12 Best & Worst Broker-Dealers: Q4 Earnings

One of the wirehouse firms produced a turnaround in profits of almost $800 million, while another reported almost $2.4 billion in losses

Earnings for the financial services industry improved an average of 85% in the quarter ended Dec. 31, 2012, according to data compiled by Reuters. This was a nice jump from the 20% improvement of the preceding quarter, ended Sept. 30. Plus, sales ticked up 53% on average for financially focused companies.

These numbers are a good change of pace for an industry that has a pretty weak five-year run rate. The group’s earnings-per-share growth of the past five years has been just 3%. Sales momentum has averaged around 13%.

Morgan Stanley (surprise!) had a big improvement in the final quarter of 2012, while UBS—thanks to the LIBOR scandal—saw its results tumble.

Here are 12 companies, selected as the six best and six worst performers in Q4, based largely on how they out- or underperformed their broker-dealer rivals.

(Check out last quarter's winners and losers 12 Best & Worst Broker-Dealers: Q3 Earnings at AdvisorOne.)

UBS CEO Sergio Ermotti. (Photo: AP)


12th Place


The Swiss company is this quarter's repeat cellar-dweller—actually it's a three-peat since it held this dubious distinction in Q3 and Q2. Calculating proper percentage declines involving negative numbers is tricky, but UBS’ year-over-year net loss (after taxes) of 1.89 billion Swiss francs (about $2.08 billion), or 0.50 Swiss francs per share, vs. a gain of 323 million Swiss francs ($346 million), or 0.08 Swiss francs, a year ago means that it has seen its earnings fall a whopping 685% and an EPS drop of 725%.

The most-recent drop, like that of Q3, was sizeable, to say the least: 2.2 billion Swiss francs (or about $2.4 billion). Due to the LIBOR troubles and related issues, the investment bank reported an operating loss before taxes of 1.82 billion Swiss francs vs. a gain of 481 million Swiss francs a year ago and a loss of 2.53 billion Swiss francs in the prior quarter.

On the plus side, UBS Americas says its advisor headcount stood at 7,059 on Dec. 31, up 27 from 7,032 in Q3 ’12 and an increase of 92 from 6,967 in Q4 '11. Net new money in the fourth quarter was $8.8 billion, a jump of 84% from $4.8 billion in Q3 ’12 and an increase of 312% from $2.1 billion in Q4 ’11. Including dividends and interest, net new assets were $16.7 billion, up 70% from $9.8 billion in Q3 ’12 and an improvement of 93% from $8.6 billion in Q4 ’11.

Investors Capital CEO Tim Murphy on the company website.11th Place


Investors Capital Holdings, parent company of the Investor’s Capital independent broker-dealer, said it had revenue of $20.77 million vs. $19.04 million a year ago. Its net income, however, dropped to $133,700, or $0.02 per diluted share, vs. $428,500, or $0.06 per diluted share a year ago—an EPS decline of 67% year over year and a 69% drop in net income.

The broker-dealer said, though, that its commission revenue rose 7.7% to $15.5 million, compared with $14.40 million in the prior period. Plus, advisory fees increased by 9.6% to $4.2 million, compared with $3.8 million in the prior period, as asset values grew.

The Lynnfield, Mass.-based company’s average yearly revenue per representative, based on a rolling 12-month period, rose to about $180,000, an increase of 5% compared with roughly $170,000 for the prior rolling 12-month period.

Bank of America CEO Brian Moynahan. (Photo: AP)10th Place


BofA reported net income of $732 million, or $0.03 per share, a drop of 63%, for the fourth quarter of 2012, compared with a gain of $1.99 billion, or $0.15 per share, in the year-ago period. (This represents an 80% decline in EPS.)

Revenue for the quarter, net of interest expense, on a fully taxable-equivalent (FTE) basis was $18.9 billion vs. $25.2 billion a year ago—a 25% decrease.

