Earnings season is nearly over. 

It was no “blowout quarter by any stretch,” says LPL Financial CIO Burt White, though earnings growth did improve about 7.5% on average, according to Thomson Reuters.

That improvement, along with 5% revenue growth, “is nothing to sneeze at,” White adds. “Further, policy optimism on Wall Street and among corporate management has helped full-year estimates for 2017 hold up relatively well. This week, we share five observations about fourth quarter earnings season so far.”

What are companies thinking about? Of the first 317 S&P 500 companies that reported Q4’16 results, tax policy was mentioned on 85 of the earnings calls, he points out.

(Related: 12 Best & Worst Broker-Dealers: Q3 Earnings, 2016)

“Regulation — of particular interest for financials — and trade policy have also garnered a lot of attention. These policies have the greatest potential to influence broad earnings,” White explained in a recent note to investors.

“We still lack clarity on what tax reform and other policies out of Washington will look like. But the latest headlines out of Washington and actual earnings results have given us no reason to change our belief that policy changes may add meaningfully to earnings growth once implemented,” he added.

The LPL strategist believes investors, advisors and others could start to see the impact of policy changes on earnings as early as late-2017, though any potential earnings boost is more likely to come next year.

“Estimates vary widely, but we believe an expectation of a 3-5% lift from tax reform, infrastructure spending, and deregulation is reasonable,” White said.

As for how the financial sector has done so far this earnings season, it has been “the clear winner,” he points out, with over 20% average year-over-year earnings growth.

“The environment has been favorable for banks with a steepening yield curve (long-term interest rates rising more than short-term rates) and a pick-up in economic activity,” explained White. “Strong stock market gains, healthy credit markets, and robust trading activity have boosted capital markets firms.”

Estimates for the group also have been among “the most resilient” of late, thanks to the the favorable environment noted above and prospects for deregulation, he concludes.

Read on to see how the largest broker-dealers did in the final period of 2016.

WORST BROKER-DEALER

UBS Bank building entrance and sign.

11th Place

UBS

Zurich-based UBS Group reported a 22% drop in its fourth-quarter net profits to 738 million Swiss francs ($737.26 million) from 949 million francs a year ago, when it recorded a large tax benefit.

For the fourth quarter, UBS said operating income at its wealth management unit outside the Americas fell 5% compared with the same period a year earlier, while operating expenses fell 7%.

In the Americas, pretax operating profits soared to $337 million from $13 million in the year-ago period. Operating income improved 10%, as operating expenses fell 7%.

UBS says its 7,025 advisors in the Americas brought in an average of about $1.17 million of yearly fees and commissions in 2016 and had average client assets of $158 million—topping wirehouse rivals like Merrill Lynch and Morgan Stanley.

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

10th Place

WELLS FARGO

Wells Fargo, moving to recover from a scandal in its retail banking operations, said it had fourth-quarter diluted earnings of $1.03 per share on $21.6 billion in revenue. Its net income of $5.3 billion was down slightly from $5.6 billion in the year-ago quarter, while sales rose 1%.

Fourth-quarter net interest income, a measure of earnings from customer deposits, climbed to $12.4 billion from $11.6 billion a year earlier.

“We believe investors are looking past the noise and looking to the margin improvement which should drive shares higher,” Keefe, Bruyette & Woods Inc. analysts led by Brian Kleinhanzl wrote in a note to investors.

Improved net interest margins were “driven by growth in loans, investment securities and trading assets, and the impact from higher interest rates,” the bank said.

The Wealth and Investment Management unit’s total client assets reached a record high of $1.7 trillion, up 7% from a year ago. Net income rose to about $650 million from roughly $600 million in Q4’15.

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

9th Place

CITIGROUP

Citigroup’s profits grew 7% to $3.57 billion on a 36% increase in fixed-income revenue.

The bank’s revenue from handling bonds, currencies and commodities was $3.01 billion in the quarter, excluding an accounting adjustment.

This improvement was the highest since the financial crisis, according to data compiled by Bloomberg, and topped analysts’ $2.83 billion estimate.

Citigroup Chief Financial Officer John Gerspach said on a conference call that “good client activity” continued into the first weeks of January.

In equity trading, Citigroup’s revenue jumped 15% to $694 million.

Ameriprise Financial Headquarters in Minneapolis.

