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12 Best & Worst Broker-Dealers: Q4 Earnings, 2013

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Earnings for the financial services sector improved an average of 29% in the fourth quarter of 2013, a small improvement from a 23% earnings jump in the third quarter, according to data compiled by Reuters.

Sales for financial services firms improved 22% on average in Q4, the same rate as in the prior quarter. The sector’s 12-month sales growth rate is 18% on average, as of Feb. 25.

The financial services sector’s earnings-per-share growth rate over the past five years ticked up slightly to 26% in late-February from 25% three months ago, Reuters says.

Financial stocks, as measured by the Financial Select Sector SPDR (XLF), are up 25% for the past 12 months, while the iShares Financial ETF (IYF) has ticked up 24%. Both ETFs though are down roughly 2% year to date.

(Check out 13 Best & Worst Broker-Dealers: Q3 Earnings on ThinkAdvisor.)

That puts the financial benchmarks ahead of the Dow Jones so far in 2014 (-3%) and for the past 12 months (17%).

Some larger institutions had strong improvements in their quarterly results in the period ended Dec. 31, but several of them also experience sizeable declines in net income.

Here are 12 companies, ranked in terms of how they out- or underperformed their broker-dealer rivals.


Screen shot of Investor Capital's web site.

12th Place


Independent broker-dealer Investors Capital, set to be acquired by RCS Capital (RCAP), posted a loss of $286,000 for the period ended Dec. 30 vs. net income of $134,000 a year ago. Still, this big drop in net income — $420,000, or 377% as calculated by Reuters — was an improvement from the quarter ended Sept. 20, when ICH had a net loss of $781,500.

Total revenue for the independent broker-dealer, though, grew about 20% year over year to $25 million.

Its sales boost was mainly due “to top-line growth of both commissions and advisory fees organically through targeted practice management initiatives, attracting and recruiting new financial advisors, and improved financial market conditions,” the company says.

“We achieved our largest quarterly revenue result in company history, our practice management initiatives continue to have a tangible effect on increasing advisor production, recruiting is robust, and advisor retention by delivering 5-star service every day remains high,” said President and CEO Timothy B. Murphy, in a statement. “Though the firm posted a net loss, I am encouraged by the fact that our operating loss was largely attributed to the merger agreement between RCAP and ICH, a positive development that I believe will tremendously benefit all stakeholders involved upon completion.”

RCS Capital is led by Executive Chairman Nicholas Schorsch, a veteran real-estate investor. 

Investors Capital’s average yearly revenue (fees and commissions) per advisor rose to about $207,500, an increase of 16% from about $179,400 for the prior 12 months.

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

11th Place


Morgan Stanley reported a 77% drop in net income for the quarter, one period after a jump in net income of roughly 80%.

Its earnings fell to $133 million, or $0.07 per share, from $568 million, or $0.29, in the year-ago quarter. Excluding one-time items such as $1.2 billion that had to be set aside for potential legal expenses, the bank earned $0.50 per share, beating estimates.

The wirehouse has outlined aggressive plans to boost its wealth management results — namely a profit margin target of 22% to 25% by year-end 2015.

In the fourth quarter, the company had net revenues of $7.8 billion vs. $7 billion a year ago. The wealth management unit produced $3.73 billion in revenue in the quarter, up from $3.33 billion a year earlier.

“Our fourth-quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments,” said Chairman & CEO James Gorman, in a statement. “We look forward to further progress on our strategic goals as we move into 2014 with strength and momentum.”

The wealth management unit ended the year with client assets of $1.9 trillion. Fee-based assets, 37%, were nearly $700 billion, while fee-based asset flows were close to $52 billion for the year.

Its advisors have average client assets of $116 million, and average annualized revenues per advisor of $905,000.

Morgan Stanley says it has 16,456 advisors — up 104 from a year ago but down 61 from the third quarter.

Jim Cracchiolo, CEO of Amerprise Financial.

10th Place


Ameriprise Financial reported a drop in net income of 23% to $298 million, or $1.47 per share, vs. $388 million, or $1.80 a share, last year. Operating earnings, though, were $378 million, up 3%.

This was a sharp decline from its third-quarter performance, when its net income rose nearly 120% to $381 million.

Total net sales were $2.95 billion vs. $2.67 billion in the year-ago quarter, while operating revenues jumped 8% to $2.8 billion, thanks to “strong fee-based business growth from client net inflows and increased client activity, as well as market appreciation, which more than offset the pressure from continued low interest rates,” the company says.

