13 Best & Worst Broker-Dealers: Q1 Earnings, 2017

The first three months of the year have seen strong markets and corporate earnings that beat analysts' estimates

The first quarter of 2017 was a strong one for corporate profits.

According to FactSet, companies in the S&P 500 reported an average increase of close to 14% in Q1’17 vs. Q1’16.

That’s the biggest gain since Q3 of 2011. Plus, equity analysts forecast a full-year boost of S&P 500 earnings of 10%.

(Related: 11 Best & Worst Broker-Dealers: Q4 Earnings, 2016 )

Bank of America-Merrill Lynch analysts point out that energy-sector earnings have been particularly robust, rising roughly 800% in Q1. Exclude energy, and the S&P 500's earnings growth in the first quarter drops to 9.4%.

The financial sector took the second-place slot for Q1’17 earnings growth at 19.9%. Average growth in revenues for the financial sector was 9.4% over last year, according to FactSet.

(Related: DOL Fiduciary Deadline Is Coming. Here’s a Compliance Checklist)

Plus, 82% of financial firms reported earnings that beat analysts’ expectations for the quarter ending March 31.

LPL Financial Chief Investment Officer Burt White says earnings likely have been “the biggest driver of this year's stock market gains, with the possible exception of policy optimism.”

White explains that policy reforms as laid out by the Trump administration could add several percentage points to 2018 earnings “after what we anticipate will be mid-to-high single digit earnings gains for S&P 500 companies in 2017.”

The strategist adds that the independent broker-dealer expects corporate earnings “to be supported by a slight pickup in economic growth, a stable U.S. dollar, and rebounding energy sector profits.”

Read on to see how see how many of the largest broker-dealers did in the final period of 2017.

Richard Lampen, President  and CEO of Ladenburg Thalmann Financial Services, Inc.

WORST BROKER-DEALER

13th Place

Ladenburg Thallman (LTS)

Ladenburg Thallman, the parent company of Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services, had a 135% rise in its net loss in the first quarter of 2017 to $11.6 million, or -$0.06 per shares, vs. a loss of $4.9 million, or -$0.03 per share, in the comparable 2016 period.

Its first-quarter ‘17 revenues, though, grew 9% year over year to $290.3 million.

Client assets were $144.3 billion as of March 31, including advisory assets under management of $60.3 billion and cash balances of $4.5 billion.

“We are tremendously proud of our nationwide network of approximately 4,000 independent advisors, which continues to provide clients with trusted services,” said Dr. Phillip Frost, chairman of Ladenburg, said in a statement.

The firm also says it has recurring revenue of 76.9% for the trailing 12 months ended March 31 in independent brokerage and advisory services business.

“Ladenburg continues to drive significant recurring revenue with strong asset growth and recruiting in our independent brokerage and advisory business,” President and CEO Richard Lampen, said in a statement.

In addition to its networks of IBDs, the company owns Premier Trust, Ladenburg Thalmann Asset Management, Highland Capital Brokerage, an independent life insurance brokerage company, and Ladenburg Thalmann & Co., an investment bank.

Waddell & Reed Financial Inc.'s headquarters is in Overland Park.

12th Place

Waddell & Reed (WDR)

Waddell & Reed Financial (WDR) reported an 11% drop in its first quarter 2017 net income to $33.1 million, or $0.39 per diluted share, compared to net income of $37.0 million, or $0.45 per diluted share, during the first quarter of 2016.

Operating revenues in the period were $287 million – representing a 12% drop due to lower average assets under management and reduced Rule 12b-1 fee revenues in its broker-dealer advisory programs.

These lower revenues, the firm says, are tied to a share conversion of load-waived Class A shares to Class I shares in July 2016.

The operating margin in Q1’17 were 18.4% compared to 12.8% during the previous quarter and 22.1% during the same period last year.

Assets under management were $81 billion, while outflows during were $3.4 billion.

“Flow pressure continues to ease as redemptions from some of the largest sources of outflows steadily abates,” the firm said in a statement.

“Redemptions from Asset Strategy, which was once our most substantial source of outflows, fell to $1.0 billion during the current quarter, compared to redemptions of $4.5 billion during the first quarter last year,” it added.

