Since early 2013, Canada’s investment industry has shown a promising turnaround in fortunes. Revenue and profit improved decisively in 2014 (up 15% and 29%, respectively, year-over-year), and were well above the 2006-07 bull market averages. However, first half 2015 results dashed hopes for a sustained earnings breakout – revenue was up 3% year-over-year, but operating profits were down 5% in H1 2015.
If business conditions in the second half of 2015 stay roughly in line with the first half, the IIAC forecasts the following for 2015 as whole:
* Operating revenue and profit at the integrated firms are expected to increase 6% and 3%, respectively;
* Operating revenue at institutional boutique firms is projected to drop 11%, with profits down nearly 20%; and
* Operating revenue at retail boutique firms is forecast to be the highest in nearly a decade, though operating profit is likely to drop 23% this year, reflecting continued increases in operating costs (up roughly 6% year-over-year) related to the increased compliance and technology burden at retail firms.
Thus, the outlook for the investment industry over the next year or so will certainly not be robust, but positive business factors leave room for optimism. Moreover, the industry has borne a steadily increasing regulatory burden throughout, leaving the hope that the pace of rulemaking will slow. A well-diversified industry, with vigorous full-service dealers and specialized retail and institutional firms, remains the order of the day.
Read more in my industry letter by clicking here.