Canaccord Capital Inc. today reported steep drops in quarterly income and revenue, with “significantly” lower activity in its capital markets operations and private client services contributing to the year-over-year decline.

Net income for the first quarter ended June 30 was $16.5 million, down 57.8% from $39 million in the year-ago period. Diluted earnings per share was 31¢, down from 80¢.

Revenue for the quarter was $172.7 million, down 29.8% from the record $245.9 million in the year ago period.

“Significantly lower activity in our capital markets operations in both Canada and the UK and Private Client Services in Canada contributed to the year-over-year decline. Higher agency revenue and new investment banking assignments helped our U.S. operations maintain revenue levels in demanding market conditions,” the company said in a release.

Commenting on the results, Paul Reynolds, president and CEO said “We were pleased with the sequential improvement over the fourth quarter of fiscal 2008, however, we expect the business environment to remain challenging for the balance of the calendar year.”

For the first quarter, revenue generated from commissions decreased $13.8 million to $72 million compared to the same period a year ago and was largely attributed to the commission revenue earned from the Canadian operations, which was down $15.5 million, or 21.8%, to $55.8 million in the current quarter.

Investment banking revenue was $76.1 million, down $52.5 million or 40.8%, primarily due to decreased activities from Canadian and UK equity markets.

Revenue derived from principal trading was $5.9 million, a decrease of $0.9 million, or 13.2% due to the declining markets. Interest revenue was $12.3 million, down $4 million or 24.4%, mainly due to lower interest rates compared to the same quarter in the prior year. Other revenue decreased by $2 million or 24.2% which was mainly attributed to lower foreign exchange gains in the current quarter.

First quarter revenue in Canada was $108.9 million, a decrease of 32.8% or $53.2 million from the same period a year ago.

Revenue in the UK was $33.7 million, a decrease of 29% or $13.8 million compared to the same period a year ago. The UK operations had a record quarter in Q1/2008.

Revenue in the United States was $25.6 million, a decrease of $0.8 million or 3%, from a year ago.

Revenue from other foreign location was $4.5 million, down 54.6% or $5.4 million, which was due to a decrease in corporate finance revenue.