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13 Best & Worst Broker-Dealers: Q2 Earnings, 2013

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Earnings for the financial services sector improved an average of 65% in the quarter ended June 30, up from 53% in the prior quarter, according to data compiled by Reuters.

Sales for financial services firms moved up 25% on average in Q2, after moving up 20% in Q1. The sector’s 12-month sales growth rate is 18% on average, as of June 30.

The financial services sector’s earnings-per-share growth rate over the past five years was about 25%, Reuters says. Sales momentum averaged about half that, or 13%, for the same period.

Financial stocks, as measured by the Financial Select Sector SPDR (XLF) and the iShares Financial ETF (IYF). are up more than 21% this year vs. about 15% for the Dow Jones. The Market Vectors Bank and Brokerage ETF (RKH), however, has ticked up about 12%.

Some of the larger institutions had strong improvements in their quarterly results, while one remained in the red and another had negative earnings growth.

Here are 13 companies, ranked in terms of how they out- or underperformed their broker-dealer rivals.

(Check out last quarter’s winners and losers in 12 Best & Worst Broker-Dealers: Q1 Earnings at ThinkAdvisor.)

Investors Capital CEO Tim Murphy on websiteWORST

13th Place


Investors Capital saw its profits fall from $262,000, or $0.04 per share, in Q2 2012 to a net loss of $360,000, or $0.05 per share, in Q2 2013, for a total drop of $622,000 over the second quarter last year. 

Total revenue, though, grew 11% to $23.08 million vs. $20.8 million in the year-ago period.

This company says that Q2’13 was the first quarter since September 2009 for total revenues to top $23 million. It attributes the increase to top-line growth of both commissions and advisory fees, which benefited from the firm’s practice management initiatives, attracting and recruiting new financial advisors, and improved financial market conditions.

Commission revenue climbed 12.8% to $18.14 million, compared with $16.09 million in the prior period. Improving financial markets also benefited advisory fee revenue, says the broker-dealer; it increased 8.1% to $4.44 million, vs. $4.11 million in the prior period.

Total expenses, however, increased $3.40 million or 16.7% to $23.75 million.

The firms says its affiliated financial advisors, based on a rolling 12-month period, had yearly average fees and commissions of $193,153, an increase of 13.7% over $169,934 for the prior rolling 12-month period.

“I’m very excited about our record first quarter revenue results,” said Timothy B. Murphy, president and CEO of Investors Capital, in a press release. “We’re seeing the fruits of recruiting and retaining high-quality advisors as well as the benefits that come from implementing strategic, organic growth initiatives.

“While pleased with our top-line growth, we are still challenged by the continued costs of product litigation and settlements, which have significantly impacted our operating and net income results for several reporting periods,” Murphy continued. “Management’s strategy for resolving these cases and stemming related costs are essential to improving our operating and net income results going forward.” Ladenburg Thalmann website12th Place


Ladenburg Thalmann Financial Services reported a net loss of $5.5 million or $(0.04) per share compared with a net loss of $5 million, or $(0.03) per share in the comparable 2012 period, for a total drop of $500,000.

The company said its second-quarter loss was magnified by a loss on extinguishment of debt of some $3.8 million related to the prepayment of $90.4 million of debt, as well as $1.8 million of amortization of retention loans related to its purchase of Securities America and interest expense of roughly $4.9 million.

Its second-quarter 2013 revenues were $193.9 million, a 19% increase from revenues of $163.4 million in the second quarter of 2012.

 “We remain focused on additional opportunities to selectively grow our investment banking business and our independent brokerage and advisory platform,” said Richard Lampen, president and CEO. “We are enthusiastic about Ladenburg’s future prospects given our growing investment banking and research capabilities, robust institutional distribution and leading network of approximately 2,700 independent financial advisors.”

CEO Paul Reilly, left, and Chairman Tom James of Raymond James Financial.11th Place


Raymond James reported net income of $84 million, or $0.59 per share, up 7% from the year-ago quarter and 5% from the preceding period.

It also had net revenues of $1.11 billion in the most recent quarter, up 2% from the year-ago quarter but down 3% from the preceding quarter.

Excluding acquisition expenses of $13.4 million, non-GAAP net income was $92.5 million, or $0.65 per share, an increase of 2% from a year ago but down 4% from the prior quarter.

Analysts had expected the company to have earnings of $0.66 per share on sales of $1.11 billion.

“Most of our businesses performed as expected in the June quarter with the exception of fixed income.  An upsurge in interest rates in June resulted in trading losses despite lower inventory levels,” said CEO Paul Reilly, in a press release.