“We had a very good quarter, and a terrific year,” said Chairman & CEO Jim Cracchiolo in a statement. “Our advisory and asset management businesses are leading our growth. Overall, assets are up significantly across the firm and we have particular strength in our Advice & Wealth Management business, with robust client net inflows and good growth in advisor productivity.”

The wealth management unit posted a 36% jump in pretax operating earnings to $162 million, and a 35% increase in full-year operating earnings to $598 million. When its former banking operations are excluded, full-year operating earnings soared 52%.

Total retail client assets expanded 16% to $409 billion.

Its total headcount of advisors at year-end 2013 was 9,716—down from 9,767 in late 2012. It now has 2,205 employee advisors versus 2,318 12 months before, and 7,511 independent advisors versus 7,449 in late 2012.

Ameriprise’s advisors improved their overall average level of annual fees and commissions, or production, by 11% year over year to $440,000 per advisor as of Dec. 31. Its advisors have average assets of $42.1 million. 

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

9th Place


Goldman Sachs’ Q4 net income dropped 19% to $2.33 billion, or $4.60 a share, from $2.89 billion, or $5.60, a year earlier. That surpassed the $4.18 average estimate of 25 analysts in a Bloomberg survey.

Its revenues weakened 5% from last year to hit $8.8 billion as of Dec. 30.

Still, Bloomberg reported, CEO Lloyd Blankfein is keeping a lid on compensation costs and relying on investment banking revenue amid a slowdown in trading, the business he helped run until becoming president in 2004. The firm cut the percentage of revenue set aside for pay to the second-lowest level since it became a public company in 1999.

Compensation, the firm’s biggest expense, was $2.19 billion as the bank lowered its full-year ratio of compensation to revenue to 37% from 38% for 2012. Return on equity, a gauge of profitability, was 11% for the year, up from 10.7% a year earlier.

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

8th Place


JPMorgan, last quarter’s worst performer due to a loss of $380 million, saw its profits drop 7% in Q4’13 to $5.3 billion from last year’s $5.3 billion.

Revenue for the quarter was $24.1 billion, down 1% compared with the prior year.

Net income for2013 was $17.9 billion, compared with $21.3 billion for the prior year. Earnings per share were $4.35 for 2013, compared with $5.20 for 2012. Revenue for 2013 was $99.8 billion, flat compared with 2012 revenue of $99.9 billion.

JPMorgan CEO Jamie Dimon says the bank is glad “to have put some significant issues behind us this quarter,” noting in a statement that “it was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward.”

Earlier this year, the CEO shared the news that JPMorgan agreed to pay some $20 billion for legal settlements in 2013. Much of the fourth-quarter expense was tied to its failure to report suspicions of fraud by Ponzi-schemer client Bernard Madoff.

John Stumpf, CEO of Wells Fargo. (Photo: AP)

7th Place


Wells Fargo said its fourth-quarter net income was $5.6 billion, up 10% from a year ago; diluted earnings per share were $1, up 10%.

Revenue in the period was $20.7 billion, compared with $21.9 billion a year ago.

“The fourth quarter of 2013 was very strong for Wells Fargo, with record earnings, solid growth in loans, deposits and capital, and strong credit quality,” CFO Tim Sloan said in a statement. “We also grew both net interest income and noninterest income during the quarter, despite a challenging rate environment and the expected decline in mortgage originations.”

Still, the California-based bank, which is the largest U.S. home lender, says its fourth-quarter mortgage-banking income drop by almost half from a year ago to $1.57 billion.

(CNBC and others reported in mid-February that Wells Fargo is tiptoeing back into the subprime mortgage market.)

Its Wealth,Brokerage and Retirement unit, though, improved its results in the fourth quarter, with income growing about 40% year over year and 9% from Q3 to $491 million. Sales for the unit expanded 11% from a year ago and 4% from Q3 to $3.4 billion.

The bank notes that it had “strong growth in asset-based fees, as well as higher net interest income and higher gains on deferred compensation plan investments (offset in compensation expense).”

The retail brokerage held $1.4 trillion in client assets, up 12% year over year. Managed account assets increased $71 billion, or 23% from a year ago “driven by strong market performance and net flows.”

Wealth management assets hit $218 billion in Q4’13, a jump of 7% from a year ago.

Mark Casady, CEO of LPL Financial.

