First quarter profits for the securities industry slide 12% to $596 million as the poor outlook for corporate profits and the unsettling impact of the war in Iraq kept investors on the sidelines, the Investment Dealers Association of Canada said today.

Overall industry revenues fell at a similar rate, down 11% to $2.3 billion. Equity trading revenues plunged 60% to a mere $72 million, key commission revenues were down 18% to $911 million, but fixed income trading and debt and income trust issuance revenues helped take up some of the slack. Industry operating expenses were trimmed 7% to about $1.1 billion.

Retail firms were hardest hit, recording $3 million loss in the first quarter, compared with $11 million in profits in the first quarter of 2002. Institutional firms recorded $97 million in profit. Integrated firms enjoyed a 14% profit increase to $502 million, which the IDA attributes to lower expenses that more than offset weaker revenues.

“Reflecting the generally adverse conditions, overall industry profits weakened in the first quarter this year, extending the period of lower results from the past two years. Integrated firms coped with lower revenues in the first quarter but because of cost cutting were able to report an increase in profits from a year earlier. Retail firms continued to have poor results with a loss in Q1 2003. Following a record performance in 2002, institutional firms began this year with fairly good first-quarter results,” the IDA said.

“In addition to lingering uncertainty over the outlook for corporate profits, the war in Iraq had an unsettling impact that kept many investors on the sidelines. The slide in the value of trading on the TSX and the downtrend in the S&P TSX composite index evident in the previous two years extended into the first quarter this year,” said the IDA.

It reports that weak market conditions hurt some institutional business. IPO financings essentially evaporated, and non-IPO issuance was flat year over year. Continued issuance in the income trust provided some support, and the debt financings were quite strong.