The company said its Private Client Group “showed modest improvement over the preceding quarter.” PCG securities fees & commissions were $624.3 million as of June 30, a nearly 2% increase from $615.2 million as of March 31 and a jump of 8% from $576.3 million a year earlier.

Total revenue for the Private Client Group was $741.6 million vs. $726.8 million in the prior quarter and $684.7 million a year ago. Pretax net income for the unit, however, declined 12% from the prior quarter to $56.7 million, which represented an 8% year-over-year improvement.

The number of U.S. financial and investment advisors is 5,428, down slightly from 5,431 as of March 31 and a drop of 61 from 5,489 in the year-ago period. The number of advisors in the U.S., Canada and United Kingdom stands at 6,301 vs. 6,297 three months prior and 6,367 in June 2012.

Over the summer, Raymond James said it tapped four new regional directors to help boost its recruiting and advisor-related business results. PCG securities fees & commissions were $624.3 million as of June 30 vs. $615.2 million as of March 31 and $576.3 million a year earlier.

Stifel CEO Ronald Kruszewski10th Place


Stifel Financial had a 13% jump in its GAAP net income for the most-recent period: $29.4 million, or $0.40 per share, vs. $26.1 million, or $0.42 per share, a year ago.

“We are pleased to announce record revenues for the second quarter and for the first six months of 2013 in both the Global Wealth Management and the Institutional Group, especially against the challenging market conditions in the quarter,” Chairman and CEO Ronald J. Kruszewski said in a press release. “The merger with KBW continues to exceed our expectations, and we are gaining market share in the financial institutions space.”

The Global Wealth Management unit segment had pretax operating income of $78.9 million, up 29% from $61.0 million a year ago and a jump of nearly 14% from $69.5 million in the prior quarter. This unit represents about 57% of total revenue for the company.

The Private Client Group reported net revenue of $257.3 million, a 17% increase over the year-ago period and a 6% jump over the prior quarter. It accounts for 52% of total company revenue as of June 30.

In terms of brokerage revenue, the PCG unit had $161 million in Q2, a 12% year-over-year improvement and a 2% quarter-over-quarter increase. This represents 60% of the company’s total brokerage sales.

The number of PCG advisors grew by 6 in the most recent period and stands at 2,069. That is up 41 from June 2012.

Stifel says its total client assets are $150.6 billion, a jump of 15% from last year and 2.4% from the prior quarter. LPL CEO Mark Casady9th Place


LPL Financial boosted its profits 14% in the second quarter: The independent broker-dealer said its net income was $45.1 million, or $0.42 a share, up from $39.5 million, or $0.35 a share, last year.

Adjusted earnings were $65.9 million, or $0.61 per share, vs. $55 million, or $0.49 per share, a year ago, topping analysts’ estimates. Total revenue grew 12% from last year to $1.02 billion, with recurring revenue representing the majority — nearly 66% — of net revenue in the second quarter.

“Our second-quarter top-line results mark the strongest quarter in LPL’s history with net revenues surpassing $1 billion,” said Chairman and CEO Mark Casady in a press release.

The number of financial advisors affiliated with the IBD grew by 224 — or nearly 2% — year over year to 13,409. The firms added 32 reps in the most recent period. 

Total client assets expanded 12% from last year and nearly 1% from the first quarter to $396.7 billion. Assets in fee-based accounts improved about 19% from a year ago and roughly 2% from last quarter to $132.4 billion.

Advisory assets in the company’s fee-based platforms were $132.4 billion at June 30, 2013, up 18.9% from $111.4 billion at June 30, 2012.

Commission revenue increased close to 14% year over year, “reflecting improved commissions per advisor and the addition of new advisors,” the company says, while advisory revenue grew 11.1%, thanks to “strong net new advisory asset flows and overall improved market levels.”

Assets under custody on LPL’s platform for independent RIAs jumped almost 67% from last year and 6% from last quarter to nearly to $50 billion managed by 215 affiliated independent RIA firms, compared with about $30 billion and 166 independent RIA firms a year ago and some $47 billion and 199 firms as of March 31.

The percentage of assets administered by LPL on this platform now tops 36% of the firm’s total assets vs. 30% about a year ago. Wells Fargo ATM (Photo: AP)8th Place


Wells Fargo, currently the biggest U.S. mortgage lender, saw its second-quarter profit grow 19.5%. Net income rose to $5.52 billion, or $0.98, from $4.62 billion, or $0.82

Revenue, though, expanded just 0.5% to $21.4 billion from $21.3 billion.

