Canaccord stock (TSX:CF) dropped the most in over a year after reporting earnings that fell short of estimates due to increased costs related to hiring and technology investments. This decline overshadowed the record revenue achieved in its wealth-management segment.
The Canadian wealth manager’s shares plummeted by up to 14%, marking the largest intraday decline since May 2023. Adjusted earnings per share for the quarter ending June 30 were C$0.13, missing analysts’ projections of C$0.21. Company-wide revenue totaled C$429 million (approximately $312 million), also falling below expectations.
CEO Explains Cost Impact on Results
Chief Executive Officer Dan Daviau noted that recent investments in the wealth-management sector, including adviser hires, increased client interest expenses, and rising costs in technology, significantly impacted the financial results. The CEO highlighted that these investments in compliance technology, marketing growth, and conferences were substantial, but many of these costs are expected to be one-time expenditures.
Future Growth Plans and Acquisitions
Looking ahead, Canaccord Genuity aims to further develop its wealth-management segment through organic growth, focusing on net new asset flows and recruitment in the wealth space. Daviau mentioned that the company invested approximately $600 million in acquiring wealth management firms, particularly in Australia and the UK, including the acquisition of Cantab Asset Management in May.
Daviau also indicated that Canaccord is open to further acquisitions, particularly in Canada, where the market is more concentrated. The firm is keen on exploring opportunities if the right acquisition presents itself.
The global wealth-management division of Canaccord generated C$215.9 million in revenue for the quarter, reflecting a 13% increase year-over-year. Revenue from capital markets rose by just over 41% to C$205.6 million, driven by higher investment banking and advisory fee revenues.
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