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12 Best & Worst Broker-Dealers: Q4 Earnings, 2014

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The fourth quarter was volatile for the markets and for several big financial firms.

The price of oil continued to weaken, and commodities on average fell 12% in the final three months of 2014.

The S&P 500, though, rose nearly 5%, while the Barclays U.S. Aggregate Bond Index ticked up close to 2%. Real estate investment trusts were the top-performing asset class, with a return of close to 13% in the period.

Fourth-quarter earnings for the financial sector improved about 11%, though, as sales ticked up about 21% on average.

Still, due to regulatory, volatility, interest rate and other concerns, the Financial Select Sector SPDR ETF (XLF) is down nearly 1% in early 2015, while the iShares US Broker-Dealer ETF (IAI) is off about 0.1%. (For the past 12 months, however, XLF has improved nearly 12.5% vs. a 14% jump for the Dow Jones Industrial Average.)

(Check out the previous quarter’s list: 13 Best & Worst Broker-Dealers: Q3 Earnings, 2014.)

Read on to see which of these 12 broker-dealers’ profits grew fastest, and which ones underperformed in terms of earnings per share.


Nicholas Schorsch, Executive Chairman of RCS Capital.

12th Place


RCS Capital, the parent company of Cetera Financial that was founded by Nicholas Schorsch, said fourth-quarter revenues fell 27% to $504 million and earnings plummeted to a loss of nearly $123 million, or -$1.33 per share, vs. a loss of $1.4 million, or -$0.02 per share, a year ago as fallout from troubles at American Realty Capital (ARCP) continued.

On an adjusted basis, earnings dropped 70% to $12.6 million or $0.14 a share, compared with $42.7 million, or $0.46 a share, in Q4’13. Both adjusted earnings and revenues missed analysts’ expectations; they had forecast $0.18 in adjusted EPS and sales of $605 million in the period.

The wholesale unit said revenue from sales of nontraded REITs and other products, some of which carry the American Realty Capital brand, was $92.1 million in the quarter based on $946 million in total direct investment sales vs. year-ago revenues of $186.6 million on $2.1 billion in total direct investment sales. These results represent a drop of 55% in equity sales and a 51% decline in revenue tied to these sales.

Though the group says it has 1,568 active selling agreements in place, up from 1,151 deals in early 2014, the latest results clearly reflect suspensions to selling deals that mushroomed after ARCP announced $23 million of accounting errors in late October. Even Cetera dropped sales of some ARCP-connected products.

“Importantly, we expect the ongoing reinstatement of our selling agreements and the strengthening of our selling group will continue to be a positive contributor to our capital-raising activities,” said Realty Capital Securities CEO Bill Dwyer, in a press release.

On a positive note, RCS Capital says its headcount of advisors stands at 9,023, up from about 8,900 a year ago. Once the acquisitions of VSR and Girard Securities are completed, it should include about 9,500 FAs. 

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

11th Place


Citigroup reported net income of $350 million, down about 86% from $2.5 billion reported in the prior-year quarter. Its adjusted earnings per share for the period were $0.06, missing estimates. It cited legal expenses for much of the drop.

For the full year, adjusted earnings were $3.55 per share, beating estimates.

Adjusted revenues of Citigroup came slightly lower than the prior-year quarter to $17.8 billion.

Excluding adjustments, revenues were stable from the prior-year quarter. Revenues of corporate and related sectors declined, but revenues in the Institutional Clients Group and Global Consumer Banking were stable.

Operating expenses at Citigroup rose 21% year over year to $14.4 billion mainly due to rising legal and related costs, as well as regulatory and compliance expenses.

At quarter end, Citi’s assets were $1.9 trillion, up 2% year over year, but loans decreased 3% year over year to $645 billion. Plus, deposits fell 7% to $899 billion.

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

10th Place


Bank of America’s net income fell 11% in the fourth quarter of 2014 to $3.05 billion, or $0.25 per share, from $3.44 billion, or $0.29 per share, a year earlier. Its total revenue dropped nearly 13% to $18.96 billion..