8th Place

AMERIPRISE FINANCIAL

Ameriprise Financial says its net income rose 12% from last year to $400 million, or $2.46 per share, in the fourth quarter of 2016 — topping analyst estimates. Sales, though, fell 1% to $3.1 billion.

Its Advice & Wealth Management assets grew 7% from the year-ago quarter to $479 billion; net inflows into fee-based investment advisory wrap accounts were $3.3 billion in the quarter — giving the platform about $201 billion in assets, or 42% of total assets.

Ameriprise ended the year with 9,675 advisors, including 77 veteran advisors who joined in the fourth quarter of 2016.

“Ameriprise had a strong fourth quarter and a good year in light of the operating environment,” said Chairman and CEO Jim Cracchiolo, in a statement.

On a trailing 12-month basis, net revenue per advisor (or yearly fees and commissions) grew 1% from 2015 to $518,000.

The Advice & Wealth Management’s pretax margin improved to 19.3% vs. 16.6% a year ago.

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

7th Place 

JPMORGAN 

JPMorgan posted a better-than-expected fourth quarter profit of $6.7 billion, or $1.71 a share, as its revenues rose 2% to $24.3 billion. The firm’s Q4’16 earnings experienced a 24% year-over-year improvement.

“Our results this quarter were a strong end to another record year, reflecting our intense client focus and solid performance across our businesses,” said CEO Jamie Dimon, in an earnings release. “We grew market share in virtually all of our businesses and showed expense discipline while continuing to invest for the future.” Shares in the bank were rising over 1% in pre-market trading.

JPMorgan’s investment bank produced a 20% year-over-year increase in sales to $8.4 billion as profits nearly doubled to $3.4 billion.

These results came from a 30-plus% bump in trading revenues, which were $5.7 billion in the period. JPMorgan’s fixed income trading revenues rose 31%, as its equities trading division posted an 8% revenue jump.

Overall expenses at the bank dropped 6%.

The firm’s asset-management unit – which includes both investment and wealth management – has 2,504 financial advisors. This level is down from 2,778 a year ago and 2,506 in the earlier quarter.

Revenues in asset management hit $3.1 billion vs. $3.05 billion in the year-ago quarter; net income rose to $586 million from $507 million.

Paul Reilly, CEO of Raymond James Financial.

6th Place

RAYMOND JAMES

Raymond James Financial beat analysts’ estimates in the final period of 2016, reporting net income of $146.6 million, or $1.00 per share, vs. $106.3 million, or $0.73 per share — a jump of 38%.

Meanwhile, sales grew 17% year over year to $1.49 billion.

“We are proud that we were able to generate record quarterly net revenues enabled by record net revenues in several of our core operating segments,” said CEO Paul Reilly, in a statement. “We are also encouraged by ending the quarter with records for several of our key revenue drivers including client assets under administration, financial assets under management and net loans at RJ Bank.”

The advisor division says it had quarterly net revenues of $1.04 billion, a jump of 19% over the year-ago period and 8% over the prior quarter.

Quarterly pretax income was $73.4 million, an increase of 6% from a year ago but down 31% from the preceding quarter; the company says this decline resulted primarily from “elevated reserves associated with legal matters.”

Assets under administration ended the year at $585.6 billion, a jump of 24% from December 2015 and 2% from September 2016. Private Client Group assets in fee-based accounts stand at $240.2 billion, or 41% of total AUA, representing a 26% increase from last year and a 4% jump from the earlier quarter.

In terms of the number of advisors, Raymond James has 7,128, up from 6,687 a year ago — thanks in part to its Alex. Brown and 3Macs deals. The figure dropped 18, however, from the prior quarter.

Bank of America headquarters (Photo: AP)

5th Place

BANK OF AMERICA

Bank of America’s fourth-quarter profit rose 47% on improvements in credit quality and continued cost-cutting to $4.34 billion, or $0.40 per share, vs. $2.95 billion, or $0.27 per share, in Q4’15.

North Carolina-based lender said revenue from interest-related products rose 6.3% to $10.3 billion in the fourth quarter.

In Global Wealth & Investment Management, net income ticked up 2% year over year to $634 million, though revenues dropped 2% to $4.38 billion.

The Merrill Lynch business has a slight decline in sales as well: $3.6 billion vs. $3.7 billion a year earlier. The group’s assets, however, improved to $2.1 trillion.

Total assets for GWIM stood at $2.5 trillion as of Dec. 31, up slightly from the year-ago period.

