People are realizing we're a much stronger company than in the past: Canaccord Genuity CEO
Canaccord Genuity Group Inc.’s dealmakers posted their best quarter ever, with a boom in merger-and-acquisition advisory fees helping the securities firm’s profit more than double.
Net income rose to $73.1 million (US$58.3 million) in Canaccord’s fiscal first quarter, which ended June 30, up from $29 million a year earlier, the company said Tuesday. Excluding some items, profit was 73 Canadian cents a share.
Driving the surge was a record $76 million in advisory revenue, more than double the figure a year earlier, as the firm handled a flood of deals in the mining, health-care and technology industries in both the U.S. and Canada. Chief Executive Officer Dan Daviau said the broad-based boom is being fueled by high prices for sellers, cheap financing for buyers and a market that’s been rewarding companies for making acquisitions.
“Companies are prepared to sell because their stock prices are high, and buyers are prepared to buy because their own stock prices are high, too,” Daviau said in an interview. “There’s also an immense amount of liquidity in the system, and there’s more stability in the environment now than we’ve seen for awhile. I actually see M&A accelerating from here.”
Canaccord’s wealth-management business boosted revenue 41 per cent from a year earlier. While rising equity markets have helped, Daviau noted that the company has invested $350 million in the business over the past decade hiring advisers in Canada, buying firms in the U.K. and employing a mix of those strategies in Australia.
Total client assets in the global wealth-management business climbed to C$94.9 billion at the end of the quarter, up 38 per cent from a year earlier.
“We’ve committed a lot of capital to grow that business, including a lot of money in technology and systems,” Daviau said. “And of course the positive market backdrop helps as well.”
Canaccord shares rose 3.6 per cent to $13.96 at 9:38 a.m. in Toronto. The shares are up 25 per cent this year, compared with a 17 per cent gain for the S&P/TSX Composite Index.
The market has taken the spread of COVID-19’s delta variant in stride so far, and it’s unlikely to slow the economic recovery and reopening, Daviau said. The U.S. jobs report on Friday will provide more clarity on that front, but Daviau said he still sees enthusiasm for stocks such as mining shares, which would benefit from the early stages of a cyclical recovery.
“People are going to manage through this,” he said of the delta variant. “I don’t see this impacting us materially in any negative way.”
Daviau, in a later interview on BNN Bloomberg Television on Wednesday, declined to comment on a Bloomberg report that Canaccord is in advanced discussions to buy Bridging Finance Inc., the private lender seized by Canadian regulators amid an investigation of its top executives. He said, however, that Bridging Finance, which focuses on lending to the same mid-market companies that Canaccord works with, would be “a natural addition to the types of services we offer.”