Canada’s securities industry enjoyed record operating profits of $3.9 billion last year, up 16% from 2003’s prior high, reports the Investment Dealers Association of Canada. For the year, commission revenue rose 18% to $4.8 billion.

Retail firms were the most prosperous in 2004, with operating profits up 70% to $296 million, from 2003. Between the third and final quarters of the year, retailer’s operating profits surged 266% to $117 million. Investment banking revenue, which rose 17% in 2004 to reach a record $3.1 billion, also jumped 46% between the third and fourth quarters, said the report.

However, the Investment Dealers Association of Canada’s report, which was released today, says the industry will see “much more modest growth” in 2005 due to the effects of a robust Canadian dollar, a period of consolidation following a record year of financings and healthy M&A activity, and a dampening income trust sector.

The IDA’s report commented on the disparity in fortune between the bigger integrated houses, which saw profits fall 3% from 2003, and more specialized retail and institutional firms, which enjoyed a 70% surge in profits.

“This rare profit divergence was largely due to the acute impact of lower trading revenue, especially in fixed income, on the integrated bottom line, and the successful advent of the small, specialized retail firm in fee-based products and other new lucrative business areas,” the IDA said in a release.

“While the integrated group remains the bedrock of the Canadian securities landscape, the smaller, specialized firms are clearly a growing force in the industry.”