UPDATE 1-Canaccord posts loss, cuts dividend as market conditions weigh

Wed Aug 8, 2012 10:00pm EDT

* Canaccord reports fiscal Q1 net loss C$0.24 a share

* Reports adjusted quarterly loss of C$0.20 a share

* Cuts quarterly dividend to C$0.05/shr, from C$0.10/shr

By Euan Rocha

TORONTO, Aug 8 (Reuters) - Canaccord Financial Inc reported a quarterly loss and slashed its dividend payout on Wednesday, as unfavorable market conditions led to a sharp fall in revenues from its investment banking arm and wealth management unit in North America.

The Toronto-based financial services company halved its quarterly dividend payout to 5 Canadian cents a share from 10 Canadian cents, due to challenging market conditions.

Canaccord and some of its Canadian rivals that generate a sizable chunk of revenues from equity financings in the mining and energy sectors in Canada have been hurt by the downturn in commodity prices due to the European debt crisis and slowdowns in emerging economies.

The uncertainty in market conditions has led to a slump in equity issuances by small- and mid-sized companies in the mining and energy sectors, hurting firms like Canaccord that earn fees from such deals.

"Our operating environment continues to be characterized by adverse market conditions - particularly in the small to mid-market resource space - a traditional strength for our company," said Chief Executive Paul Reynolds in a letter to shareholders.

The firm reported a fiscal first-quarter net loss of C$20.6 million, or 24 Canadian cents a share. That compared with a profit of C$13.2 million, or 16 Canadian cents a share, a year earlier.

Excluding one-time amortization costs and other items, the company reported a loss of C$16.3 million, or 20 Canadian cents a share.

Revenue from the firm's investment banking business slid 52 percent in the quarter to C$28.6 million, while revenue from its North American wealth management business fell over 30 percent to C$36.8 million. Acquisition-related gains helped lift overall revenues for the firm by 1.7 percent to C$162.5 million in the period.

Canaccord, which earlier this year bought British broker and advisory group Collins Stewart Hawkpoint for 250 million pounds ($392 million), said it was working on lowering the cost base of the combined business, merging common operations and business units.

The financial services firm said it has identified costs of roughly C$42 million that can be eliminated from the combined entity. It has also cut jobs and leasehold expenses in Canada to save a further C$5.5 million a year.

To achieve these savings, Canaccord said it has restructured its Montreal office and eliminated 16 positions there. In the last two months, the firm said it has also cut about 60 full-time and contract positions in other offices in Canada.

Shares of Canaccord, which have fallen more than 50 percent over the last six months, closed at C$4.46 on Wednesday on the Toronto Stock Exchange.

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