Canaccord Genuity Group Inc. expects the surging capital-markets activity that drove the investment bank’s record results to continue, with the year’s frenzy of equity sales giving way to a steady increase in mergers.
A jump in new equity offerings from companies seeking capital to withstand the recession or to take advantage of other opportunities helped Canaccord to record revenue of C$390.4 million ($301 million) in its fiscal second quarter, which ended Sept. 30.
Net income rose to C$33 million, the Toronto-based company said Friday. Profit excluding some items was 28 Canadian cents a share, topping analysts’ 17-cent average estimate. The shares advanced as much as 14% in Toronto on Monday morning, their biggest intraday increase in seven months.
Chief Executive Officer Dan Daviau credited the performance to Canaccord’s focus on mid-market life sciences, technology and mining companies, as well as an acquisition that has bulked up its presence in Australia.
Daviau said that while the end of the uncertainty from the U.S. election and the onset of the pandemic will reduce companies’ need to raise new cash, that stability will give the companies the comfort they need to make deals. He expects merger and acquisition revenue to post steady gains “over the next couple of quarters.”
“That M&A number will obviously improve going forward as people get more and more used to the current environment we’re in,” Daviau said in an interview.
He also expects fiscal stimulus to continue boosting the mining sector, and the disruptions of Covid-19 to spur heightened initial public offering activity.
“People are opening their eyes to the immense value you can create in a changing paradigm like you see in some of the technology stocks and some of the health-care stocks,” Daviau said.
The only notable weak spot in Canaccord’s results last quarter was the U.K. and Europe capital-markets business, where revenue fell 26% because of falling investment banking and advisory fee revenue.
“In the U.K., you’re not only dealing with Covid and the U.S. election, but you’re also dealing with confusion around Brexit,” Daviau said.
Daviau declined to comment on reports that Canaccord is exploring a sale of part or all of its business, potentially its U.K. wealth unit, saying that the firm doesn’t comment on rumors and speculation.
Regarding the U.K. wealth business, Daviau said Canaccord continues to “actively explore a range of solutions aimed at unlocking greater value from this business, while supporting its continued growth.”