“Wells Fargo again demonstrated an ability to grow during a dynamic economic and interest-rate environment,” the bank’s chairman and CEO, John Stumpf, said in a statement.

Wells Fargo’s Wealth, Brokerage and Retirement reported revenue of close to $3.3 billion, up 10% from the year-ago period and 2% from the prior quarter, partly due to higher asset-based fees, the bank says.

Net income rose 27% from last year and 29% from last quarter to $434 million.

The retail brokerage reported client assets of $1.3 trillion, up 9% from last year. Managed accounts grew 19% to $52 billion, “driven by strong net flows and market performance,” the bank notes.

Wells’ wealth management group said it had client assets of $203 billion as of June 30, up 3% from the prior year. Also, retirement IRA assets grew 12% year over year to $315 billion, while institutional retirement plan assets expanded 11% to $277 billion. Citigroup CEO Michael Corbat. (Photo: AP)7th Place


Citigroup reported a stronger-than-expected 26% rise in adjusted quarterly profits thanks to stronger home prices, which reduced mortgage losses, and better trading revenue.

Adjusted net income rose to $3.89 billion, or $1.25 per share, in the second quarter, from $3.08 billion, or $1 per share, a year earlier. (The adjusted results exclude changes in the value of the company’s debt.)

Adjusted revenue jumped 8% to $20 billion. Sales in the fixed-income unit improved 18% to $3.37 billion, and equity market revenue grew 68% to $942 million.

“Generating consistent and quality earnings is a key priority and this quarter met that goal,” Citigroup CEO Michael Corbat said in a statement.

Citi Holdings, which includes Citi’s remaining interest in the Morgan Stanley Smith Barney joint venture, reported negative revenues of $20 million for its brokerage and asset management business vs. sales of $87 million a year ago.

Citi also acknowledged that it had completed the sale of the final 35% stake it held in the venture. With $131 billion in assets, Citi Holdings now includes about 7% of total company assets. JPMorgan Chase CEO testifying before Congress in June 2012. (Photo: AP)6th Place


JPMorgan Chase says its profits rose about 31% on strong results in investment banking business, credit card operations and mortgage lending. Net earnings were $6.496 billion, or $1.60 a share, on revenue of nearly $26 billion vs. earnings of $4.96 billion, or $1.21 per share, on sales of about $22 billion a year earlier.

“Our earnings reflected strong growth across our businesses,” Jamie Dimon, the bank’s chief executive, said in a statement.

JPMorgan says its asset management unit had revenue of more than $2.73 billion in the second quarter, up from $2.36 billion a year ago and $2.65 in the first quarter. Net income for the group was about $500 million in the most recent period, up from $487 million in March and $391 million in June 2012.

Private-banking activities brought in sales of $1.5 billion, up 11% from last year. The retail side had revenues of $654 million, a 35% jump from last year, while the institutional side grew sales 9% year over year to $588 million.

Overall client assets stand at $2.2 trillion, a 10% jump from Q2’12; client assets under management are $1.5 trillion. Overall net flows for the past year were $67 billion, including $3 billion in the most recent period. Plus, the unit has had 17 quarters of positive flows, JPMorgan says.

This business includes 2,804 financial advisors as of June 30, an increase from 2,797 as of March 30 and 2,739 as of June 30, 2012. Across the firm, there are 5,828 advisors vs. 5,795 in the prior quarter and 5,814 a year ago.

UBS headquarters in Zurich. (Photo: AP)5th Place


UBS said its second-quarter profit improved nearly 32% to 690 million Swiss francs ($742 million), or 0.18 Swiss francs per share, from 524 million Swiss francs ($563 million), or 0.14 Swiss francs per share, a year ago. (In the first quarter, profits were 988 million Swiss francs ($1.06 billion), or 0.26 center a share.)

Sales across the company grew 15% year over year to 7.4 billion Swiss francs ($8 billion), though they dropped 5% from the earlier quarter.

“I am very pleased with our performance this quarter. The results show that our strategy is right, and we’re ahead on execution,” said Group CEO Sergio P. Ermotti, in a statement. “Every quarter since we set the strategy in 2011, we have executed it in a very clear and disciplined way building an unmatched capital position and delivering for our clients.”

Wealth Management Americas saw its headcount grow by 34 from last quarter and by 78 from last year to 7,099.

Invested assets per financial advisors stand at $126 million, close to last quarter’s results and up 11% from $114 million in the year-ago period.

