Canaccord Genuity CEO lays out strategy to buoy share prices
The chief executive of Canada’s largest non-bank brokerage, Canaccord Genuity Group Inc., defended significantly restructuring the firm’s U.K. business on Thursday, saying it’s been “frustrating” to manage operations without knowing which way Brexit is headed.
Dan Daviau, president and CEO of Canaccord Genuity, told BNN Bloomberg that while the company’s overall business is very profitable, they lost $20 million before taxes in their London market over the last year.
“It’s definitely frustrating, and that’s the problem. You can manage if you knew what was going on, if you knew exactly what was happening in Brexit,” Daviau said in a television interview. “Hard Brexit, soft Brexit – it doesn’t matter – you need the certainty to be able to plan accordingly.”
Daviau said clients were holding back, simply because they didn’t know which direction the U.K.’s planned exit from the European Union was headed.
“Who would buy a business in the U.K. today, and result in an M&A transaction? Who would raise money when you don’t know where the market is going?” said Daviau. “So that uncertainty creates volatility in our results.”
Daviau’s comments come the day after the Toronto-based brokerage said it recorded an $11.8-million charge in the fiscal fourth quarter as a result of restructuring due to Brexit uncertainty. The company indicated in March they would record a charge when it announced it was reorganizing its U.K. capital markets business, and cutting jobs in London.
The U.S. and Canada account for most of Canaccord’s capital market business, but Daviau said two-thirds of the company’s wealth earnings come from the U.K.
“Our wealth business is incredibly stable. It will go forward no matter what the market is, and that’s what we’ve also seen in London – in the preamble on Brexit,” Daviau said.
But, he added that “too much uncertainty [and] too much volatility” with Brexit is why Canaccord is fundamentally changing its cost structure in the country.
“The problem being too much volatility. People aren’t doing transactions so we wanted to restructure the business … So we can have a more stable business.”
Uncertainty over the future of Brexit continues to intensify with U.K. Prime Minister Theresa expected step down from her role as Conservative Party leader on Friday after failing to deliver a deal for the U.K. to leave the EU. The contest to succeed her heats up ahead of the Oct. 31 deadline for a Brexit agreement.