GMP Capital Posts Quarterly Loss on Investment-Banking Slump

GMP Capital Inc., Canada’s second-biggest non-bank brokerage, posted a first-quarter loss as a capital-markets slump eroded investment-banking and trading revenue.

The net loss was C$422,000 ($418,000), compared with net income of C$211,000 a year earlier, the Toronto-based firm said today in a statement. Revenue fell 26 percent to C$49 million.

“Senior management is fully cognizant of the near-term impact of the ongoing malaise in global markets,” Chief Executive Officer Harris Fricker said on a conference call with investors. “Our franchise is sound and has proven itself sustainable through what has been a prolonged and severe downturn.”

Excluding some items, per-share earnings were break-even, beating the 1-cent-a-share loss average estimate of four analysts surveyed by Bloomberg.

GMP rose 1.3 percent to C$5.36 at 4 p.m. in Toronto. The stock has fallen 8.4 percent this year, compared with the 3.7 percent gain of the Standard & Poor’s/TSX Financials Index.

Capital-markets revenue fell 29 percent to C$42.1 million from a year earlier, mostly because of lower investment-banking fees and trading commissions, GMP said. Financings and takeover deals in the resource industry were hard hit in the quarter, according to Fricker.

‘Whipsaw Effect’

“We had such disruption in some of the primary commodities, that you just saw activity grind to a halt almost overnight,” Fricker said. “It’s very difficult for a CEO in the commodity space to proceed with any aggression on the acquisition front when you’re getting that sort of whipsaw effect on prices and on share performance.”

GMP has reduced salaries and cut jobs, including eliminating 15 positions on Jan. 8, as markets have slowed. The firm had 369 employees at the end of March, down from 462 a year earlier, according to financial statements.

“On staffing, I think we’re where we want to be,” Fricker said.

GMP is also “inclined” to use its share buyback program, Fricker said, which could mean buying back about 4.6 million shares through a plan it renewed in March.

Fricker said GMP’s capital and liquidity position is “extremely strong” and that the firm has no plans to change its 5-cent-a-share dividend.

(GMP Capital will hold its annual investors meeting at 11 a.m. in Toronto.)