Global Wealth and Investment Management boosted revenue 3% from a year ago to $4.6 billion, “driven by higher noninterest income with record asset management fees, partially offset by lower transactional activity,” according to BofA-Merrill Lynch. (Merrill revenue accounted for $3.8 billion, or 83%, of total wealth management sales.

Excluding advisors in consumer and business banking, the number of advisors was 14,085 in Q4, an increase from 13,772 a year earlier and from 13,999 in the prior quarter.

Productivity of these Merrill Lynch reps, as measured by average yearly fees and commissions, was roughly $1.07 million in the fourth quarter, down slightly from $1.08 million in Q3 but up from $1.04 million in Q4’13.

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

9th Place


Goldman Sachs Group was able to slightly beat estimates with $4.38 of earnings per share on revenues of $7.7 billion in the fourth quarter. Still, net earnings applicable to shareholders for the period dropped 10% year over year to $2.0 billion; overall net earnings fell 6% to $2.2 billion.

“We are pleased with our performance during a year characterized by mixed global economic and financial conditions,” Lloyd Blankfein, CEO of Goldman Sachs, said in a press release.

Total operating expenses fell 15% to $4.5 billion in the quarter.

On the sales side, fixed-income trading revenue at Goldman declined 30% to $1.22 billion for the fourth quarter. Still, the bank’s total trading revenue hit $3.15 billion, boosted by a 15% improvement in equity trading revenue.

The private equity portfolio, referred to as Investing & Lending, had $1.51 billion in sales. And investment banking revenue was $1.44 billion.

Goldman repurchased 6.6 million shares during the fourth quarter at an average price of $188.14, for a total of $1.25 billion. For the full year, the firm repurchased 31.8 million shares at an average price of $171.79. KBW had forecast Goldman to buy back 11.1 million shares.

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

8th Place

JPMorgan Chase & Co. (JPM)

JPMorgan reported a 6.6% drop in its fourth-quarter profits, tied to a 23% decline in fixed-income trading revenue and heavy legal costs. (Last quarter, it was the best-performing broker-dealer.)

JPMorgan’s net income was $4.93 billion, or $1.19 a share, in Q4’14 vs. $5.28 billion, or $1.30, a year earlier. Excluding $990 million in legal expenses and other one-time charges, earnings per share were $1.33, which beat analysts’ estimates.

Net income for the year was a record $21.8 billion, on revenue of $97.9 billion, as legal costs shrank $8.2 billion from 2013. For the fourth quarter, revenue declined 2.3% from a year earlier to $23.6 billion.

The bank’s fixed-income trading sales were $2.5 billion during the period, when it sold its commodities unit and experienced lower revenue tied to credit and securitized products.

Meanwhile, equity trading revenue rose 25% year over year to $1.1 billion on gains in the derivatives and prime-brokerage business, and net income at the corporate and investment bank rose 3% to $972 million.

JPMorgan retail bank branches have 3,090 financial advisors and 21,039 private bankers, according to its latest results.

Net new assets in the period for these advisors were $3.3 billion in Q4’14, down from $4.3 billion in the third quarter and $3.6 billion a year ago. Total client investment assets came to $213.5 billion, with 39% held in management accounts.

Ronald Kruszewski, CEO of Stifel Financial.

7th Place


Stifel Financial, which is buying broker-dealer Sterne Agee for $150 million, says its fourth-quarter earnings were $58.4 million, or $0.75 per share, $0.03 below analysts’ estimates for the adjusted results.

Revenue for the quarter was $578.1 million vs. the consensus estimate of $581.6 million.

While Stifel’s non-GAAP net income fell about 2% year over year (to $58.4 million), its GAAP earnings declined 6% to $45.2 million, $0.58 per diluted common share, vs. $48.3 million, or $0.64 per diluted common share.

(The company says the non-GAAP results exclude merger-related expenses associated with recent acquisitions.)

If all reps and all assets stay after the merger, Stifel will have some 2,095 employee advisors, 738 independent reps and $200 billion of AUM. It has set aside some $58 million for retention packages as part of the deal.

