The securities industry remained in the doldrums in 2002 as profits sank for the second straight year, the Investment Dealers Association of Canada said Tuesday.

Although debt trading and new issues business helped buoy earnings for fully integrated firms in 2001, lower income from these business lines last year resulted in integrated firms suffering a 30% decline in operating profits in 2002.

The IDA said fourth-quarter operating profits dropped 25% to $718 million, while full year profits declined 14% to $2.4 billion.

Retail firms reported a jump in profits in 2002, but this mainly reflected a one-off earnings gain from newly public TSX shares. When this factor is removed, retail firms turned in a tepid performance in 2002 as retail investors shied away from the market. Small firms suffered a $17 million loss.

In contrast to the general malaise in the industry, institutional firms bucked the earnings downtrend by chalking up record profits of $733 million in 2002, helped by a surge in income trust issuance.

Lower revenues were a major factor adversely affecting industry results in 2002. As investor interest in the equity market remained weak, key commission revenues decreased for the second straight year. Revenues from most other major business lines also fell in 2002.

Weaker fourth-quarter revenues contributed to 3% decline in 2002 revenues to under $10 billion for first time in three years. Key commission revenues were under $4 billion for first time in four years.

Among other highlights, equity and fixed income trading revenues suffered double-digit annual declines during the year. Margin debt continued its more than two-year slide to $7 billion at end 2002. And the annual return in 2002 was under five-year average of 15% for third time in five years.