On the plus side, the global wealth unit, which includes Merrill Lynch, saw its net income more than double to $578 million for the fourth quarter from $272 million a year ago. Quarterly revenue increased 6% year over year and close to 3% from the prior quarter to nearly $4.2 billion, “driven by higher asset-management fees due to higher market levels and long-term [assets under management] flows, as well as higher brokerage transactional revenue.”

The number of Merrill Lynch advisors, though, is down to 16,413 from 16,784 in September and 16,457 a year ago. Including the mass-affluent-focused Merrill Edge advisors, who are part of BofA's Consumer Business & Banking unit, there are 20,408 client-facing professionals in the organization, down from 20,832 in Q3 and 20,841 in Q4'11. U.S. Trust operations include 2,077 reps.

LPL CEO Mark Casady9th Place


LPL Financial said its fourth-quarter earnings declined to $36.9 million, or $0.34 a share, from $39.5 million, or $0.35 a share, a year earlier. This represents an overall earnings drop of nearly 7% and an EPS decline of 3%.

Net revenue improved about 14% to $944.2 million from $828.7 million a year ago. This beat analysts' Q4’12 expectations of $918.2 million.

In its earnings release, LPL Financial said that it was planning to spend $70 million to $75 million through 2014 on outsourcing of back-office and other functions, information technology and related restructuring of its operations. By 2015, the company expects to save about $30 million to $35 million a year as a result of these steps.

LPL said that as of Dec. 31, it had 13,352 affiliated independent advisors. This is an increase of 182 from Sept. 30 and 505 from a year ago.

TD Ameritrade CEO Fred Tomczyk8th Place

TD Ameritrade (AMTD)

TD Ameritrade said it brought in $15.6 billion of net new client assets in the quarter ending Dec. 31, up more than 50% from the same quarter a year ago and the period ending Sept. 30, when net new clients assets were $10.2 billion and $10.1 billion respectively.

The company also said it had net income of $147 million, or $0.27 per share, versus $152 million, or $0.27 per share, a year ago. This is a 3% earnings decline over Q4’12 and flat EPS results. In the prior quarter, TD gained $147 million, or $0.26 per share.

Sales were $651 million in its fiscal first quarter, down from $653 million a year ago but up a bit from $647 million in the prior period.

The brokerage company reported average client trades per day of about $334,000 in the recent quarter vs. $328,000 in the prior quarter and $367,500 in the year-ago period. Client assets grew to almost $481 billion, up from $472 billion in the quarter ending September 2012 and from $406 million in December 2011.

Customer at a Wells Fargo ATM. (Photo: AP)7th Place


Wells Fargo posted fourth-quarter 2012 earnings and sales that beat expectations, though its net interest margin—how much it profits on loans—fell to 3.56% from 3.89% a year ago.

In the fourth quarter, net income was $5.1 billion, or $0.91 per share, compared with $4.1 billion, or $0.73 per share, in the same period of 2011. This represents a jump of 24% in net income and a 25% improvement in EPS. Sales for the period grew 7% to $21.9 billion.

The Wealth, Brokerage and Retirement unit reported net income of $351 million, up 13% from the fourth quarter of 2011. Revenue was $3.1 billion, up 2%. Client assets for the retail brokerage were $1.2 trillion, up 8% from the prior year.  

Wells Fargo Advisors, led by Danny Ludeman, said its headcount was 18,662 as of Dec. 31, up from 18,277 in the previous quarter. The number of traditional, nonbank employee advisors as of Dec. 31 was 10,945 vs. 10,857 on Sept. 30.

Workers walking past Citigroup headquarters in New York. (Photo: AP)6th Place


Citigroup said its net income for the fourth quarter 2012 was $1.2 billion, or $0.38 per diluted share, vs. net income of $956 million, or $0.31 per diluted share. That’s a jump of 26% of net income and 23% of EPS.

Sales of $18.2 billion were up 6% from $17.2 billion in the fourth quarter 2011.

Securities and banking revenues rose 34% from the prior-year period to $4.3 billion, and the unit’s net income was $629 million in the fourth quarter of 2012. Investment banking revenues of $996 million increased 56% from the prior-year period.