The financial markets continue to enjoy new record highs, and the S&P 500 and Dow Jones indexes are trading up more than 10% year-to-date, despite volatility the past month.

Meanwhile, broker-dealers are not faring as well. As a group, their shares have ticked up just 5% year-to-date, as tracked by the iShares U.S. Broker-Dealer ETF (IAI). This comes despite the fact that broker-dealer financial results have been pretty decent.

For instance, the broker-services and investment banking industry had an average improvement in earnings of 26% in the third quarter versus a year ago. At the same time, its sales expanded close to 12%.

(Related on ThinkAdvisor: 12 Best & Worst Broker-Dealers: Q2 Earnings, 2014.)

Regulatory issues and costs tied to compliance and litigation affected several of the major broker-dealers in the period ended Sept. 30.

Read on to see which 13 broker-dealers outperformed the financial industry’s average EPS growth rate, and which ones underperformed.

WORST BROKER-DEALER

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

13th Place

BANK OF AMERICA (BAC)

By any measure, Bank of America’s whiplash profit-to-loss swing of nearly $2.3 billion was horrible. BofA had a third-quarter net loss attributable to shareholders of $70 million, or $0.01 per share, versus a profit of $2.22 billion, or $0.20 per share, a year ago.

Its net income, including preferred stock dividends, declined sharply to $168 million in the period ending Sept. 30 from $2.5 billion a year earlier, mainly because of its latest mortgage settlement — which involved a pretax charge of $5.3 billion and took $0.43 per share off earnings, according to the bank.

Analysts had expected BofA to post a loss of $0.09 per share, according to Thomson Reuters. However, adjusted earnings per share (excluding an accounting gain) were $0.40, beating estimates compiled by Bloomberg.

Total revenue in Q3’14, net of interest expense, was $21.43 billion, down from $21.73 billion last year. Analysts had anticipated sales of $21.36 billion in the period ending Sept. 30. 

BofA, which is led by CEO Brian Moynihan, said four of its five business lines, including wealth management, had higher net income in Q3’14 vs. last year’s results.

Global Wealth and Investment Management, which includes the results of Merrill Lynch and U.S. Trust, reported net income of $813 million, compared to $720 million in the third quarter of 2013 and $726 million in the prior quarter.

Revenue increased about 1% from the year-ago quarter and 7% from Q2’14 to nearly $4.7 billion, driven by “higher non-interest income related to improved market valuation and long-term AUM flows,” BofA says.

As for its advisor headcount, BofA says it has some 15,868 advisors — up from 15,560 in the prior quarter and 15,624 a year earlier. Excluding advisors in the consumer and business-banking segments, the group includes 14,000 registered reps, an increase of 155 from last quarter.

Merrill Lynch advisors had average yearly fees and commissions of $1.08 million as of Sept. 30, 2014, up from $1.06 million as of June 30, 2014, and $1.0 million as of Sept. 30, 2013. Veteran advisors have annual production of about $1.4 million.

Nicholas Schorsch, Executive Chairman of RCS Capital.

12th Place

RCS CAPITAL (RCAP)

RCS Capital reported a loss in its third-quarter results of $32 million, or $0.59 per share loss, versus a gain of $11.1 million, or $0.17 a share, in the year-ago period.

On an adjusted (or pro-forma) basis, earnings were $35.5 million, $0.40 per share, vs. $23.5 million, or $0.27 per share, in Q3’13.

On a conference call with analysts, executives were clear about the many options they are considering in the face of a rapidly declining stock price and issues tied to sister company American Realty Capital Properties’ (ARCP) disclosure of accounting errors on Oct. 23.

That disclosure has led some broker-dealers and custodians to halt sales of products distributed by RCAP under the Cole and AR Capital brands. (See Schwab, Fidelity Stop Sales of Schorsch-Led Nontraded REITs)

Asked by an equity analyst about whether they are willing to break up the company and possibly spin off Cetera Financial Group, RCAP CEO Michael Weil said, “As we’ve indicated, there is not one thing that we are not willing to look at, and we will look at [everything] on a long-term strategic basis involving the broker-dealer operations and will come back to the market at the appropriate time with the results of that strategic review.”

RCAP’s multiple broker-dealers include 9,139 affiliated independent advisors. 

Ronald Kruszewski, CEO of Stifel Financial.

11th Place

STIFEL FINANCIAL (SF)

Stifel Financial had net income from continuing operations of $39.9 million, or $0.52 per share, compared with net income of $69.7 million, or $0.93 per share, in the prior-year quarter (when the company reported certain non-recurring items). This represents a 43% drop in profits.

