Optimism of Canadian Securities Firms’ CEOs Slips, Survey Finds

Optimism among the heads of Canadian investment dealers has slipped from a year ago, with 61 percent expecting global capital markets will be little changed or get worse, an industry survey found.

About 48 percent of chief executive officers at securities firms say the state of capital markets will be about the same as last year, 39 percent say conditions will improve and 13 percent expect worse markets, according to a survey of 166 members released today by the Investment Industry Association of Canada. By comparison, the association’s first poll, released in December 2012, found 57 percent of CEOs expected little change or worsening markets last year, while 43 percent anticipated improvements.

About half of CEOs surveyed predicted improved results for firm profitability this year, compared with 67 percent in the 2012 poll, according to the IIAC. Ten percent of respondents this year said there’ll be “significant improvements,” compared with none in the previous survey.

“This reflects the major efforts many small firms have made to cut costs, add scale, build business and generally put themselves on sounder footing,” Ian Russell, the CEO of the Toronto-based industry group, said in a statement. “If the overall picture improves, they are positioned to benefit.”

Canada’s Standard & Poor’s/TSX Composite Index (SPTSX) rose 9.6 percent last year, more than double the 4 percent gain in 2012. The Canadian benchmark last year lagged behind the 24 percent increase of the MSCI World Index, which was up from 13 percent in 2012.

Staffing Levels

Investors are more likely to participate in the market and reduce their cash holdings, the survey said. About 52 percent of CEOs said they plan to hire this year, while 42 percent said they’ll maintain staffing levels and 7 percent will downsize.

Canadian securities firms last year were hurt by reduced trading, stock sales and takeovers among resource companies, sapping revenue for businesses that rely on doing deals for mining and energy companies. Mining financings hit an eight-year low and energy stock sales were the slowest since 2008, according to data compiled by Bloomberg. Announced mining and energy takeovers involving Canadian companies sunk last year to the lowest level since 2004, the data show.

Fewer CEOs plan to buy firms or pursue partnerships this year, the survey said, with 10 percent considering such actions compared with 30 percent in 2013.

Many firms still face “tough challenges” just to survive, with the main roadblock being regulatory pressures threatening growth, Russell said.

The IIAC has about 175 members, including bank-owned investment banks, independent securities firms and boutiques.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Peter Eichenbaum at peichenbaum@bloomberg.net

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