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13 Best & Worst Broker-Dealers: Q3 Earnings, 2013

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Earnings for the financial services sector improved an average of 23% in the quarter ended Sept. 30, down from 65% in the prior quarter, according to data compiled by Reuters.

Sales for financial services firms moved up 22% on average in Q3, after improving 25% in Q1. The sector’s 12-month sales growth rate is 23% on average, as of Sept. 30.

The financial services sector’s earnings-per-share growth rate over the past five years remains at 25%, Reuters says.

Financial stocks, as measured by the Financial Select Sector SPDR (XLF), are up 31% year to date; the iShares Financial ETF (IYF) has ticked up 28%. Both ETFs are beating the Dow Jones (22.5%) and S&P 500 (26%), though the Market Vectors Bank and Brokerage ETF (RKH) is trying to catch up at 18%.

Some larger institutions had strong improvements in their quarterly results in the period ended Sept. 30, while one moved dramatically into the red and another had very weak 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 13 Best & Worst Broker-Dealers: Q2 Earnings at ThinkAdvisor.)

JPMorgan CEO Jamie Dimon. (Photo: AP)


13th Place


JPMorgan replaces Investors Capital at the bottom of the pack after it reported its first loss under CEO Jamie Dimon in the quarter ended Sept. 30: a shortfall of $380 million, or $0.17 a share, vs. profits of $5.71 billion, or $1.40 a share—representing a year-over-year decrease in net income of more than $6 billion.

It took a $7.2 billion charge to cover the cost of rising legal and regulatory issues. (On Nov. 20, it reached a $13 billion settlement with U.S. regulators.)

Revenue for the quarter was $23.9 billion, compared with $25.9 billion in the prior year.

The company said its latest pretax legal charge was $9.2 billion, compared with $684 million a year earlier. It has litigation reserves of about $23 billion, but believes it’s possible for losses to top these reserves by $5.7 billion.

“While we had strong underlying performance across the businesses, unfortunately, the quarter was marred by large legal expense,” Dimon said in a press release.

In the period, Asset Management had net income of $476 million, a 7% jump from the prior year, while net revenue improved 12% to $2.8 billion. Revenue from Private Banking hit $1.5 billion, up 9%, while retail sales rose 36% to $722 million. Institutional sales were $553 million, down 2% from a year ago.

Investors Capital CEO Tim Murphy on website.

12th Place


Investors Capital (ICH), set to be acquired by RCS Capital (RCAP), posted a net loss of $781,500 for the quarter ended Sept. 30, vs. a net profit of $280,200 a year ago—representing a drop of about $1 million.

Total revenue for the independent broker-dealer, though, grew about 10% year over year to $22.28 million.

The IBD says the increase “was due primarily to top-line growth of both commissions and advisory fees organically through the firm’s practice management initiatives, attracting and recruiting new financial advisors, and improved financial market conditions.”

Commission revenue improved 8% to $17.02 million in same period of 2012, while fee revenue expanded 14% to $4.54 million last year.

The firm also says its average revenue per representative, based on a rolling 12-month period, rose to an all-time high of $196,689, an increase of 16.1% over $169,373 for the prior rolling 12-month period.

“I’m pleased to see our revenue momentum …,” said President & CEO Timothy B. Murphy. “Organic growth from our practice management initiatives, recruitment of successful advisors, and a tailwind from improved market and economic conditions have all combined to achieve commendable … revenue results.”

Goldman Sachs trader at the NYSE. (Photo: AP)

11th Place


Goldman Sachs tumbles for last quarter’s top spot as it said its third-quarter net income was basically flat–ticking up just 1%, to $1.52 billion, or $2.88 a share, vs. $1.51 billion, or $2.85, a year ago. These results beat estimates, but net revenue fell way short of expectations.

The bank, led by Lloyd Blankfein, did trim costs by 25% to $4.56 billion in the third quarter, and compensation expenses declined by 35%.

“Ongoing uncertainty around the economic outlook and the traditional seasonal slowdown drove a significant reduction in client activity during the quarter, said CFO Harvey M. Schwartz, in a call with analysts early Thursday.

Investment-management fees topped $1 billion but were 1% lower than they were in the prior quarter. Assets under supervision grew by $36 billion to a $991 billion. “Net market appreciation of $19 billion was primarily in equity assets, while $17 billion in inflows were concentrated in fixed income assets,” according to Schwartz.

LPL CEO Mark Casady.

10th Place


LPL Financial said its third-quarter net income increased about 10% year over year to $37.6 million, or $0.36 per share, from $34.3 million, or $0.31 per share last year.

It beat analysts’ estimates with net revenue of $1.05 billion for the third quarter of 2013, up 16% from a year ago.

This included a 19% jump in commission revenue and a nearly 12% improvement in advisory revenue. Plus, recurring revenue represented 64.0% of total sales in the period, LPL says.

“Advisor productivity continues to be strong and points in positive direction moving into the fourth quarter across our advisory and brokerage businesses,” said CFO Dan Arnold, in an interview with ThinkAdvisor.

