TORONTO - CI Financial Corp. (TSX:CIX) was taking good news with the bad on Tuesday as it reported a precipitous drop in third-quarter profits, but also hiked its dividend by 20 per cent.

CI, one of Canada's largest wealth-management and mutual fund operators, said it would boost its dividend by a penny to six cents per share payable Dec. 15.

Chief executive Bill Holland called the quarter "the best in recent memory."

"The world today is significantly better than just six short months ago," he said in a conference call with analysts.

"In fact, this remarkable rally has all but wiped out the damage of the worst bear market since the '20s."

However, CI Financial still posted an 86 per cent decline in net income to $17.4 million or six cents per share, as it booked a loss on the sale of its Blackmont division. That compared with a quarterly profit of $118.1 million, 42 cents per share a year earlier.

CI has agreed to sell the retail brokerage division of Blackmont for $93.3 million, and plans to sell the rest of Blackmont's assets within a year. The results included a $47.3-million writedown related to the Blackmont sale.

Adjusted net earnings from its continuing operations were $74 million or 25 cents per share, compared with $130 million or 47 cents per share a year earlier. The results beat analyst expectations of 22 cents per share according to Thomson Reuters.

Overall revenue fell to $318.7 million, down from $349.8 million in the third quarter of 2008. Management fees fell to $273.5 million from $302.7 million.

Shares in CI closed down 22 cents to $19.03 on Tuesday at the Toronto Stock Exchange, with a 52-week high to $21.70 and low of $10.60.

Holland said in the conference call that average investors are still reluctant to return to trading stocks.

"When you look at the industry as a whole, I think the one thing we haven't seen yet is the stampede of retail investors into the market," he said.

"I think that's just the result of the fear level that became palpable in the spring. Two bear markets of almost 60 per cent in seven years just changes people's risk appetite."

During the quarter, retail assets under management dropped to $58 billion from $62.9 billion, while net sales declined 47 per cent to $246.5 million from $463.1 million.

CI Financial has spent the past year tightening its costs to contend with the economic downturn. Earlier in the year, the firm cut jobs while executives decided Blackmont had to go because it wouldn't be very profitable under its current structure.

BMO Capital Markets analyst John Reucassel said the cost reductions have helped the company overall, and considered the latest results positive.

"Net flows remain healthy and the dividend increase is a strong indication of management's comfort with the outlook for and financial condition of CI," he said in a note.