PrefBlog

DBRS has announced that it:

has today confirmed its rating of the Cumulative Preferred Shares of Canaccord Genuity Group Inc. (Canaccord Genuity or the Company) at Pfd-3 (low). The trend has been revised to Negative from Stable.
…
The Negative trend reflects the significant headwinds facing the Company, which are driving weak results and low returns. While Canaccord Genuity’s variable expense structure is an important factor underpinning its solid expense control, results were notably weak 9M 2016, resulting in an inability to reduce compensation commensurately. DBRS views this as appropriate from a franchise perspective, given the Company’s need to retain and attract top talent. The challenge is balancing the need to generate returns and grow capital through retained earnings, which continue to be significantly challenged, while continuing to invest in the franchise. DBRS expects that the Company’s earnings will remain significantly pressured over the near to medium term.

Signs of sustained earnings deterioration would likely add negative rating pressure, particularly if capital levels continue to be eroded. Increased pressure on the Company’s cash flows could also pressure the rating. Furthermore, as with all broker-dealers, any significant reputational issues would likely pressure ratings. On the other hand, further franchise diversification that contributes to sustained and improving earnings trends across businesses would provide support to the current rating level.

The trend was assessed as Negative in 2011, then revised to Stable in 2014.

This entry was posted on Friday, April 8th, 2016 at 8:36 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.