Net revenues, though, were $523.5 million, up 9.4% year over year. These results were propelled by higher global wealth management and institutional group revenues.

Global Wealth Management’ net revenues increased 15.5% to $317.3 million, on a year-over-year basis.

Stifel Financial’s non-interest expenses were $457.7 million, up 2.2% from the year-ago quarter.

“In the third quarter, we had record results in Global Wealth Management and solid results in Investment Banking,” stated Ronald J. Kruszewski, chairman and CEO of Stifel.

“Our results reflect two months of our partnership with Oriel Securities, our U.K. investment bank,” Kruszewski said. “The initial integration is going well and we look forward to their future contributions. Looking ahead, we expect to close the acquisition of Legg Mason Investment Counsel in November, which will add $9 billion in client assets.”

Mark Casady, CEO of LPL Financial.

10th Place

LPL FINANCIAL (LPLA)

LPL Financial reported that its net income fell nearly 12% to $33.3 million, or $0.33 per share, in the period ending Sept. 30, from $37.6 million, or $0.36 per share, a year ago. Net sales grew 3% from last year to $1.09 billion.

On an adjusted basis, net income dropped 18% to $48.8 million, or $0.48 a share, from $59.6 million, or $0.56, the company says. Its reported results met S&P Capital IQ consensus estimates.

The latest earnings results included $23 million in regulatory charges, which were $18 million above expectations and cut earnings by $0.11 per share.

The firm has 13,910 affiliated advisors vs. 13,840 in the prior quarter and 13,563 a year ago. The number of custom clearing subscribers stands at 4,407, compared with 4,444 in Q2’14 and 4,492 in Q3’13.

Average annual fees and commissions per advisor, or yearly production, is $248,000, down from $251,000 in the prior quarter but up from $245,000 a year ago. The firm says the level of its production payouts is 86.67%, including base pay and production bonuses.

The level of assets custodied at LPL Financial by independent RIAs is $83.8 billion as of Sept. 30, up 53% from a year ago and 7% from the prior quarter. The firm is working with 330 RIAs vs. 228 in Q3’13. 

Wells Fargo Headquarters in San Francisco. (Photo: AP)

9th Place

WELLS FARGO (WFC)

Wells Fargo, one of the largest mortgage lenders, reported third-quarter earnings and revenue in line with analysts’ expectations. The bank reported a net income of $5.7 billion, up 3% year over year, and earnings per share of $1.02 that were also up 3% from last year.

Analysts polled by Thomson Reuters expected earnings to hit $1.02 a share on $21.1 billion in revenue. Revenue hit those expectations, with Wells Fargo reporting revenue of $21.2 billion for third quarter 2014, up 4% from last year.

Wells Fargo’s Wealth, Brokerage and Retirement unit reported net income of $550 million, up $6 million, or 1%, from second quarter 2014.

The retail brokerage group’s client assets were up 8% from the prior year, reaching $1.4 trillion in the third quarter, and its managed-account assets increased 17% year over year, or $59 billion, to reach $409 billion in the quarter. The bank also reported strong loan growth with average balances up 19% year over year on growth in first mortgage and security-based lending.

Wealth management assets were $219 billion in the third quarter, up 7% year over year. The unit’s retirement group reported IRA assets were $354 billion, up 8% from last year, and institutional retirement plan assets were up 6% year over year with $314 billion in the third quarter.

Wells Fargo said it had a total of 18,772 registered representatives as of Sept. 30 — up from 18,661 in the prior quarter. Its level of client assets is $1.4 trillion.

Of this group, 15,163 are financial advisors, down from 15,189 as of July 30. The majority of these reps — 10,178 work at Wells Fargo Advisors branch offices. About 3,210 work in bank branches, with the remainder — 1,774 — working as independent Wells Fargo Financial Network (or FiNet) reps.

The group also includes 3,609 licensed bankers and 76 clearing firms. The number of bankers rose from 3,472 last quarter, while the number of clearing firms declined by one.

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

8th Place

CITIGROUP (C)

Citigroup, the third-biggest U.S. bank, reported its net income rose 7% year over year to $3.4 billion in the third quarter 2014, or $1.07 per diluted share, on revenues of $19.6 billion. Earnings per share beat analysts’ expectations of $1.12, reporting $1.15 a share excluding accounting adjustments.

Citigroup shared recently that it was ending consumer operations in 11 more countries – affecting consumer franchises in Costa Rica, the Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungary, Japan, Nicaragua, Panama and Peru, as well as the consumer finance business in Korea.