On the advisory side, net new asset were up 11% or by $4 billion in the third quarter. “This shows our great strength in attracting assets across both our hybrid RIA and corporate RIA programs,” Arnold said.

On the brokerage side, average advisor productivity improved to $156,000 in the third quarter from $152,000 in the second quarter, “which bucked the trend of a summer slowdown mainly due to third-quarter sales of alternative products,” the CFO shared.

LPL had 13,563 affiliated advisors as of Sept. 30, up from 13,409 on June 30 and from 13,170 a year ago.

Wells Fargo CEO John Stumpf. (Photo: AP)

9th Place


Wells Fargo said its net income rose 13% year over year in the third quarter, despite a 42% drop in its mortgage banking income.

Wells Fargo reported net income of $5.6 billion, or $0.99 a share, vs. $4.9 billion, or $0.88 cents a share, last year. Analysts had estimated Wells Fargo would earn $0.97 cents per share.

Wells Fargo made $80 billion in home loans, down from $139 billion last year, and mortgage- banking income fell 43% to $1.61 billion.

Wealth, Brokerage and Retirement reported net income of $450 million, up $16 million, or 4%, from the previous quarter. Revenue of $3.3 billion increased $46 million, or 1%, from the prior quarter.

Client assets in wealth management totaled $209 billion, up 5% year over year. IRA assets were $326 billion, up 10%, and Institutional Retirement plan assets hit $288 billion, a year-over-year jump of 11%.

Its headcount of client-facing professionals stands at 18,632 — including 15,285 financial advisors and 3,347 licensed bankers.

Raymond James Financial CEO Paul Reilly.

8th Place


Raymond James Financial said net income of $117.5 million, or $0.82 per share, in the quarter ended Sept. 30 topped last year’s results by 41% and last quarter’s by 40%.

Sales for the quarter ending Sept. 30 grew 5% from last year and 1 % from the prior quarter to $1.12 billion, topping estimates.

“Results this quarter were lifted by a beneficial tax rate and better than expected results in Capital Markets and Raymond James Bank,” said CEO Paul Reilly, in a press release.

The firm’s Private Client Group revenues grew 7% from the prior year quarter to $742.5 million, but were down slightly from last quarter (when the unit had sales of $745 million.)

The unit’s pretax income, though, grew 26% from last year and 10% from the preceding quarter to $64.6 million, “as profitability benefited from continued realization of operating efficiencies, particularly related to technology expenses,” the company says.

The firm has 6,197 advisors in the United States, Canada and the United Kingdom, down 4 from the prior quarter and 13 from last year.

Morgan Stanley CEO James Gorman. (Photo: AP)

7th Place


Morgan Stanley said its third-quarter earnings from continuing operations rose about 80% to $1.01 billion vs. $560 million. Revenue grew about 7% to $8.1 billion from the year-ago period, excluding debt value adjustments.

The bank saw its equity sales and trading boost revenue to $1.7 billion from $1.3 billion in the year-ago period. Its fixed-income and commodities trading revenues, however, declined sharply to $835 million from $1.5 billion in the third quarter of 2012.

“Our strategy to combine a world class investment bank with the stability of the largest U.S. wealth management franchise and strong investment management is enabling us to deliver exceptional advice and execution for our clients as well as stronger returns for our shareholders,” said Chairman and CEO James P. Gorman, in a press release.

Wealth-management operations at the investment bank, which account for 43% of total sales, grew 8% year over year to almost $3.5 billion. And the unit’s net income jumped to $430 million, a 32% gain over last quarter and nearly double the year-ago period’s results.

The number of advisors at Morgan Stanley grew 1% to 16,517 in the third quarter. The wealth-management unit has seen a number of highly productive advisors depart to rival firms this year but continues to attract FAs.

Stifel CEO Ronald Kruszewski.

6th Place


Stifel Financial (SF) said its net income from continuing operations was $74.9 million, or $1.00 per share, on net revenues of $478.6 million in the third quarter – a jump of 100% from last year’s net income of $37.4 million, or $0.60 per share, on sales of $414.2 million.

The Global Wealth Management unit had a pre-tax operating income of $72.1 million, down from $78.9 million in the second quarter of 2013. However, net revenues for the quarter were $274.7 million, compared with $250.9 million in the third quarter of 2012.

“Despite the fact that the industry reflected muted client activity during the summer months, we are pleased with our third quarter results,” said Chairman and President Ronald J. Kruszewski in a press release.

The company says the increase in net revenues from the third quarter of 2012 is primarily attributable to (1) an increase in commission revenues; (2) growth in asset management and service fees; and (3) increased net interest revenues.

Stifel has 2,075 financial advisors, up from 2,069 as of June 30 and 2,042 a year ago. It also has some $154 billion in assets under management.

Amerprise Financial CEO Jim Cracchiolo.

5th Place


Ameriprise Financial said its net income rose nearly 120%, to $381 million, or $1.86 per share, in the third quarter vs. $174 million, or $0.79 per share, a year ago.

Operating net revenues increased 7% percent to $2.7 billion, driven by growing client net inflows, client activity and market appreciation.

