- Quarterly loss widened to C$15.6 million amid commodity rout
- GMP revenues dropped 30% as investment banking fees plunged
GMP Capital Inc. Chief Executive Officer Harris Fricker said he’s more optimistic for the industry in 2016 after enduring “the most challenging year" in the firm’s history and posting its first annual loss as a public company amid the commodity rout.
"The world is not ending and I actually feel relatively upbeat about what I’m seeing," Fricker said Friday on a call. “The few players who remain relevant in the broker-dealer space are going to have a pretty interesting landscape on the other side of this thing.”
GMP’s fourth-quarter net loss widened to C$15.6 million, or 26 cents a share, from a loss of C$6.9 million, or 12 cents, in the year earlier period, after taking restructuring charges tied to streamlining its capital markets business, GMP said in a statement. GMP had an annual net loss of C$30.1 million, or 52 cents, for 2015, compared with profit of C$14.3 million, or 12 cents, the year earlier.
Restructuring costs were C$18.5 million, higher than the C$15 million disclosed Jan. 13 when the firm said it was suspending its dividend, cutting jobs and exiting the U.K. and Australia while paring back its U.S. energy businesses.
Shares of Canada’s second-largest non-bank brokerage rose 4.9 percent to C$4.50 at 4 p.m. trading in Toronto, the biggest increase in three weeks. The stock is down 14 percent over the past 12 months.
"This has clearly been one of the most difficult operating environments in our 20-year history, with a sharp contraction in business activity felt more acutely this past quarter," Fricker said. “Business activity was at a virtual standstill as clients hit the pause button amid uncertain and volatile market conditions, particularly in commodities."
Revenue fell by a third in the quarter to C$35.3 million. Losses in the capital markets business widened to C$31.9 million from C$3.55 million a year earlier, pulled down by a 60 percent drop in investment banking fees and the restructuring costs, GMP said. Wealth management had C$14.1 million of earnings, compared with a loss of C$959,000 a year earlier.
This marked GMP’s biggest loss since the first quarter of 2010, when the firm had a C$62.4 million loss due to impairment charges from a private equity business.
Fricker says GMP’s investment banking business is “extremely well positioned" for when conditions normalize in oil-and-gas and metals industries, while opportunities in non-commodity sectors, notably technology and pharmaceuticals, are improving. Fricker sees more revenue growth from its New York operations, and potential in mergers and acquisitions.
"I continue to believe the M&A outlook is good if we get stability in the underlying commodity prices, especially oil-and-gas," he said. “We remain optimistic." The market has been underweight Canadian assets that’s going to get addressed during the next couple of quarters, he said.