2010 Q4 Earnings: Piper Jaffray Tops Estimates on Strong Sales

Net revenues for the investment bank’s capital-markets unit rose 18% in the quarter to $151 million

Piper Jaffray Cos. (PJC) said early Wednesday that it had net income of $9.4 million, or $0.49 per share, for the fourth quarter of 2010 vs. net income of $12.3 million or $0.63 cents a share in the same period of 2009.

The company says its recent results were reduced by $0.48 per share due to a $9.1 million after-tax charge related to the restructuring of the firm's European operations.

Fourth-quarter revenues were $176.4 million vs. $132.9 million in the year-ago period and $116.5 million for the third quarter of 2010.

Analysts had expected the investment bank to earn $0.48 cents a share on sales of $132.3 million.

Piper Jaffray’s shares were trading up 13.5% on very high volume near $41 in early afternoon trading Wednesday.  

For the year ended Dec. 31, 2010, net income was $24.4 million, or $1.23 per share, compared with net income of $30.4 million, or $1.55 per share, in 2009.

Net revenues were $530.1 million for the 12 months ended Dec. 31, 2010, up 13 percent compared to last year, the highest since Piper Jaffray  (formerly owned by US Bancorp) became a public company in 2003.

"We are very pleased with our strong fourth-quarter results, reflecting solid performance in all of our businesses," said CEO and Chairman Andrew S. Duff in a press release. "In 2010, we took actions to improve our profitability and return on equity for the longer term.”

For 2010, the company says its asset-management activities comprised 13% of total net revenues and 28% of operating income, up from 3% and a loss in 2009, respectively.

The firm has two reportable business segments: Capital Markets and Asset Management. Consolidated net revenues and expenses are fully allocated to these two segments.

It sold its private-client business for about $500 million in 2006 to UBS, which picked up 700 financial advisors through the deal.

Piper Jaffray’s capital-markets group generated pre-tax operating income of $16.0 million, which was reduced by $9.4 million (pre-tax) of restructuring charges, compared to $18.7 million in the

fourth quarter of 2009 and $9.3 million in the third quarter of 2010. Net revenues of $151.0 million rose 18% and 52%, compared to the year-ago period and the third quarter of 2010, respectively.

Advisory services revenues of $34.6 million rose 215% and 68% vs. the year-ago period and the third quarter of 2010, respectively, and were the highest since the fourth quarter of 2007.

The improved performance resulted from a higher aggregate value of completed transactions and higher revenue per transaction, the company said.

Equity institutional brokerage revenues were $27.5 million, down 2% compared to the year-ago period, and up 13% compared to the third quarter of 2010, mainly driven by higher client activity in the U.S. and Asia.

In the fourth quarter, the unit completed 35 equity financings raising a total of $4.0 billion in capital, 170 tax-exempt issues with a total par value of $2.7 billion and 15 merger and acquisition transactions with an aggregate enterprise value of $3.5 billion.

Asset Management
For the quarter ended Dec.31, asset management generated pre-tax operating income of $7.1 million compared to $0.3 million in the fourth quarter of 2009, and $4.3 million in the third quarter of 2010.

Net revenues of $25.3 million rose from $4.9 million in the year-ago period, primarily attributable to the acquisition of Advisory Research. Revenues rose 49%, or $8.3 million, compared to the third quarter of 2010, mainly driven by performance fees.

Assets under management in the segment were $12.3 billion, compared to $6.9 billion a year ago and $12.8 billion in the third quarter of 2010. The increase compared to last year was mainly attributable to the acquisition of Advisory Research. The decrease compared to the third quarter of 2010 was driven by FAMCO client outflows offset in part by positive client inflows at Advisory Research, and market appreciation of client assets.

"In 2011, we remain committed to further improving our productivity, profit margins and return on equity,” CEO Duff said in a press release. “We are optimistic about how our firm is positioned against an improving macroeconomic backdrop, yet are cautious about the potential for volatile periods in the capital markets in the year ahead."

Read AdvisorOne's 2010 Q4 earnings calendar for the financial sector for release dates and links to earnings stories.

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