Its retail brokerage has 1,662 advisors, down from 1,803 a year ago. Their average productivity (or fees & commissions) was about $61,000 in the latest quarter or $242,000 in the past 12 months.

“We are seeing early signs of progress, although much work remains,” said CEO Philip J. Sanders, in a statement. “Asset levels were stable sequentially, reflecting a slowing of net outflows, an uptick in gross sales and positive market action.”

Paul Reilly, CEO of Raymond James Financial.

11th Place

Raymond James (RJF)

Raymond James reported a nearly 20% jump in revenues to about $1.6 billion for the quarter ending March 31 vs. last year’s figure. Its net income, though, tumbled 10% to $113 million, or $0.77, from the year-ago period due to legal and other expenses.

The firm’s private client results had a similar bifurcation. Sales soared 23% year over year to $883 million, but pretax profits dropped 65% to about $29 million.

In an interview, CEO Paul Reilly said the firm had “a record start for the past six months, record client assets … [and] advisor headcount, and our recruiting is still at the top of market and retention, too.”

The firm’s attrition, 0.6%, is especially impressive, Reilly explains, acknowledging that a positive market environment and rising interest rates are helping too: “It’s really the best six-month start we’ve had, and we are continuing to” see positive results from these trends in the current quarter.

The firm’s 7,222 advisors work with client assets of $611 billion, up 26% from a year ago. Fee-based assets stand at $251 billion, a jump of 33%. 

In terms of the advisor headcount, Raymond James has been growing at a compound annual rate of 3.4% for the past five years.

LPL Financial headquarters in San Diego.

10th Place

LPL Financial (LPLA)

The independent broker-dealer’s first-quarter profit declined about 4% to $48 million, or $0.52 per share, vs. $50.4 million, or $0.56 per share, a year ago. These results beat analyst forecasts.

During the most recent period, the company completed $2.2 billion in debt refinancing, which reduced EPS by $0.14. Revenue grew 3% to $1.035 billion in Q1’17 from the year-ago period.

“We had a solid start to the year,” said Dan Arnold, president and CEO, in a statement. “We have heard positive sentiment from our advisors, who are energized by the improved macro environment, LPL’s enhanced capabilities, and their opportunities to win in the marketplace.”

“This quarter, we strengthened our balance sheet by refinancing our entire debt structure,” said Matt Audette, CFO. “We lengthened our average maturities, lowered our interest rates, increased the capacity of our revolver, and diversified our funding sources. We believe our updated capital structure positions us well to fund future growth.”

During Q1’17, total brokerage and advisory assets increased 11% year-over-year to $530 billion. Total net new asset inflows were $2.6 billion, while net new advisory assets were $6.0 billion.

The advisor headcount decreased to 14,354, down 23 sequentially and up 261 year-over-year.

Wells Fargo Sign.

9th Place

Wells Fargo (WFC)

Wells Fargo said its first-quarter net income was flat at $5.5 billion, or $1.00 per share, compared with $5.5 billion, or $0.99 per share, a year ago.

Its advisor headcount fell three from last year and two from the prior quarter to 14,657.

The bank, under pressure from its fake-accounts scandal, says it “continued to make meaningful progress in the first quarter in rebuilding trust with customers and other important stakeholders, while producing solid financial results,” according to CEO Tim Sloan.

The Wealth & Investment Management unit had revenues of $4.2 billion, up from $3.9 billion in Q1’16. Its net income was $623 million vs. $512 million last year.

The unit’s total assets are $1.8 trillion, up 9% from a year ago.

The retail brokerage group reported loan growth of 15% from last year, while the wealth-management group said its average loan balances improved 8%.

Ameriprise Financial Headquarters in Minneapolis.

8th Place

Ameriprise Financial (AMP)

Ameriprise said its first-quarter net income was $403 million, up 11% from last year, while it had revenues of $2.91 billion, up 3% from the year-ago period.

Ameriprise says the investment firm’s “experience and expertise in serving the financial institutions market will complement Ameriprise’s successful growth strategy in Advice and Wealth Management. The group will become part of a new institutions channel.