“We had an excellent quarter with strong growth in revenue and record operating earnings,” said Chairman and CEO Jim Cracchiolo, in an earnings release. “We are building on the momentum we’ve experienced throughout the year; wealth management is producing strong results and assets under management are up across the firm.”

Advice & Wealth Management saw its client assets grew 13% year over year to $389 billion, while total wrap assets increased 19% to $144 billion.

Its advisors finalized $55 million worth of financial plans in the third quarter vs. $61 million in prior quarter and $49 million in the year-ago period.

The headcount for Ameriprise’s financial advisors reached 9,761, down from 9,788 in the second quarter and 9,815 a year ago. About three-fourths of the reps are franchisees, while the rest are employee advisors.

Average revenue per FA was $110,000 in the third quarter—up from $98,000 a year ago.

A screenshot of Ladenburg Thalmann's website.

4th Place


Ladenburg Thalmann said its net income jumped to a profitable $2.4 million vs. a loss of $6 million a year ago—a change of $8.4 million. While this was a small amount compared to other heavy-hitters, the turnaround was really strong, thus its fourth place ranking.

The third quarter 2013 results included $1.7 million of amortization of retention loans related to the Securities America acquisition and a $0.9 million gain from a change in fair value of contingent consideration tied to the Securities America deal.

Ladenburg has some 2,700 independent financial advisors and more than $80 billion in client assets. Commissions in Q3 were $101.5 million vs. $80.6 million a year ago, while advisory fees grew to $70 million from $58.7 million.

“We are excited about our ability to both continue to grow our independent brokerage and advisory platform organically and through acquisitions in order to capitalize on favorable demographic trends and expand our investment banking business to drive future results,” said President & CEO Richard Lampen.

UBS CEO Sergio Ermotti. (Photo: AP)

3rd Place


UBS had a third-quarter profit of 577 million Swiss francs ($644 million) vs. a 2.1 billion-francs loss in the year-ago period—an improvement of 2.7 billion francs (or $3 billion)

The results included charges of 586 million francs for litigation, regulatory and related matters, issues that—along with larger capital requirements—are likely to limit its ability to meet its profit targets in 2015, the bank says.

In the latest period, the bank trimmed operating expenses and staff. Its total headcount fell to 60,635 from 62,628 last year. UBS says it has set aside some $803 million to settle claims in the United States tied to mortgage-backed securities.

Its Wealth Management-Americas unit recorded a pre-tax profit of $218 million, up 32% from $165 million in 3Q12 but down 11% from 2Q13, which had a record profit of $245 million.

In terms of its advisor headcount, the number of FAs rose to 7,137 from 7,099 in 2Q13 and 7,032 in 3Q12.

Citigroup CEO Michael Corbatt. (Photo: AP)

2nd Place


Citigroup it had a third-quarter profit of $3.23 billion profit in the third quarter, missing analysts’ estimates, but handily topping last year’s net income of $468 million with a 590% increase and improvement of close to $2.8 billion.

It blamed the miss a 26% decline in bond trading and fallback in U.S. mortgage activity.

(In last year’s third-quarter, the bank recorded a $2.9 billion loss on its Morgan Stanley Smith Barney joint venture.)

“We performed relatively well in this challenging, uneven macro environment. While many of the factors which influence our revenues are not within our full control, we certainly can control our costs and I am pleased with our expense discipline and improved efficiency year-to-date,” said CEO Michael Corbat, in a press release.

Overall, securities and banking sales dropped 2% from the prior-year period to $4.7 billion, while the unit’s net income shrank 16% from last year to $989 million Private bank revenues, however, improved 1% to $614 million.

BofA CEO Brian Moynihan. (Photo: AP)


1st Place


Bank of America took over the top spot from Goldman Sachs after BofA reported that its third-quarter net income rose to $2.5 billion, a jump of about 635% from last year’s $340 million.  

The bank’s results benefited from increases in equity investment income, net interest income and investment and brokerage income, as well as improved credit quality and lower expenses. Still, it did face headwinds like lower mortgage-banking income and adjustments to deferred tax assets related to U.K. corporate income tax rate reductions.

BofA said its Global Wealth and Investment Management unit had revenue of $4.4 billion, up 8% from last year but 2% off last quarter’s results.

Asset flows were $9.7 billion, a nearly 80% year-over-year growth rate. This marks the 17th consecutive quarter of positive flows, the bank says, and the highest third-quarter level since BofA merged with Merrill Lynch.

Total GWIM client balances were $2.28 trillion, of which $1.85 trillion were held in Merrill accounts.

Merrill Lynch revenues were $3.6 billion, up close to 7% over last year but down nearly 3% from last quarter due to reduced market activity and seasonality, the bank says.

BofA says it has a total of 15,624 advisors, down 135 from the prior quarter and 1,135 from a year ago. It also reports that is has 16,846 wealth advisor (including FAs) and 19,534 client-facing professionals across the wealth unit.

(Check out last quarter’s winners and losers in 13 Best & Worst Broker-Dealers: Q2 Earnings at ThinkAdvisor.


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