“I am committed to simplifying our company and allocating our finite resources to where we can generate the best returns for our shareholders,” said Michael Corbat, CEO of Citi, in a statement.  “While we have made progress optimizing these 11 consumer markets, we believe our Global Consumer Bank will achieve stronger performance by focusing on the countries where our scale and network provide a competitive advantage.”

Ameriprise Financial Headquarters in Minneapolis.

7th Place

AMERIPRISE FINANCIAL (AMP)

Ameriprise Financial reported third-quarter earnings of $420 million, or $2.17 per diluted share, versus $382 million, or $1.86 per diluted share a year ago—a jump in net income of 15% year over year. Sales grew 11% to $3.1 billion. Both results topped analysts’ estimates.

“Ameriprise delivered another strong quarter, continuing the trend we set in the first half of the year,” said Chairman and CEO Jim Cracchiolo in a statement. “Our fee-based businesses drove our growth, led by Advice & Wealth Management.”

Total assets under management and administration grew 8% from Q3’13 to $797 billion “driven by Ameriprise advisor client net inflows and market appreciation,” the company says.

The unit’s total revenue jumped 12% year over year to $1.2 billion, and its pre-tax operating earnings improved 34% to $205 million.

As for its advisor force, Ameriprise has a total of 9,696 advisors, up four from Q2’14 but down 65 from the year-ago period.

The number of employee advisors stands at 2,100 — a drop of 15 from the prior quarter and 135 from Sept. 30, 2013. It has 7,596 franchisee reps, which is up 19 from Q2’14 and up 70 from Q3’13.

Advisor fees and commissions, on a trailing 12-month basis, grew 13% year over year and 3% from the prior quarter to $483,000, excluding results from the firm’s former banking operations.

Paul Reilly, CEO of Raymond James Financial.

6th Place

RAYMOND JAMES FINANCIAL (RJF)

Raymond James Financial (RJF) reported a 16% jump in net income for the period ending Sept. 30 to $136.37 million, or $0.94 per share, compared to $117.46 million, or $0.82 per share, in the year-ago quarter. Net sales jumped 14% year over year to nearly $1.3 billion. Both profits and revenues beat analysts’ estimates.

Private client results improved at a dramatic pace, with pre-tax income jumping 55% year over year and 23% from the prior quarter to $100.2 million on sales of $861 million. Revenues for the unit had a 16% improvement from a year ago and a 5% rise from the earlier period.

Total securities fees and commission for the advisor business were $725.8 million, a 17% year-over-year increase and a 5% jump from the earlier period.

“We are extremely proud of our associates and financial advisors for achieving record results in the fourth quarter and for fiscal 2014,” said CEO Paul Reilly in a statement.

The Private Client Group has some $450.6 billion of assets under administration, which is a nearly 12% gain from a year ago but a slight drop from the quarter ending June 30. “Growth in client assets was driven by market appreciation and near-record levels of financial advisor recruiting and retention, resulting in the number of financial advisors increasing to 6,265,” the company said in its quarterly report.

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

5th Place

UBS (UBS)

UBS said its third-quarter profits rose 32% year over year to 762 million Swiss francs (CHF), or CHF 0.20 per share, vs. CHF 577 million, or CHF 0.15 per share, a year ago. (In dollars, this represents a jump to roughly $805 million vs. $609 million in Q3’13.)

Revenue grew roughly 10% to CHF 6.9 billion (or $7.3 billion) from CHF 6.3 billion (or $6.7 billion) in the year-ago period.

The Swiss-based bank noted that these result included net charges of more than CHF 1.8 billion tied to provisions for litigation, regulatory and related, as well as a net tax benefit of CHF 1.3 billion.

In the Americas, total wealth-management sales in Q3’14 were $1.92 billion, up 10% from a year ago. Profits improved about 17% year over year to $254 million — about one-third of what they were outside the Americas.

In the United States, Canada and Latin America, UBS’ operations included 7,114 financial advisors, down five from the prior quarter and down 23 from a year ago.

The Americas reps brought in $4.8 billion in net new assets vs. outflows of $2.5 billion last quarter and inflows of $2.1 billion in Q3’13. Including interest and dividend income (which some rival wirehouses report), the group had new assets of about $10.5 billion, vs, $3.2 billion in the prior quarter and $7.5 billion in Q3’13.

Yearly revenue per advisor in the Americas (or average annual fees and commissions) stands at $1,079,000, up 1% from $1,068,000 in 2Q’14 and up 9% from $994,000 in 3Q’13. Invested assets per FA are currently $143 million, unchanged from the prior quarter and 11% higher than a year ago.

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

4th Place

GOLDMAN SACHS (GS)

Goldman Sachs reported a 47% jump in its third-quarter profits to $2.24 billion from $1.52 billion during the same period last year. Its earnings per share were $4.57 vs. $2.88 12 months ago.