6th Place


LPL Financial said its fourth-quarter profits rose 20% to $44.4 million, or $0.43 per share, from $36.9 million, or $0.34 a share, a year ago. Sales improved 16% to $1.09 billion in the period. Its adjusted results topped analysts’ estimates.

During a call with investment analysts, LPL Chairman and CEO Mark Casady explained that the independent broker-dealer is no longer pursuing any plans to form a bank holding company. It is, however, still considering the possibility of acquiring an industrial loan company.

 “Our continued success in retaining and recruiting advisors also contributed to our strong results,” Casady said during a conference call. “We believe our 97% annual production retention continues to lead the industry … We [also] believe advisor migration to independence continues to be a sustainable, long-term trend.”

The executive noted that LPL recruited 110 net new advisors in the fourth quarter and 321 net new advisors in 2013.

Net new advisory assets, which exclude market movement, were $3.9 billion in Q4 and $14.6 billion for the year, a 12% jump from 2012.

Assets under custody on the company’s RIA platform grew 54% to $62.9 billion at year end and included 285 independent RIA firms versus $40.9 billion and 191 firms as of Dec. 31, 2012.

Total brokerage and advisory assets rose 17% in Q4 to $438 billion. Overall, LPL’s 13,600-plus advisors managed an average of about $32 million in client assets and had averagely yearly fees and commissions of $254,000, a 13% jump from a year ago.

Ronald Kruszewski, CEO of Stifel Financial.

5th Place


Stifel Financial reported fourth-quarter net income of $48.3 million, up close to 21% from last year’s $40 million. Its net income from continuing operations was $52.1 million vs. $43.3 million in the year-ago quarter.

Sales were $562.5 million compared with $411.3 million last year, with Global Wealth Management accounting for 57% of revenues.

Its current results were affected by merger-related expenses associated with the acquisitions of the Knight Capital Fixed Income business, KBW, and Miller Buckfire.

Chairman, President & CEO Ronald J. Kruszewski said, “We are very pleased to post our 18th consecutive year of record net revenues. This speaks to the dedication of our over 5,800 professionals, as well as to our balanced business model. Non-GAAP net income from continuing operations for the year improved over the prior year as a result of both better market conditions and the benefits of our recent acquisitions.”

For the quarter, the Global Wealth Management segment generated record pretax operating income of $79 million, compared with $68.7 million in the fourth quarter of 2012 (for a 15% jump) and $72.1 million in the third quarter of 2013.

Net revenues for the quarter also rose 15% year over year to $292.8 million, compared with $253.8 million in the fourth quarter of 2012, and $274.7 million in the third quarter of 2013.

The broker-dealer says the increase in revenue is primarily attributable to growth in asset management and service fees; an increase in commission revenues; and increased net interest revenues.

The Private Client Group reported net revenues of $256.1 million, an 11% increase compared with the fourth quarter of 2012 and a 3% increase compared with the third quarter of 2013.

Stifel has 2,077 financial advisors, up from 2,075 as of Sept. 30 and 2,041 a year ago. It also has some $166 billion of assets under management.

Paul Reilly, CEO of Raymond James Financial.

4th Place


Raymond James’ profits grew 36% year over year to $116.6 million, or $0.81 per share, in the latest quarter from $85.9 million, or $0.61 per share, for the same period in 2013.

The firm had revenue of $1.2 billion in the period ending Dec. 30, a jump of 7% from last year and 5% from the prior quarter.

(Both results topped Street expectations.)

“Record quarterly pretax income was driven by record results in our Private Client Group and Asset Management segments, which were bolstered by record levels of assets under administration and assets under discretionary management,” said CEO Paul Reilly, in a press release.

Raymond James’ advisors brought in net revenues of $776.7 million, up 9% from the year-ago quarter and 5% percent from preceding quarter. The unit’s fees and commissions were $657.5 million, a jump of 10% from last year and 6% from the period ending Sept. 30.

The number of advisors in its employee, independent and other channels is now 6,178. That’s a drop of 19 advisors from September and a decline of three from last year. 

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

3rd Place


Citigroup, the third-biggest U.S. bank, reported that its fourth-quarter net income improved by 103% to $2.69 billion from $1.2 billion a year earlier, when Citigroup reported a $653 million charge, and earnings per share rose to $0.85 from $0.38, the New York-based bank said in a statement.

Excluding accounting charges and special items, profit was $0.82 a share, less than the $0.95 average estimate of 26 analysts surveyed by Bloomberg.

