Source: The Canadian Press

Canaccord Financial Inc. (TSX:CF) ended its 2010 fiscal year back in the black, reversing a deep loss suffered in the previous financial year, and its leaders pledged to continue to keep a lid on expenses in the near term as markets remain “choppy” in the wake of the recession.

The Vancouver-based investment bank, rebranded Canaccord Genuity earlier this month following its acquisition of Genuity Capital Markets, reported Wednesday a profit of $7.5 million or 14 cents per share in the fourth quarter and an annual profit of $38.5 million.

That was a big improvement on the year-earlier comparable periods, when Canaccord’s fourth-quarter net income was just $3.6 million or seven cents per diluted share and fiscal 2009 recorded a $47.6-million loss. But it was well below its third-quarter performance, when it earned $15.1 million on $173.2 million in revenue.

“In the near term we expect the markets to remain choppy,” president and CEO Paul Reynolds said on a conference call with analysts.

“That presents challenges for the pricing and marketing of equity offerings.”

Even so, the company participated in a number of major equity financings during the quarter, leading 35 transactions that raised total proceeds of $854.4 million and participating in a total of 90 around the world that raised proceeds of $3.1 billion for its clients.

Assets under administration rose 41% to $12.9 billion during the quarter, but “at 9.8% for the full year, return on equity fell short of the business cycle target of 20%,” Reynolds said.

“But we remain deeply committed to that goal. In fact, many of the strategic acquisitions we completed… are intended to drive the higher rates of return we know are possible across our businesses.”

Canaccord’s top line also improved year-over-year, with double-digit revenue growth.

It generated $143.1 million in revenue during the three months ended March 31, up 33.8% from $107 million in the fourth quarter of fiscal 2009, which marked a low point for the Canadian stock market.

Canaccord’s 2010 annual revenue was up 20.9% from fiscal 2009, rising to $577.5 million from $477.7 million.

The company booked $5 million in charges ($3.5 million net of taxes), related to the acquisition of Genuity Capital Markets, which was announced March 4 and completed April 23.

Excluding this item, the company earned $11.1 million on $143.1 million in revenues during the quarter, up from $3.8 million on $107 million a year earlier.

Reynolds noted that the company expenses rose 32.4% to $132.7 million during the quarter.

“While this increase is in line with the current quarter’s revenues, a large portion of it can be attributed to higher incentive compensation,” he said.

“I want to assure you that we are actively addressing both operating and compensation costs in Canaccord Genuity and Canaccord Wealth Management.”

With the Genuity deal under its belt, Canaccord will continue to look for fitting acquisitions, “especially in the U.K. and the U.S.,” Reynolds said.

“As far as expansion beyond that, we’re looking at some opportunities in China, we’re evaluating them and there will be more to come on that over time.”

Shares in Canaccord Genuity were down 33 cents or 3.5% at $9.11 in Wednesday trading on the Toronto Stock Exchange.