Net revenue for the July-September quarter was $8.39 billion, with net sales from investment banking hitting $1.46 billion for the quarter. The bank reported revenues in investing and lending of $1.69 billion.

Goldman said net revenues from underwriting totaled $870 million, up 17% from the same period last year. The bank was the lead underwriter for the record September IPO of Chinese e-commerce giant Alibaba, which raised $21.8 billion.

The firm, though, had lower net revenues in debt underwriting.

“During the quarter, equities operated in an environment characterized by continued low volatility levels and generally lower market volumes in the United States and Europe compared with the second quarter of 2014,” the bank said.

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

3rd Place

MORGAN STANLEY (MS)

Morgan Stanley nearly doubled its net income in the third quarter, the company said early Friday. It had a profit of $1.65 billion, or $0.84 per share, up 87% from a year ago, when it reported a profit of $880 billion, or $0.45 per share.

Revenue expanded 12% year over year to $8.9 billion, a 3% improvement from the prior period. Both sales and net income beat analysts’ estimates for Q3’14.

“Morgan Stanley has delivered another quarter of earnings growth and strong performance based on consistent execution for our clients,” said Chairman and CEO James Gorman in a statement. “We are well positioned to create superior returns for our shareholders, particularly as the U.S. economy continues to strengthen.”

Wealth Management net revenues were nearly $3.8 billion in the third quarter, a 9% jump from a year ago and a 2% increase from the prior quarter. Net income improved 17% year over year and 6% from Q2’14 to $501 million.

As for advisor headcount, Morgan Stanley had 16,162 registered reps as of Sept. 30, a slight drop from 16,316 in Q2’14 and 16,517 in Q3’13. Advisors have an average asset level of $124 million. Their average yearly production level (or fees and commissions) stands at $932,000 vs. $908,000 as of June 30 and $848,000 a year earlier.

 

Richard Lampen, President and CEO of Ladenburg Thalmann Financial.

2nd Place

LADENBURG THALMANN FINANCIAL SERVICES (LTS)

Ladenburg Thalmann Financial Services posted net income of $12.8 million for the third quarter, compared with $2.4 million a year earlier, a more than 500% increase in profits.

After paying preferred stock dividends, the company reported net income applicable to common shareholders of $8 million, or 4 cents a diluted share, compared with a net loss of $477,000 a year earlier.

Third-quarter revenue rose 12 percent to $223.7 million from $200.5 million a year earlier, fueled by continued growth in investment banking and capital markets business and its broker-dealer and advisory business.

“The strong growth in advisory fees revenue continued to be driven by an increase in net new advisory assets, successful recruitment of additional advisors and market appreciation,” said the company, which owns the independent broker-dealers Securities America, Triad Advisors, Investacorp  and KMS Financial Services, as well as Premier Trust. “Commissions and investment banking revenues remained strong due to high levels of client activity.

The third quarter 2014 results included an income tax benefit of $13.4 million primarily resulting from the purchase of Highland Capital, an independent life insurance brokerage company, and other one-time items.

EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted, was $12.1 million, down 6% from $12.8 million the year-ago period.

BEST BROKER-DEALER

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

1st Place

JPMORGAN CHASE (JPM)

JPMorgan Chase & Co., the U.S.’s biggest bank, reported a $6 billion turnaround on third-quarter profits of $5.6 billion up from a loss of $400 million the year before. Earnings per share were $1.36, missing analysts’ expectations of $1.38 per share but showing a considerable improvement from a loss of $0.17 a share a year earlier.

Revenue was up 5% year over year, reporting $25.2 billion for third quarter 2014 — boosted in part by revenues from JPMorgan’s Markets & Investor Services and fixed income trading operations.

Markets & Investor Services revenue was $6.1 billion, up 15% from the year before. The bank reported fixed income markets revenue of $3.5 billion, up 2% from the prior year, with “particularly strong performance in currencies and emerging markets,” the New York-based firm said today in a statement.

JPMorgan’s asset management division saw long-term inflows for the 22nd consecutive quarter, reporting third-quarter profits of $572 million, up 20% from a year ago.

Jamie Dimon, chairman and CEO of JPMorgan, commented on the financial results in a statement released by the bank.

“While challenges remain in the global economic recovery, the U.S. economy is an exception, showing signs of steady improvement. Corporate America is in good shape with strong balance sheets, and employment trends continue to be positive. JPMorgan continued to support the economic recovery. We provided credit and raised capital of $1.6 trillion for our clients during the first nine months of 2014, which included $15 billion for U.S. small businesses.”

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