With weakness in fourth-quarter earnings, profits for most of the S&P 500 firms reporting their results so far are estimated to be down an average 7%, analysts say.
Such a decline is the worst since the third quarter of 2009. According to Bloomberg data, profits fell by about 2% in Q2’15 and 3% in Q3’15.
Factors pulling down results in Q4, as in prior quarters of ’15, include weak energy prices and a strong dollar.
When breaking down the earnings results by sector, financial companies are in the middle of the pack. Their earnings are estimated to have dropped an average of roughly 5% on Q4’15 vs. more than 70% for energy and 25% for materials.
Financial firms are being battered by high market volatility and a sharp slowdown in capital markets activity, according to BNP Paribas. These general conclusions are borne out by results reported by some—but not all—U.S. broker-dealers.
(Related on ThinkAdvisor: 13 Best & Worst Broker-Dealers: Q3, 2015)
Read on to see how 10 players in the brokerage and wealth-management business fared in the October-to-December period of 2015.
GOLDMAN SACHS (GS)
Goldman reported a 72% decline in net income applicable to common shareholders to $574 million, or $1.27 per share, vs. $2.03 billion, or $4.38 per share, a year earlier.
The company posted quarterly adjusted earnings of $4.68 a share, compared to $4.38 a share in the year-earlier period.
Revenue for the quarter came in at $7.27 billion, against the comparable year-ago figure of $7.69 billion.
Analysts had expected the investment bank to report adjusted earnings of about $3.53 a share on $7.07 billion in revenue.
The bank said recently that a $5 billion settlement of crisis-era legal claims would reduce earnings in the quarter by $1.5 billion after taxes.
LPL FINANCIAL (LPLA)
LPL Financial said its net income fell about 45% year over year to $27 million, or $0.28 per share, in the final quarter of 2015.
Fourth quarter 2015 adjusted earnings were $36 million, or $0.37 per share, down about 32% from the year-ago quarter. Revenue dropped about 8% to $1.02 billion.
Analysts had expected adjusted earnings to be $0.51 per share and sales to hit $1.05 billion.
“The market environment was volatile and challenging in 2015, particularly for brokerage sales,” said Chairman & CEO Mark Casady in a statement and CEO. “So we focused on bringing assets onto our platform and executing on our operational, efficiency, and capital plans.”
Total assets on the platform are $476 billion, up 3% from a year ago. Net new assets in Q4 were $3.1 billion. For the full-year 2015, net new assets were close to $17 billion.
RAYMOND JAMES FINANCIAL (RJF)
Raymond James Financial said it had net income of $106.3 million, or $0.73 per share, down 16% from the year-ago fourth quarter. Net revenues of $1.27 billion, though, improved 2% from the prior year. Both results, however, missed analysts’ estimates.
Weakness in the most-recent results, the company says, was mainly due to lower assets in fee-based accounts at the start of the quarter as a result of earlier equity market declines, along with “an extremely challenging environment for equity investment banking.” Also affecting net income were expenses related to growth, as well as higher increased reserves for legal and regulatory matters in the Private Client Group.
Quarterly net revenues for the Private Client Group were $872.3 million, up 3% from a year earlier. Quarterly pre-tax income of $69.1 million, however, were down 25% year over year.
The number of financial advisors affiliated with or employed by Raymond James hit 6,687 in the United States and overseas. Assets in fee-based accounts grew 9% year over year and now represent more than 40% of the group’s total client assets, or about $190 billion.
AMERIPRISE FINANCIAL (AMP)
Ameriprise Financial reported fourth-quarter net income of $357 million, or $2.00 per diluted share, down 16% and 10%, respectively, from the fourth quarter of 2014.
The Minneapolis-based company, however, had operating earnings of $441 million up slightly (0.2%) from $440 million last year; its earnings of $2.47 a share topped estimates of $2.35 per share.
(For the full year, net income was $1.6 billion, down 4% from 2014, though earnings per share increased 2% to $8.48.)
“Increased volatility and investor concerns reinforce the importance of the advice and solutions Ameriprise provides to our clients,” Ameriprise chairman and CEO Jim Cracchiolo said in a statement.
The advice and wealth management unit, which includes 9,780 advisors said its revenues for the period rose slightly to $1.27 billion with pre-tax profits dropping slightly to $210 million. Its average yearly level of fees and commissions per advisor stands at $514,000 vs. 496,000 last year.
Wrap-account net flows were $3.1 billion in Q4 and $11.2 b for the full year. They now represent about $180.5 billion of assets out of the unit’s total AUM, which was $447.1 billion as of Dec. 31.
WELLS FARGO (WFC)
Wells Fargo says its fourth-quarter profit was nearly unchanged from a year ago at $5.7 billion, or $1.03 per share, and revenue grew less than 1% to $21.6 billion. (Analysts estimated the bank would earn $1.02 in Q4’15.)
The wealth and investment-management unit posted a profit of $595 million, a 15% gain, on a roughly 1% jump in revenue, which totaled $3.95 billion in Q4’15.
The average loan of loans for the unit was $63 billion, up from $55 billion a year ago. The bank says advisor clients had an average of 10.55 cross-sold products in their accounts in the most-recent period, up from 10.49 a year ago.