Canaccord Genuity cuts 7 per cent of Canadian staff amid Bay Street’s deal drought

Open this photo in gallery:

Canaccord Genuity Corp. CF-T is slashing 7 per cent of its Canadian staff this week, with the bulk of cuts coming from its capital markets division, as Bay Street grapples with a prolonged dry spell for mergers and financings that is forcing investment banks to rethink their head counts.

The layoffs, announced Tuesday in an internal memo obtained by The Globe and Mail, amount to roughly 75 job losses at Canaccord, which employs close to 1,200 people in Canada. Before the cuts, the investment bank’s Canadian capital markets arm employed 275 people, while its North American wealth management arm, which is predominately a Canadian business, employed close to 500 people. Canaccord’s corporate division, which includes the Canadian back office, employs 427 people.

The Canadian cuts follow a shakeup at Canaccord’s executive ranks, with the investment bank parting ways with its president of Canadian capital markets, Pat Burke, in June, and naming him a special adviser to the company. Former wealth management head Stuart Raftus is now chief executive of Canaccord Genuity Corp., the formal name of the entire Canadian business.

The investment bank also cut 6 per cent of staff in its U.S. capital markets arm over the past few weeks, and the division had close to 400 employees.

In Tuesday’s internal memo, Mr. Raftus said the cuts follow a “comprehensive evaluation of each area of our business” and that the investment bank had a “goal of designing an organizational structure consistent with the current and forecasted economic environment – a structure that will position us to compete effectively and provide us with the necessary resources to produce superior client outcomes and create the unique client experience CG is known for.”

Canaccord declined The Globe’s request for comment.

Investment banks in Canada and the U.S. are grappling with a deal drought that has sapped revenues generated by underwriting share sales and advising on mergers and acquisitions. Although equity markets are on fire in the U.S., with the S&P 500 gaining 19 per cent this year, until very recently the market’s return was heavily concentrated and came from a few high-flying shares, including Apple, Meta and Alphabet.

Because most stocks had lacklustre returns and investors, and interest rates have jumped over the past year, deal flow for the small-and-mid-sized companies that Canaccord specializes in has been very slow.

In Canada, equity markets are vastly underperforming the U.S., and underwriting activity in particular has been extremely slow. In April, investment bank Lazard said it would cut 10 per cent of its global staff over the course of 2023, changes that included significantly reducing the number of bankers who advise on Canadian deals, The Globe reported. In June, Bank of Montreal laid off about 4 per cent of its capital markets positions globally – or more than 100 employees – with about half of those roles in Canada, The Globe reported.

In Canaccord’s last fiscal year, which ended March 31, the investment bank reported capital markets income before taxes of $30.7-million – down from $324.6-million the year prior when the bank benefited from intense capital markets activity during the pandemic.

Canaccord reports first-quarter earnings on Thursday but already disclosed in late June that it is facing a potentially “significant penalty” related to its wholesale market-making business.

In a separate filing around the same time, Canaccord said board chair David Kassie will step down from his executive management role after the company’s Aug. 4 annual general meeting and step down as chair one year later.

Also in June, Canaccord’s executives abandoned their $1.13-billion plan to take the company private, citing an unnamed “ongoing regulatory matter” as the main reason why required approvals were not received before the bid expired on June 13.