The securities industry suffered another setback in the three months to September as industry operating profits slumped for the second straight quarter.
Industry third-quarter operating profits fell 10% to $401 million. Coupled with lower results in the previous quarter, operating profits haven fallen 9% in the nine months to September.
This and other key observations were presented in the IDA’s latest quarterly publication Securities Industry Performance. The report noted that, in a repeat of the previous quarter’s results, revenues from major business lines including sales commissions, equity trading, fixed income trading and interest income declined from year-earlier levels.
Weakness in these major areas led to total revenues in the quarter just matching the year-earlier level and left the total for the nine months to September below the same period last year. Sagging revenues have been the major factor in the deterioration in the industry’s profit position this year.
Many retail investors remained on the sidelines in the July-September period. Weak investor trust and confidence were reflected in the S&P/TSX Composite index falling substantially in the third quarter and in an escalation in mutual fund redemptions from the previous three-month period. Firms dealing mainly with retail clients were hit hard by these trends. Retail firms suffered their second straight quarterly setback in the third quarter, registering a $7 million loss that raised losses for the year to date to $13 million.
Third quarter operating profits at integrated firms plunged 45% to $216 million. Profits for the first three quarters have fallen over 30% to just over $1 billion.
In a repetition of second quarter results, the lone bright spot was institutional firms racking up another strong performance. Operating profits for these firms more than tripled year to year in the third quarter to $192 million. Profits for the nine months to September more than doubled to over $590 million and are on track to surpassing the previous annual high.
In other highlights, commission revenues decreased 3% to $851 million in Q3 and have fallen 6% to just under $3 billion in the nine months to September.