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GMP Capital's Q3 profit jumps 167%, beating analyst expectations


Canadian investment bank GMP CapitalĀ  (TSX: GMP) more than doubled its profits in the third quarter, driven by improved results in the company's capital markets division.

For the third quarter, the bank posted net income of $22.4 million, or $0.32 per basic share, up from $8.4 million, or $0.12 per basic share, in the prior year period.

GMP said total revenue jumped 41% to $100.9 million during the period, representing strong growth in the capital markets segment on account of improved trading activity. Sales from the division soared 77% to $91.0 million in the third quarter, compared to a year earlier.

Investment banking revenue also saw a whopping 92% increase, as the area saw more activity particularly in the latter part of the quarter in the Canadian mid-market, GMP said.

"We are encouraged by our solid results this quarter and, while global economic conditions remain uncertain, we believe our firm is well positioned to exploit opportunities in our core markets," said CEO Harris Fricker.

The bank, which underwrote 34 transactions in Canada during the quarter raising more than $3.0 billion, didn't see the same improved growth in its alternative investments division. In the segment, revenue decreased 41% to $6.1 million in the period, largely due to lower management fees.

However, GMP's private equity unit, Edgestone, recently made a deal to allow venture capital firm Bridgescale Partners to manage Edgestone's venture portfolio, allowing Edgestone to concentrate on its core strength of investing in mid-market buyouts.

Wealth management narrowed its losses by 73% to $0.3 million in the third quarter, benefitting from the merger with Richardson Partners Financial Limited and improving equity markets. GMP's wealth management segment merged with the Richardson's family wealth management unit, which had about $7 billion of assets under management, to create Richardson GMP. As at September 30, 2010, assets under administration for the unit were $12.8 billion.

According to Thomson Reuters, analysts expected the company to earn $0.20 per share on revenue of $88.9 million.

GMP's shares have rallied roughly 17% since Frickers replaced former CEO Kevin Sullivan in August.

Disclosure: no position