New and experienced reps had average yearly fees and commissions of $983,000, while veteran FAs had annual production of $1.25 million.

Both results were down slightly from the same period in ’15.

LPL Financial headquarters in San Diego.

4th Place

LPL FINANCIAL

The indepenent broker-dealer’s net income jumped 56% in the fourth quarter to $41.7 million from the year-ago period; it rose 14% for the full-year 2016 to nearly $192 million.

But revenue dropped 1% in Q4’16 to about $1 billion, and it fell 5% for the full year to $4.05 billion.

While LPL Financial’s total assets grew 7% from a year ago to hit $509 billion in Q4’16, its major sales categories moved in the reverse directions.

Commission revenue for 2016 was down 12% to $1.74 billion. Advisory revenue declined 5% to $1.29 billion. Asset-based revenue, however, ticked up 13% to nearly $557 million.

The fourth quarter brought year-over-year declines in commission on alternative products (-42%), fixed annuities (-22%), variable annuities (-9%), variable annuities (-9%) an mutual funds (-4%).

LPL now has 14,377 affiliated financial advisors and 3,988 insurance reps (who use its clearing and related services.)

Discussing departures in general, LPL has relationships that are, from time to time, “not a good fit strategically, operationally or economically,” Arnold said.

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

3rd Place

MORGAN STANLEY

The wirehouse’s fourth-quarter profit doubled on large gains in bond and other trading. Its net income was $1.51 billion, or $0.81 per share, vs. $753 million, or $0.39 per share, a year earlier. Total revenue improved 17% from last year to $9.02 billion

“There is certainly more reason to be optimistic as we enter 2017 than there was at the beginning of 2016,” Gorman said on a conference call with analysts.

The Wealth Management operations reported a 6% gain in sales from last year’s fourth quarter with $3.99 billion as of Dec. 31. Net income improved 11% to end the period at $531 million.

The total advisor headcount at the wirehouse stands at 15,763, which is down 93 (or 1%) from Q3’16 and down 126 (or 1%) from Q4’15.

Record average annualized revenue (or fees and commissions) per FA was $1.01 million, up 3% from the prior period and 7% from a year ago.

Client assets stand at $2.1 trillion, up 1% from Q3’16 and 6% from Q4’15. Fee-based assets of $877 billion represent about 42% of total assets, and flows into this asset category were $17 billion in the period.

Ronald Kruszewski, CEO of Stifel Financial. (Photo: AP)

2nd Place 

STIFEL FINANCIAL

St. Louis-based Stifel — which has 2,282 financial advisors with over $235 billion in assets — reported a nearly 120% gain in its fourth-quarter net income to $24.5 million, or $0.31 per share, from $11.2 million, or $0.14 per share, a year earlier.

Sales rose 14% to $661.4 million.

Chairman and CEO Ron Kruszewski says the firm remains open to further acquisitions and is upbeat about its recruiting momentum due to lower costs.

It wrapped up its purchase of Indianapolis-based City Financial in mid-January. City has 40 advisors with $4 billion in assets. In 2016, Stifel bought Eaton Partners, which works with institutional investors.

These deals came on the heels of M&As that included Sterne Agee and Barclays Wealth Americas. With Barclays, for instance, some 180 reps with about $56 billion came on board.

“There’s a lot of things going on the recruiting front that I’m optimistic about,” Kruszewski said. The “elevated recruitment costs” of recent years may be “coming into what we would consider more reasonable numbers, which is where we are.”

BEST BROKER-DEALER

Goldman Sachs headquarters in NY. (Photo: AP)

1st Place

GOLDMAN SACHS

Goldman Sachs’ fourth-quarter earnings surged close to 300% to $2.2 billion, or $5.08 a share, on revenue of $8.17 billion. It was expected to post earnings of $4.82 a share on revenue of $7.74 billion.

Goldman Sachs Chairman & CEO Lloyd Blankfein have been cutting costs and restructuring management to adjust to stricter capital requirements and a revenue downturn since the financial crisis.

The firm’s fixed-income revenue improved to $2 billion, exceeding the $1.59 billion estimate. In equity trading, though, sales fell 9% percent to $1.59 billion.

“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” Blankfein explained in a press release. “We continued to manage our expenses carefully and we enter the new year with industry leading positions across our businesses, as well as strong capital and liquidity.”

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