Average annualized fees and commissions per financial advisor are $1.01 million, an improvement of 3% from $984,000 in the first quarter and up 12% from the second quarter of 2012.

(Rival Merrill Lynch said that its advisors also had yearly production of more than $1 million, though Morgan Stanley’s reps have annual fees and commissions of $866,000 as of June 30.)

In Wealth Management Americas, net new money totaled 2.7 billion Swiss francs ($2.8 billion), a drop from 8.6 billion Swiss francs ($9.2 billion) in the first quarter and from 3.7 billion Swiss francs ($4.0 billion) in the prior quarter. (The unit has had 12 consecutive quarters of net inflows, and its results exclude interest and dividend income.)

Assets stood at $892 billion as of June 30, a slight increase from $891 billion on March 31 and an increase of 12% from $797 billion last year.

Morgan Stanley CEO James Gorman (Photo: AP)4th Place


Morgan Stanley beat analysts’ expectations with a 42% jump in net income attributable to common shareholders to $802 million, or $0.41 per share, from $564 million, or $0.29 per share, in the year-ago period.

Excluding special items, Morgan Stanley earned $0.45 cents per share, which topped Wall Street expectations of $0.43 cents. The Q2’13 results included a gain related to the bank’s debt valuation and a charge tied to its purchase of Citigroup’s remaining share of the Morgan Stanley Smith Barney joint venture.

Total revenue jumped 22% from last year and 4% from the previous quarter to $8.50 billion, while expenses increased roughly 12% year over year and 2% quarter over quarter to $6.73 billion.

“This quarter, we saw significant year-over-year revenue growth in each of our five major business units and higher year-over-year profitability,” said Chairman & CEO James P. Gorman.

The Wealth Management unit had net revenues of $3.5 billion, up 10% from last year and 2% from a year ago. The group’s pre-tax margin was roughly 19%, up from 17% in Q1’13 and 13% in Q2’12. Net income was $326 million, representing a jump of 41% over the year-ago period and an increase of 28% from the prior quarter.

The headcount of Morgan Stanley advisors is 16,321, an increase of 37 reps from the prior quarter and a decrease of 157 reps from the year-ago period.

The Morgan Stanley financial advisors had average fees & commissions (also known as production) of $866,000 in Q2’13, up 2% from $851,000 in Q1’13 and up 12% from $770,000 in Q2’12.

Fee-based asset flows for the quarter were $10.0 billion, down 35% from the prior quarter’s $15.0 billion but up 233% from $3 billion in the year-ago quarter.

Total client assets were $1.78 trillion at quarter end vs. $1.79 trillion in the earlier quarter and $1.64 trillion last year. Fee-based assets currently represent 35% of total assets, according to the company. Ameriprise CEO Jim Cracchiolo3rd Place


Ameriprise Financial said its second-quarter net income rose 44% to $322 million, or $1.54 per share, vs. $224 million, or $0.99 per diluted share, a year ago. Adjusted earnings were $352 million, or $1.69 per share, compared with $254 million, or $1.13 per share, a year ago.

Operating net revenues grew 9% to $2.75 billion, “primarily driven by robust client net inflows, increased client activity and market appreciation, partially offset by the decline in net investment income from low interest rates,” the company says.

Analysts had expected adjusted earnings to be $1.62 per share and revenue to hit $2.77 billion.

Ameriprise’s operating expenses grew 6% to $2.3 billion, mainly due to higher distribution costs from business growth, though general and administrative expenses remaining flat compared to a year ago.

“Ameriprise delivered another quarter of strong financial results,” said Chairman and CEO Jim Cracchiolo, in a statement. “Revenues and earnings were up nicely; in fact, our operating return on equity reached an all-time high of 17.9%.

“All of our business segments performed well, most notably Advice and Wealth Management,” Cracchiolo explained. “We’re experiencing good growth in client acquisition and strong client net inflows, which are key drivers of advisor productivity gains. Even with the pressure of low interest rates, we’re delivering meaningful growth in profitability.”

Revenue in the Advice and Wealth Management unit grew 6% from last quarter and 13% from the prior year to $1.076 billion. The unit accounts for about 40% of Ameriprise’s total revenue.

Pretax earnings for the division hit $152 million, a jump of 16% from the second quarter and an increase of 37% from the year-ago period.

The average quarterly amount of fees & commission per advisor (or production) was $110,000, up 6% from the first quarter and 13% from the year-ago period. For the first six months of 2013, production per rep stood at $214,000 vs. $195,000 a year ago.

