UPDATE 3-Canaccord Capital posts surprise quarterly profit
* Q4 EPS C$0.07, cost-cutting credited
* Revenue falls 25.4 percent to C$107 million
* Dividend remains suspended to preserve capital
* Shares surge 8.4 pct to C$7.86 (Adds analyst, executive comments; updates share price)
TORONTO, May 20 (Reuters) - Canaccord Capital Inc (CCI.TO) reported a surprise quarterly profit on Wednesday as heavy cost cuts offset a drop in revenue, sending its shares up more than 8 percent.
The Canadian investment dealer said efforts to reduce spending by cutting compensation and general operating expenses had begun to pay off, ending two consecutive quarters of losses at the Vancouver-based company.
Shares of Canaccord shot up 8.4 percent to C$7.86 in Toronto as investors applauded the belt-tightening. Analysts said the cost-cutting discipline could help Canaccord as it adjusts to the grim economy and slower business.
"Though we continue to have a cautious view on the revenue outlook, we believe the signs of progress in expense management for Canaccord this quarter will be viewed favorably by the market," Macquarie analyst Sumit Malhotra said in a research note.
Canaccord said net income for the fourth quarter, excluding C$0.1 million of restructuring costs, was C$3.8 million ($3.3 million), or 7 Canadian cents a share, down from C$7.2 million, or 15 Canadian cents a share, a year earlier.
Revenue in the quarter, which ended March 31, fell 25.4 percent to C$107 million from C$143.4 million in the final quarter of 2008.
Canaccord Capital President and Chief Executive Paul Reynolds said the company met the bad operating environment with cost cuts designed to stem losses that plagued the balance sheet earlier in the year.
"The cost-saving has come out of every single department in every single geography.... Everybody gave something across the organization and there was pain, or shared contribution, everywhere," Reynolds told a conference call.
While Reynolds said Canaccord was seeing "the early signs of an upturn" in its business volume, analyst Malhotra remained cautious about how quickly things could improve.
"Despite the improvement in market conditions, our analysis indicates that investment banking deal flow for Canaccord has thus far been slow to pick up," Malhotra wrote.
Canaccord, which has operations in Canada, the United States and Britain, focuses on advising small to medium-sized resource companies. Continued...
