in the year earlier period.

Return on equity for the quarter was 7.3%, down from return on common equity of 44.9% a year ago.

“Despite the traditionally slower summer trading months for the industry, Canaccord continues to deliver solid revenue growth in line with our expectations,” said chairman and CEO, Peter Brown, in a release.

A key quarterly highlight for Canaccord was the continued growth in its global capital markets business. The firm said capital markets activity has been extremely favourable in Europe, driven largely by a high demand for resource-related equities. Total global capital markets revenue for the quarter of $46.7 million, up $7.7 million, or 20%, compared to a year ago.

Cannacord also announced a dividend of 5¢ per share.

Canaccord shares were off 5¢ to $8.70 in morning trading.