The total number of financial advisors stood at 9,788, up slightly from 9,777 on March 31 and down a bit from 9,803 a year ago. The number of franchisee advisors was 7,499, while the headcount for employee reps was 2,289.

Overall client assets in the advice and wealth management business were $136.3 billion as of June 30, up 2% from the prior quarter and 19% from a year ago. Total client assets stood at $373.1 billion.

In terms of asset flows, advisor wrap accounts experienced inflows of $3.1 billion in the most-recent period, a decline of 24% from $4.1 billion in Q1’13 and an increase of 18% from $2.6 billion in Q2’12. Bank of America headquarters in Charlotte, N.C. (Photo: AP)2nd Place


Bank of America’s second-quarter net income rose 63% to $4.0 billion, or $0.32 per share, from $2.5 billion, or $0.19 per share, a year ago, which beat analysts’ estimates. Revenue improved 3% to $22.9 billion from $22.2 billion last year.

“We are doing more business with our customers and clients, and gaining momentum across every customer group we serve,” said CEO Brian Moynihan, in a press release. “We must keep improving, but with the consumer recovering and businesses strong, we have lots of opportunity ahead.

BofA-Merrill Lynch’s Global Wealth and Investment Management unit increased its net income 38% from the second quarter of 2012 to $758 million. In addition, its pretax margin was 28% in the recent period vs. 21% in the year-ago quarter.

Revenue grew 10% year over year to $4.5 billion. The results were driven by “higher asset management fees related to higher market levels and long-term AUM flows, higher transactional revenue and higher net interest income,” the company says.

The number of financial advisors was 15,759 as of June 30, down 306 from 16,065 in the first quarter and a decrease of 1,005 reps from the year-ago quarter. Merrill Lynch advisors had average yearly fees & commissions of over $1 million as of Q2’13, up from $971,000 as of Q1’13 and $895,000 as of Q2’12.

The number of GWIM advisors was 16,989 in the second quarter vs. 17,293 in the prior quarter and 18,060 last year, while the total headcount for client-facing financial professionals was 19,689 in Q2’13 vs. 20,018 in the prior quarter and 20,844 a year ago. US Trust has 2,084 reps.

Net AUM flows for the wealth unit were $7 billion in the second quarter, down from $18 billion in the prior quarter, but up from $3.7 billion a year ago. For the first six months of 2013, total flows stood at $25 billion vs. $11.4 for the same period in 2012.

Client balances rose 8% (excluding certain balance transfers) from the year-ago quarter to $2.22 trillion, “reflecting higher market levels and net inflows, driven by client activity in long-term AUM, deposits and loans,” according to the bank; client balances in Merrill Lynch accounts were $1.8 billion. Total GWIM assets under management rose $76.2 billion, or 11%, year over year to $743.6 billion.

Asset-management fees grew 10% year over year to $1.7 billion, while long-term AUM flows more than doubled from the year-ago quarter to $7.7 billion. Goldman Sachs CEO Lloyd Blankfein. (Photo: AP)BEST

1st Place


Goldman Sachs said its second-quarter profits rose 101% over last year’s results. The investment bank earned $1.93 billion (before dividends) for the period ending June 30, or $3.70 a share, vs. $962 million, or $1.78 a year earlier. These results beat estimates, as revenue climbed 30% to $8.6 billion from $6.6 billion a year ago.

(Quarter over quarter, sales dropped 15% from $10.1 billion as of March 31, while earnings declined by a similar amount from the prior period.) 

The bank says it nearly tripled revenue from investing in bonds for its own account, to $658 million, thanks to strong profits made before interest rates began to rise late in second quarter.

“The firm’s performance was solid especially in the context of mixed economic sentiment during the quarter,” said Chairman and CEO Lloyd C. Blankfein, in a press release.

Net revenues in Investment Banking were $1.55 billion, 29% higher than the second quarter of 2012 and basically flat vs. the first quarter of 2013. Net revenues in its Financial Advisory unit were $486 million, slightly higher than the second quarter of 2012.

For Institutional Client Services, net sales were $4.31 billion, 11% higher than the second quarter of 2012 and 16% lower than the first quarter of 2013. 

Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.46 billion, 12% higher than the second quarter of 2012, reflecting significantly higher net revenues in currencies, credit products and commodities.

Check out last quarter’s rankings in 12 Best & Worst Broker-Dealers: Q1 Earnings, 2013 on ThinkAdvisor.


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