12 Best & Worst Broker-Dealers: Q3 Earnings

During the three months ended Sept. 30, the markets were generally kind to investors, with the S&P 500 rising 6.4%. Growth in earnings per share for the financial sector, over the past five years, has increased at a similar level of 6.3%.

In the past quarter, though, financial sector EPS growth averaged 20%, according to Reuters.

Goldman Sachs staged a big turnaround, while Bank of America’s results tumbled, along with those of other major rivals.

Here are 12 companies, selected as the six best and six worst performers in Q3, 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: Q2 Earnings at AdvisorOne.) 6th Best
INVESTORS CAPITAL (ICH)

Investors Capital Holdings, the parent company of the Lynnfield, Mass.-based broker-dealer of the same name, said it had net income of $280,000 on total revenue of $20.32 million for the period ended Sept. 30. This represents a gain of $0.04 per share vs. a loss of $0.13 a year ago.

Since you can’t calculate a proper percentage increase from a negative number, and the dollar amount of the turnaround was somewhat small, we have ranked Investors Cap No. 6.

In the second fiscal quarter, revenue rose close to 1% from last year thanks to a jump in commission revenue and other fee income, the company says. Commission revenue rose 0.8% to $15.78 million, compared to $15.66 million in the year-ago period. Advisory fees, however, declined 2.5% to $3.98 million, compared to $4.08 million in the same period last year.

The company says that ongoing expense reductions and revenue growth translated into consecutive operating and net income postings for the first two quarters of the fiscal year. It has about 450 advisors and some $8 billion in assets under management.

5th Best
RAYMOND JAMES FINANCIAL (RJF)

Raymond James said its net income of $83.3 million was up 21% from a year ago in the quarter ended Sept. 30. Earnings were $0.60 per share, up 11% from last year.

Excluding $19 million of pre-tax charges for expenses related to the purchase of broker-dealer Morgan Keegan, net income would have been $95.7 million, or $0.69 per share, up 33% year over year; analysts had expected earnings of $0.63 without the charges.

As of Sept. 30, Raymond James has 6,330 advisors vs. 5,350 a year ago and 6,367 in the earlier quarter. It has 5,452 in the United States, while the rest are in Canada and the United Kingdom; this figure is up from 4,504 last year and down 37 reps from about 5,489 in the earlier period.

4th Best
WELLS FARGO (WFC)

Wells Fargo reported record quarterly net income of $4.9 billion, up 22% from last year’s $4.1 billion, also thanks to increased lending, for a total of $21.2 billion in revenues. The record profits reflected 11 straight quarters of gains. EPS came in at $0.88 versus analysts’ expectations of $0.87 and EPS of $0.78 last year – representing a 13% jump in EPS.

Wells, which is the largest mortgage lender in the United States, continued to generate growth across its diversified set of businesses. “In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses,” said Chairman and CEO John Stumpf in a statement.

Wells Fargo Advisors said its headcount was 18,277, down 109 from 18,386 in the second quarter of 2012. The number of traditional advisors as of Sept. 30 was 10,857 vs. 10,913 in the previous quarter. Wells Fargo had 2,827 reps working in banks, along with 3,110 licensed bankers.

3rd Best
JPMORGAN CHASE (JPM)

JPMorgan Chase & Co. (JPM), saw its quarterly profits rise 34% on income of $5.7 billion over the prior year’s $4.3 billion, with earnings per share of $1.40 versus $1.02 a year ago – a jump of 37%.

The results surprised analysts, who expected EPS of $1.24, and were due to strength in core lending, including mortgages, and commercial loans.

New home loans and refinancing totaled $47 billion at JPM in Q3, up 29% from last year. Mortgage unit earnings were 57% higher.

2nd Best
(sort of, see next page)
GOLDMAN SACHS (GS)

Goldman Sachs said it had net earnings of $1.51 billion, or $2.85 per share, for the third quarter ended Sept. 30. This was a massive improvement from the loss of $393 million, or $0.84 per share, in the third quarter of 2011. That’s a nearly $1.9 billion gain.

The company said net revenues in investment banking were $1.16 billion, 49% higher than a year ago. Net revenues in financial-advisory services were $509 million, slightly lower than in the third quarter of 2011.

Net revenues in the firm’s underwriting business, though, were $655 million, which is more than double the amount of the year-ago period. And net revenues in institutional client services were $4.18 billion, 3% higher than the third quarter of 2011.

Sales in fixed income, currency and commodities client execution were $2.22 billion, up 28% than the year-ago period.

Best
STIFEL FINANCIAL (SF)

(Goldman technically could have topped the list, but, as we said earlier, you can’t calculate a percentage change from a negative number so, again, as we did in Q2, we just like giving the Best rating to the little guy.)

And repeating as champion from Q2 is … Stifel Financial, which said its net income of $37.7 million, or $0.60 per share, on revenues of $420.1 million, surged compared with net income of $22.3 million, or $0.35 per share, on revenues of $334.2 million for the third quarter of 2011. This represents a 69% jump in net income and a 71% increase in EPS.

“Today’s [Nov. 5] announcement of our merger with KBW furthers our goal of creating the premier middle-market investment bank with a specialized focus on the financial services industry,” Ronald J. Kruszewski, chairman, president and CEO of Stifel Financial, in a statement

The transaction is valued at more than $575 million, of which some $250 million in excess capital on KBW’s balance sheet is expected to be immediately available to Stifel upon closing, the company says.

6th Worst
AMERIPRISE FINANCIAL (AMP)