“We have a talented team and resources in place to make this a seamless transition, and we are confident our new colleagues will enjoy the many benefits of working with Ameriprise,” said Pat O’Connell, head of the Ameriprise Advisor Group, in a statement.

In its earnings announcement, Ameriprise said it has 9,668 advisors with average trailing 12-month fees and commissions of $529,000. The firm is down about 100 reps from a year ago and seven from the prior quarter.

The wealth and advisor unit boosted assets to $500 billion from $450 billion a year ago. It also raised total revenue to roughly $1.3 billion from $1.2 billion.

The group’s pretax operating margin was 19.2% in the most recent period vs. 17.1% in Q1’16. Total pretax profits were up 21% year over year to $248 million. 

Jamie Dimon, CEO of JPMorgan Chase (Photo: AP)

7th Place

JPMorgan (JPM)

JPMorgan said its first-quarter earnings rose 16.81% to $6.5 billion, or $1.65 per share vs. $5.5 billion, or $1.35 per share, a year ago. Revenue hit nearly $25.59 billion. These results topped analyst estimates.

The bank’s trading revenue was $6.5 billion, beating expectations by $1 billion. Average core loans rose 9% from last year.

"We are off to a good start for the year with all of our businesses performing well and building on their momentum from last year," CEO Jamie Dimon said in a statement.

"U.S. consumers and businesses are healthy overall and with pro-growth initiatives and improving collaboration between government and business, the U.S. economy can continue to improve," he said.

The Asset and Wealth Management unit, though, bucked the trend of its overall business momentum. Its sales fell 4% to $3.1 billion, and its profits decline by about 34% to $385 million from $587 a year ago.

Client assets are about $2.55 trillion, with $1.84 trillion representing assets under management.

The firm advisor headcount stands at 2,480 client advisors down from 2,750 a year ago and 2,504 in the prior quarter.

Michael Corbat, CEO of Citigroup. (Photo: AP)

6th Place

Citigroup (C)

Citigroup said its net income improved 17% in Q1’17 to $4.1 billion, or $1.35 per share. Its total revenue was $18.12 billion in the most-recent period.

The bank’s revenue from fixed income trading rose nearly 20% from last year to to $3.62 billion. Equity trading revenue ticked up 10%.

"The momentum we saw across many of our businesses towards the end of last year carried into the first quarter, resulting in significantly better overall performance than a year ago," Citi CEO Michael Corbat, in a statement.

"Revenues increased in both our consumer and institutional lines of business, most notably in areas where we have been investing such as equities, U.S. cards, and Mexico," he said.

Loans rose 2% to almost $630 billion; deposits grew 2% to $950 billion.

Bank of America headquarters (Photo: AP) 

5th Place

Bank of America (BAC)

BofA’s first-quarter profits jumped 40% to $4.86 billion, up from $3.47 billion a year ago. Per-share earnings were $0.41, beating estimates and last year’s $0.38 EPS.

Revenue rose 7% to $22.25 billion from last year; on an adjusted basis, sales were $22.45 billion, which also surpassed analysts' estimates. The bank's net interest income also increased 7%, hitting nearly $11.1 billion in Q1’17; BofA had projected this figure would just be $600 million.

Global Wealth & Investment Management had net income of $770 million, up 4% over last year, as revenue grew 3% year over year to $4.6 billion “driven by higher asset management fees and net interest income, which more than offset lower transactional revenue,” the bank says.

Though the number Merrill Lynch of advisors grew 72 from a year ago, the total figure fell 145 to hit 14,484 as of March 31.

Advisors’ average yearly level of fees & commissions hit $1.3 million per veteran rep, up from $1.25 million in Q4’16. Total advisor productivity stands at $1 million vs. $960,000 in the prior quarter.

Assets held in Merrill accounts were $2.2 trillion, a jump of $169 billion (or 9%) from a year ago and $65 billion (or 3%) from the prior quarter. The group’s revenue of close to $3.8 billion is up 3% from last year and 5% from the earlier period.

James Gorman, CEO of Morgan Stanley. (Photo: AP) 

4th Place

Morgan Stanley (MS)

Morgan Stanley reported strong results earlier this week, with its first-quarter net income jumping 70% year over year, to $1.93 billion, and revenue increasing 25% to $9.75 billion.

