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 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 (ICH)
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 (GS)
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 FINANCIAL (LPLA)
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 (WFC)
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 (RJF)
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.