The deal with Stifel comes after a turbulent period for the Birmingham, Alabama-based broker-dealer. In May, Sterne Agee CEO James Holbrook Jr. and his son William, who served as the firm’s chief operating officer, were asked to leave the firm, after they came under investigation by the U.S. Treasury and Justice Department.

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

6th Place


Wells Fargo said its quarterly earnings improved close to 2% in late 2014.

The San Francisco-based bank said expenses grew nearly 5% year over year in Q4’14 to $12.6 billion, affecting net income. Still, profits rose nearly 2% to $5.71 billion, or $1.02 a share, in the period, topping estimates.

Fourth-quarter revenue increased to $21.4 billion, though mortgage-banking revenue of $1.52 billion fell $118 million from the prior period; the bank reported $44 billion in home loans vs. $48 billion in the third quarter. The bank pointed to loan and deposit growth, as well as a continued strength in credit quality, for the overall sales improvement.

The bank’s Wealth, Brokerage and Retirement unit had net income of $514 million, down $36 million, or 7%, from third quarter of 2014, but up about 5% from $491 million in the year-ago period.

Revenue for the unit was $3.6 billion, though, up $94 million from the prior quarter and $209 million for Q4’13.

As for the retail brokerage, client assets ended the year at $1.4 trillion, up 4% from the prior year. Managed account assets totaled $423 billion, a year-over-year jump of 13%, “reflecting net flows and increased market valuations,” explains the company.

Wealth-management client assets stood at $225 billion as of Dec. 31, up 5% from the prior year. These operations also had loan growth improvement, with average balances up 10% year over year.

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

5th Place


UBS reported a fourth-quarter 2014 net profit of 963 million Swiss francs ($998.3 million), a jump from 5% from last year. Its overall revenue grew about 7% to 6.75 billion Swiss francs ($7 billion).

Fourth-quarter results in the group’s wealth management operations in the Americas included operating income of $1.924 billion in Q4’14, up slightly from $1.919 billion in Q3’14 and an increase of 4% from $1.852 billion in Q4’13.

Wealth Management Americas’ adjusted operating profit before taxes was $217 million, a drop of 15% from the same year-ago period and from the prior quarter.

UBS said its advisor headcount in the Americas was 6,997 as of Dec. 31, down 1.5% from 7,114 in the third quarter and a decrease of 2% for 7,137 a year ago.

The firm, though, says the drop in reps is “consistent with our stated strategy of retaining and attracting the top producers in U.S. wealth management and keeping our advisor force in the 6,500-7,000 range.”

Average production, or fees and commissions per advisor, were $1.091 million in Q4’14, up 1% from $1.079 million in Q3’14 and up 5% from $1.042 million in Q4’13. Average invested assets per advisor reached $147 million in Q4, a 3% rise from the earlier quarter and an 8% jump from a year ago.

Total client assets reached $1.032 trillion as of Dec. 31, a jump of 2% from the prior period and 6% from a year ago.

Net new money (NNM) for the period was $5.5 billion vs. $4.9 billion in Q3. Including interest and dividends, NNM was $15.9 billion in Q4’14, up 51% from $10.5 billion in Q3’14.

Paul Reilly, CEO of Raymond James Financial.

4th Place


Raymond James beat estimates with an 8% jump in net income in the quarter ending Dec. 31, as private-client results improved year over year at a similar pace.

The company had earnings of $126.3 million, or $0.87 per share, up from $116.6 million, or $0.81 per share, a year earlier. Net revenue was $1.25 billion, an increase of 6% over the year-ago period.

Net sales for the Private Client Group were $845.2 million, a jump of 8% from last year, but a 2% drop from the prior quarter. Pretax net income for the unit totaled $92.7 million, a 30% improvement from a year ago and a 7% decline from the earlier period.

Financial advisors’ securities commissions and fees were $706.7 million, up 7% from last year and down 3% for the quarter ending Sept. 30. The decline was “mostly attributable to a onetime mutual fund commission adjustment,” according to the firm.

Private-client assets under administration grew to $459.1 billion from $450.6 billion in the prior period and $422.9 last year, “driven by market appreciation and very strong financial advisor retention and recruiting results,” the company notes.

