Canaccord Genuity Group Inc. saw its quarterly revenue increase on both an annual and sequential basis, thanks to strong wealth management results and an improvement in capital market conditions.
The firm reported $428.2 million in revenue in its first fiscal quarter ended June 30 — up 24.7% from a year earlier and 4.7% from the previous quarter. Expenses were $404.6 million, up 20% from a year earlier and 2.5% from the previous quarter.
“Results for our first fiscal quarter reflect improving market conditions for corporate financing and advisory activities in our capital markets division, coupled with continued strong performance from each of our wealth management businesses,” said Dan Daviau, president and CEO of Canaccord, in a conference call with analysts on Friday.
Globally, the firm said its capital markets division earned $205.6 million in revenue during its first quarter, an increase of 41.1% on a year-over-year basis. Canaccord said this was primarily due to “increased revenue from investment banking and advisory activities in each of our geographies.”
The firm’s global wealth management operations had record quarterly revenue of $215.9 million, an increase of 13.0% on a year-over-year basis.
Total client assets in Canaccord’s global wealth management business in the quarter grew to a record $105.8 billion, an 8.8% increase from the same period last year. This was driven by “rising equity markets, solid advisor retention and recruiting and positive flows in our managed portfolio products,” Daviau noted. In Canada, client assets increased by 3.1% year over year.
Canaccord’s profitability was impacted by “higher interest expense in addition to increased [general and administrative] expenses in connection with conference and client engagement activities during the three-month period,” Daviau said.
The firm made investments in its compliance infrastructure in each region during the first quarter, which it expects to continue to do over the coming year, he noted.
As well, Canaccord’s development costs for the quarter were higher, primarily due to ongoing investments for growing its wealth management operations, in addition to increased professional fees and “certain exceptional items” incurred during the period, such as for its upcoming 2024 annual growth conference, Daviau said.
“About half of the quarter-to-quarter increase in our non-compensation expense is not expected to recur in future,” he added.
The firm’s board of directors approved a first-quarter common share dividend of $0.085 per share, in line with previous quarters.
Daviau expressed cautious optimism about the firm’s performance over the coming months.
“While we are encouraged by indications that we are on a path toward more normalized economic conditions relevant to our core businesses, we expect bouts of volatility from quarter to quarter, given the ongoing geopolitical and macroeconomic overhangs,” he said.
“With interest rates poised for further declines, we expect improved corporate finance and [merger and acquisition] activities and improved risk appetite, which bodes well for client engagement in both our wealth and capital markets and businesses.”