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November 21, 2016 at 10:44 AM
The election of Donald Trump has moved up the stocks of the major banks, broker-dealers and other firms in the financial sector.
The Financial Select Sector SPDR ETF (XLF), for instance, has bounced up 13% in the past few weeks versus a 4% jump in the Dow Jones.
Meanwhile, despite compliance costs associated with the new DOL fiduciary standard, may companies in the group are seeing better financial results.
Last quarter, 11 of the 12 broker-dealers surveyed by ThinkAdvisor had a drop in net income, and just one had increased profits. This quarter, the number of loss-making BDs fell to seven, while five had a positive jump in their profits.
(Related: 12 Best & Worst Broker-Dealers: Q2 Earnings, 2016)
Across the economy, corporate earnings are expected to rise by nearly 4% on average for the quarter ended Sept. 30, according to Thomson Reuters’ estimates, which exclude one-time charges. Revenues should move up about 2.5%.
Read on to see how each BD performed in Q3.
WORST BROKER-DEALER
12th Place
UBS Group (UBS)
UBS Group (UBS) says its earnings dropped about 60% in the most-recent quarter to 827 million Swiss francs (CHF), or 0.22 CHF per share, from 2,068 million CHF, or 0.54 CHF per share, a year earlier.
In the Americas, however, the wealth-management operations continue to outperform rivals: UBS advisors have yearly average fees and commissions of $1,120,000 and average assets per advisor of $156 million.
“We continue to be the industry leader,” it said in a statement, noting that is has 7,087 advisors in the U.S., Canada and Latin America.
“The quarter saw record pre-tax profit [of $328 million] driven by record recurring net fee income and record net interest income as well as continued growth in banking,” UBS explained.
The UBS unit had revenue of over $1.9 billion in the most-recent period. It says about $1.6 billion, or 81%, is recurring fee-based income and net interest. That’s up from 79.7% a year ago.
11th Place
Ladenburg Thalmann (LTS)
Ladenburg Thalmann Financial Services said its net quarter loss expanded to nearly 50% to minus $15.3 million or down $0.08 per share as of Sept. 30, 2016, compared to -$10.2 million or -$0.06 per share the prior year.
The firm, which owns Securities America, Triad Advisors, Securities Service Network, Investacorp an KMS Financial Services, says its third-quarter revenues were $274.3 million, a 3% decline from the prior year.
Commissions revenue for the three months ended Sept. 30 decreased by 7% year over year to $128.0 million “mainly a result of an industry-wide decline in sales of alternative investment, mutual fund and variable annuity products resulting from volatile markets, investor uncertainty in the low interest rate environment and the impact of the pending Department of Labor’s fiduciary rule,” according to a press release.
For the three and nine months ended Sept. 30, 2016, recurring revenues, which consist of advisory fees, trailing commissions, cash sweep fees and certain other fees, represented about 77% and 76%, respectively, of revenues from the company’s independent brokerage and advisory services business. The firm, which is led by Dr. Phillip Frost, chairman, has some $132 billion of client assets.
10th Place
Ameriprise Financial (AMP)
Ameriprise Financial missed analysts’ expectation in the third quarter, as net income fell 46%, to $215 million, or $1.30 a share, from $397 million, or $2.17 a share, a year ago. Revenues improved 4%, though, to about $3 billion.
“With good inflows in investment advisory accounts, retail client assets grew to a record high,” said Chief Executive Jim Cracchiolo, in a statement. “In a more volatile climate and period of change for the industry, we are managing expenses well.”
Ameriprise has $796 billion of client assets as of Sept. 30. Its 9,747 employee and affiliated advisers account for $476 billion, or about 60% of total assets.
In the third quarter, the company said it spent about $7 million for expenses related to the new Department of Labor fiduciary standard. “The company is dedicating significant internal resources to prepare for the Department of Labor fiduciary rule and maintaining targeted growth investments,” it said in its earnings release.
The Advice & Wealth Management unit had net inflows of $2.8 billion in the quarter versus $3 billion in the year-ago period.
On a trailing-12-month basis, yearly fees & commissions per advisor declined 1% from last year to $511,000, “as higher advisory fee revenue was more than offset by lower transactional client activity,” the company says, adding that it brought on 80 veteran advisors in the third quarter.
The unit’s pre-tax earnings grew 5% year over year to $231 million on revenues of $1.27 billion, representing a pre-tax margin of 18.2%.
9th Place
Citigroup (C)
Citigroup says its net income for the third quarter was $3.84 billion, or $1.24 per diluted share, on revenues of $17.8 billion. This compared to net income of $4.31 billion, or $1.35 per diluted share, on revenues of $18.7 billion for the third quarter 2015 – representing an 11% drop in net income.
“We remain intensely focused on shareholder returns. The acquisition of the Costco portfolio and the recently announced sales of our retail operations in Argentina and Brazil are the latest examples of how we are shifting resources to the areas we believe will generate the best returns for our shareholders,” said Citi CEO Michael Corbat, in a statement.
The Institutional Client Group had sales of $8.6 billion, up 2% from the prior year, driven by an 11% jump in Markets and Securities Services revenues and a 7% increase in banking revenues, which were partially offset by a $218 million loss on loan hedges related to accrual loans.
This unit also includes the result of some 800 private bankers and product specialists worldwide.
8th Place
JPMorgan (JPM)
JPMorgan’s net income weakened 8% to $6.3 billion, or $1.58 per share, vs. $$6.8 billion, or $1.68 per share. Adjusted revenue was $24.7 billion.
Total trading revenue was $5.75 billion, up 33% from the same quarter last year. Fixed income trading revenue was $4.33 billion, a jump of 45%, driven by a stronger quarter in rates, credit and securitized products.
Equity trading revenues were $1.42 billion, up 1% from the year-ago quarter, while investment banking revenue was $1.74 billion, a 14% year-over-year gain.
The firm’s Asset Management activities include some 2,560 client advisors who generated revenue of $1.55 billion in the latest period, up from $1.41 billion a year ago – when it had nearly 2,800 reps.
7th Place
Stifel Financial (SF)
Stifel Financial reported a 5% drop in net income to $16.25 million, or $0.21 per share, versus $17.18 million, or $0.22 per share, a year earlier.