The number of financial advisors in different channels now stands at 6,336, a jump from 6,265 at Sept. 30 and 6,178 a year ago. (These figures include reps in Canada and the United Kingdom.)

The independent channel, Raymond James Financial Services, includes 3,369 affiliated reps, up 50 from the prior quarter. In the employee channel, Raymond James & Associates, there are 2,491 FAs, a jump of 29 from Sept. 30.

Mark Casady, CEO of LPL Financial.

3rd Place


LPL Financial said its earnings grew 9.3% in the fourth quarter on higher advisory and brokerage assets, which improved 8.4% to $475.1 billion.

Net income hit $48.5 million, or $0.49 a share, in the period ended Dec. 31, up from $44.4 million, or $0.43 a share, a year earlier.

On an adjusted basis, earnings were $66 million, or $0.66 a share, vs. $65 million, or $0.63 a share, in the year-ago period, which beat analysts’ estimates. Revenue met expectations at $1.10 billion, a nearly 1% improvement from last year.

“With the addition of 126 net new advisors in the fourth quarter, we achieved a notable milestone in 2014, as we now support over 14,000 advisors,” said Chairman and CEO Mark Casady, in a statement. “This growth, combined with existing advisor productivity and market appreciation, drove advisory and brokerage assets up 8.4% to $475 billion for the year.”

These 2014 results included $18 billion in net new advisory assets, “benefiting in part from the strong growth in our hybrid RIA solution,” Casady explained. In addition, LPL added 363 net new advisors last year.

The company says it now has 14,036 affiliated advisors, up about 3% from 13,673 last year.

Ameriprise Financial Headquarters in Minneapolis.

2nd Place


Ameriprise Financial said fourth-quarter net income jumped 43% to $426 million, or $2.23 per share, topping estimates and beating last year’s net income of $298 million, or $1.47 per share.

Operating net revenues grew 5% from last year $3.0 billion “driven by strong fee-based business growth from client net inflows and market appreciation, according to the company.

“Ameriprise delivered another good quarter to complete a strong year, led by our Advice and Wealth Management business,” said Chairman and CEO Jim Cracchiolo, in a press release. “We’re bringing in significant client net inflows, growing our assets under management and increasing advisor productivity.”

Companywide assets under management and administration rose 5% year over year to $806 billion, while client assets in Advice & Wealth Management expanded 9% to $444 billion. Wrap-account assets increased 14% to $175 billion, with Q4’14 net inflows of $3.1 billion.

Average yearly fees and commissions per rep shot up 13% to $496,000 from $440,000 in 2013.

Total advisor headcount stands at 9,672, down slightly from 9,696 in Q3’14 and 9,716 in Q4’13. Retention in the employee channel is about 91%, while it is 95% in the franchisee channel, which includes 7,576 reps.


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

1st Place


Morgan Stanley said its fourth-quarter net income jumped to $1.04 billion, or $0.47 per share, from $84 million, or $0.02 a share, a year earlier, a gain of more than 1,100%. However, adjusted profits were $0.39 a share, missing estimates, according to Bloomberg.

Wealth Management net revenues were $3.8 billion, an 8% jump from the prior quarter and a 2% increase from last year. Net income for the group was $736 million, which was down 8% sequentially but up 3% year over year, giving it a 19% pretax margin for Q4’14.

For the year 2014, though, the pretax profit margin was 20% on net income of about $3.2 billion compared with a pretax margin of 18% in 2013 on net income of roughly $1.5 billion. Revenue for the unit grew 5% to $14.9 billion.

“Wealth Management continues to improve,” said CEO James Gorman on an analysts call, according to Reuters, and is “on a clear path” to hit 22%-25%.

Average assets per advisor are $126 million as of Dec. 31, and advisors had average quarterly fees and commissions of $944,000 in Q4’14, slightly below the average production of $1.07 million achieved by Merrill’s thundering herd.

The number of reps at Morgan Stanley dropped to 16,076 in Q4’14, down from 16,162 in Q3’14 and 16,456 in Q4’13.

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