CEO Michael Corbat sought to cut costs and boost revenue even as trading from bond and foreign exchange markets came under pressure. The effort was marred by a 15% drop in fixed income revenue excluding accounting charges. Adjusted profit decreased 8% at the securities and banking unit and 16% for global consumer banking, according to the firm.

“We haven’t seen any rebound in fixed income,” Marty Mosby, a bank analyst with Guggenheim Securities LLC, said in an interview before the results were announced. That’s what the bank “really needs because they are more heavily dependent on that than the other money-center banks,” he said. Mosby has a buy rating on the stock with a $68 price target.

Citigroup set aside $1.4 billion for litigation and legal costs during the first nine months of 2013, according to regulatory filings. That compared with $11.1 billion at JPMorgan and $4.8 billion at Bank of America. Figures for the final quarter haven’t been released. Legal and related costs were $809 million in the quarter, the bank said.

Sergio Ermotti, CEO of UBS. (Photo: AP)

2nd Place


UBS’ fourth-quarter profit rose to 917 million Swiss francs ($1.02 billion), beating analysts’ estimates with a strong turnaround from a loss of 1.9 billion francs a year ago, or a jump of about 125%.

News for UBS’ wealth management operations in the Americas (WMA) was also upbeat. The group’s sales were $1.85 billion, up 5% from the earlier quarter and 9% from a year ago.

“In 2013, WMA delivered on our goals of $1 billion in adjusted pretax profit and $1 million in annualized revenue per financial advisor while invested assets rose to $970 billion—all record levels of performance,” said UBS Group CEO Sergio P. Ermotti, in a statement. “Coupled with our 14th consecutive quarter of positive net new money, WMA’s results are further proof that our strategy is working.”

UBS says that its advisors had an average assets of $136 million and average production of roughly $1.04 million, up 5% from $994,000 in 3Q’13 and up 8% from $967,000 in 4Q’12. The full-year 2013 average production level was $1.001 million.

The group’s advisor headcount stood at 7,137, the same as in 3Q’13 and up 1% from 7,059 in 4Q12.

The UBS unit attracted $4.9 billion in net new money in the quarter (excluding interest and dividends), up from $2.1 billion in Q3 but down from $8.8 billion in Q4’12.


Brian Moynihan, President and CEO of Bank of America. (Photo: AP)

1st Place


Bank of America reigns supreme again this quarter. Its fourth-quarter 2013 profits more than tripled, rising to $3.44 billion, or $0.29 per share, from $732 million, or $0.03, a year earlier — an increase of 370%. Its full-year net income more than doubled to $11.4 billion.

Revenue improved 14% to $22.3 billion, excluding accounting charges. Still, its return on average shareholder’s equity was 5.74% in the fourth quarter vs. 13.8% for Wells Fargo (WFC) and 10% from JPMorgan Chase.

“We still have not approached the true earnings potential of Bank of America,” CEO Brian Moynihan said, leading off the bank’s earnings call with equity analysts.

The bank says that losses in its mortgage unit were $1.1 billion in the quarter vs. $3.7 billion a year ago. It made $11.6 billion in home loans in the most recent period, down close to 50% from the prior quarter.

Plus, legal expenses jumped to $2.3 billion in the fourth quarter from $916 million in the year-ago period.

The number of advisors in the Global Wealth and Investment Management unit, which includes Merrill Lynch, continues to shrink, though the reps’ average fees and commissions are growing.

BofA said it had 15,316 financial advisors as of Dec. 31, vs. 16, 611 a year ago and 15,624 in the prior quarter. When advisors working on the consumer and business banking operations are excluded, the number of Merrill advisors stands at 13,771 vs. 14,915 at the end of 2012 and 14,039 as of Sept. 30.

The 13,771 traditional advisors had yearly production of $1.005 million in 2013, up from $902,000 in 2012. For Q4’13, average fees and commissions were $1.039 million vs. $1 million in Q3’13.

The wealth management group had revenue of $4.5 billion in Q4’13, a 7% increase from the year-ago period. Its pretax margin was 26.6%.

Asset management fees were $1.8 billion in the quarter, a year-over-year increase of 15%. Long-term asset flows were $9.4 billion for Q4 and $48 billion for the full year.

Client balances of $2.37 trillion increased $83 billion, or 3.6%, for the quarter. Deposit balances moved up quarter over quarter by 1.4% to $245 billion, while loan balances jumped 1.3% to $119 billion.

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