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<strong>GMP</strong> Capital Inc.'s Harris Fricker, right, during an interview with The Globe and Mail in 2010.Darren Calabrese/The Globe and Mail

GMP Capital Inc.'s struggles to make money in the securities business continue, showing just how strained the market is for brokers that are focused on the Canadian market.

The big problem was a 49-per-cent drop in investment banking activity at the firm. Activity in the key sectors of mining and oil and gas was down 61 per cent and 27 per cent, the Toronto-based company said.

GMP reported net income of $4.8-million in the most recent quarter. However, the firm said Friday morning, the big driver was not its core business but a sale of assets that added $11.3-million to net income. On an adjusted basis, the securities firm said it lost $300,000.

GMP is also facing big severance payouts as it tries to restructure its business for the slow market and to get ready for any rebound. So far this year, GMP has booked $8.5-million in restructuring.

GMP has tried to cut costs by reducing bonus payouts, but even so compensation is now eating up 83 cents of every dollar of revenue produced by the capital markets business.

Still, GMP's shares have been trading strongly relative to rival Canaccord Financial, the other big independent brokerage that is publicly traded, as this post from Thursday pointed out. One reason, GMP boosters say, is that while it appears that Canaccord is snubbed on a price-to-book-value basis, much of Canaccord's book value is goodwill. On a tangible book value basis (i.e., what can you actually sell to raise cash in a hurry) GMP actually has a higher book value. Once you account for that, the price-to-book ratios look a lot more similar.

Also, GMP's wealth management segment is performing well relative to Canaccord's North American wealth management business. GMP's wealth management business made money, while Canaccord reported a pretax net loss of $5.1-million from North American wealth management.

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