Meanwhile, the wealth unit had an even bigger jump in net income, which rose 31%. The unit’s pre-tax margin, 24%, was the highest since the firm acquired Smith Barney, according to CFO Jonathan Pruzan.

Plus, total client assets hit $2.2 trillion, and fee-based assets grew 6% to $927 billion, including net asset flows of $19 billion.

The latest figure for Morgan Stanley advisors is 15,777, which the firm says is up 14 advisors from Q4’16 but down 111 (or 1%) from Q1’16.

When it comes to average yearly fees & commissions per FA, Morgan Stanley tops Merrill Lynch by a hair at $1,029,000 vs. the Thundering Herd’s $999,000. (Merrill says that its level for veteran advisors is around $1,300,000.)

UBS Bank building entrance and sign.

3rd Place

UBS Group (UBS)

UBS Group said its overall net income rose 80% from a year ago to nearly $1.3 billion as the global bank and wealth-management firm saw clients add over $20.6 billion to their accounts worldwide.

Its wealth management business in the Americas increased its total operating income by 8% from last year to $2.05 million thanks to higher recurring net fee income, net interest income and transaction-based income. The group’s pretax profit soared 42% year over year to $302 million.

As of March 30, the group has 6,986 registered reps, down from 7,025 in December and 7,145 a year ago. As CFO Kirt Gardner said on a conference call, “Last year, we introduced a new operating model in Wealth Management Americas, and we now focus more on increasing retention and productivity and are de-emphasizing recruiting.”

Average yearly fees and commissions (or production) per advisor in the Americas stands at $1.174 million while the average asset level is $165 million.

The roughly 14,500 reps at Merrill Lynch had annual advisor production of $999,000 in Q1’17. Its veteran reps, though, hit $1.3 million as of March 30. Morgan Stanley, with nearly 15,800 FAs, said its average yearly production is $1.029 million.

UBS Wealth Management Americas’ clients have close to $1.2 trillion in assets with the firm, up from roughly $1.1 trillion a year ago.

Lloyd Blankfein, CEO Goldman Sachs. (Photo: AP)

2nd Place

Goldman Sachs

Goldman Sachs net income rose 80% in the first quarter but didn’t mean analyst expectations.

The firm reported earnings of $2.16 billion, or $5.15 a share, vs. $1.20 billion, or $2.68, a year ago. Revenue for the period was $8.03 billion, up 27% from last year’s $6.43 billion.

"The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise," Goldman Sachs CEO Lloyd Blankfein said in a statement.

Sales fell below where they were in the prior period. Fixed-income, currencies and commodities revenue, for instance, grew only 1% year over year to $1.7 billion.

Investment-banking revenue, though, ticked up 16% to $1.7 billion, while investment banking sales grew 12% to $1.5 million.

The institutional client services unit, however, saw its sales fall 2% to $3.36 billion. Total client assets under management stand at $1.37 trillion, up about 7% from March 31, 2016.

Ronald Kruszewski, CEO of Stifel Financial. (Photo: AP) 

BEST BROKER-DEALER

1st Place

Stifel Financial (SF)

Stifel Financial said its net income soared 133% in the first quarter to $63.2 million, or $0.78 per share, from $27.1 million, or $0.36 per share, a year ago. Net revenues of $675.5 million, increased 9% from last year’s $620.1 million.

Global Wealth Management, though, saw its sales drop to roughly $171.5 million from $173 million in Q1’16.

Total client assets were $252.4 billion as of March 31, with fee-based assets of $75.4 billion.

The wealth unit now has 2,299 employee advisors working in about 400 locations nationwide.

Client lending in the latest period was $3 billion vs $2.6 billion in the year-ago period.

“In the first quarter, our net revenue was driven by record results in our Global Wealth Management segment that was due to further increases in fee-based revenue and improved net interest income at Stifel Bank,” said Chairman & CEO Ronald J. Kruszewski, in a statement.

“The growth in these recurring revenue streams over the past year and a half has helped to offset the volatility in our more transaction-driven institutional businesses,” he added.

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