The first quarter of 2017 was a strong one for corporate profits.
According to FactSet, companies in the S&P 500 reported an average increase of close to 14% in Q1’17 vs. Q1’16.
That’s the biggest gain since Q3 of 2011. Plus, equity analysts forecast a full-year boost of S&P 500 earnings of 10%.
Bank of America-Merrill Lynch analysts point out that energy-sector earnings have been particularly robust, rising roughly 800% in Q1. Exclude energy, and the S&P 500′s earnings growth in the first quarter drops to 9.4%.
The financial sector took the second-place slot for Q1’17 earnings growth at 19.9%. Average growth in revenues for the financial sector was 9.4% over last year, according to FactSet.
Plus, 82% of financial firms reported earnings that beat analysts’ expectations for the quarter ending March 31.
LPL Financial Chief Investment Officer Burt White says earnings likely have been “the biggest driver of this year’s stock market gains, with the possible exception of policy optimism.”
White explains that policy reforms as laid out by the Trump administration could add several percentage points to 2018 earnings “after what we anticipate will be mid-to-high single digit earnings gains for S&P 500 companies in 2017.”
The strategist adds that the independent broker-dealer expects corporate earnings “to be supported by a slight pickup in economic growth, a stable U.S. dollar, and rebounding energy sector profits.”
Read on to see how see how many of the largest broker-dealers did in the final period of 2017.
Ladenburg Thallman (LTS)
Ladenburg Thallman, the parent company of Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services, had a 135% rise in its net loss in the first quarter of 2017 to $11.6 million, or -$0.06 per shares, vs. a loss of $4.9 million, or -$0.03 per share, in the comparable 2016 period.
Its first-quarter ‘17 revenues, though, grew 9% year over year to $290.3 million.
Client assets were $144.3 billion as of March 31, including advisory assets under management of $60.3 billion and cash balances of $4.5 billion.
“We are tremendously proud of our nationwide network of approximately 4,000 independent advisors, which continues to provide clients with trusted services,” said Dr. Phillip Frost, chairman of Ladenburg, said in a statement.
The firm also says it has recurring revenue of 76.9% for the trailing 12 months ended March 31 in independent brokerage and advisory services business.
“Ladenburg continues to drive significant recurring revenue with strong asset growth and recruiting in our independent brokerage and advisory business,” President and CEO Richard Lampen, said in a statement.
In addition to its networks of IBDs, the company owns Premier Trust, Ladenburg Thalmann Asset Management, Highland Capital Brokerage, an independent life insurance brokerage company, and Ladenburg Thalmann & Co., an investment bank.
Waddell & Reed (WDR)
Waddell & Reed Financial (WDR) reported an 11% drop in its first quarter 2017 net income to $33.1 million, or $0.39 per diluted share, compared to net income of $37.0 million, or $0.45 per diluted share, during the first quarter of 2016.
Operating revenues in the period were $287 million – representing a 12% drop due to lower average assets under management and reduced Rule 12b-1 fee revenues in its broker-dealer advisory programs.
These lower revenues, the firm says, are tied to a share conversion of load-waived Class A shares to Class I shares in July 2016.
The operating margin in Q1’17 were 18.4% compared to 12.8% during the previous quarter and 22.1% during the same period last year.
Assets under management were $81 billion, while outflows during were $3.4 billion.
“Flow pressure continues to ease as redemptions from some of the largest sources of outflows steadily abates,” the firm said in a statement.
“Redemptions from Asset Strategy, which was once our most substantial source of outflows, fell to $1.0 billion during the current quarter, compared to redemptions of $4.5 billion during the first quarter last year,” it added.
Its retail brokerage has 1,662 advisors, down from 1,803 a year ago. Their average productivity (or fees & commissions) was about $61,000 in the latest quarter or $242,000 in the past 12 months.
“We are seeing early signs of progress, although much work remains,” said CEO Philip J. Sanders, in a statement. “Asset levels were stable sequentially, reflecting a slowing of net outflows, an uptick in gross sales and positive market action.”
Raymond James (RJF)
Raymond James reported a nearly 20% jump in revenues to about $1.6 billion for the quarter ending March 31 vs. last year’s figure. Its net income, though, tumbled 10% to $113 million, or $0.77, from the year-ago period due to legal and other expenses.
The firm’s private client results had a similar bifurcation. Sales soared 23% year over year to $883 million, but pretax profits dropped 65% to about $29 million.
In an interview, CEO Paul Reilly said the firm had “a record start for the past six months, record client assets … [and] advisor headcount, and our recruiting is still at the top of market and retention, too.”
The firm’s attrition, 0.6%, is especially impressive, Reilly explains, acknowledging that a positive market environment and rising interest rates are helping too: “It’s really the best six-month start we’ve had, and we are continuing to” see positive results from these trends in the current quarter.
The firm’s 7,222 advisors work with client assets of $611 billion, up 26% from a year ago. Fee-based assets stand at $251 billion, a jump of 33%.
In terms of the advisor headcount, Raymond James has been growing at a compound annual rate of 3.4% for the past five years.
LPL Financial (LPLA)
The independent broker-dealer’s first-quarter profit declined about 4% to $48 million, or $0.52 per share, vs. $50.4 million, or $0.56 per share, a year ago. These results beat analyst forecasts.
During the most recent period, the company completed $2.2 billion in debt refinancing, which reduced EPS by $0.14. Revenue grew 3% to $1.035 billion in Q1’17 from the year-ago period.
“We had a solid start to the year,” said Dan Arnold, president and CEO, in a statement. “We have heard positive sentiment from our advisors, who are energized by the improved macro environment, LPL’s enhanced capabilities, and their opportunities to win in the marketplace.”
“This quarter, we strengthened our balance sheet by refinancing our entire debt structure,” said Matt Audette, CFO. “We lengthened our average maturities, lowered our interest rates, increased the capacity of our revolver, and diversified our funding sources. We believe our updated capital structure positions us well to fund future growth.”
During Q1’17, total brokerage and advisory assets increased 11% year-over-year to $530 billion. Total net new asset inflows were $2.6 billion, while net new advisory assets were $6.0 billion.
The advisor headcount decreased to 14,354, down 23 sequentially and up 261 year-over-year.
Wells Fargo (WFC)
Wells Fargo said its first-quarter net income was flat at $5.5 billion, or $1.00 per share, compared with $5.5 billion, or $0.99 per share, a year ago.
Its advisor headcount fell three from last year and two from the prior quarter to 14,657.
The bank, under pressure from its fake-accounts scandal, says it “continued to make meaningful progress in the first quarter in rebuilding trust with customers and other important stakeholders, while producing solid financial results,” according to CEO Tim Sloan.
The Wealth & Investment Management unit had revenues of $4.2 billion, up from $3.9 billion in Q1’16. Its net income was $623 million vs. $512 million last year.
The unit’s total assets are $1.8 trillion, up 9% from a year ago.
The retail brokerage group reported loan growth of 15% from last year, while the wealth-management group said its average loan balances improved 8%.
Ameriprise Financial (AMP)
Ameriprise said its first-quarter net income was $403 million, up 11% from last year, while it had revenues of $2.91 billion, up 3% from the year-ago period.
Ameriprise says the investment firm’s “experience and expertise in serving the financial institutions market will complement Ameriprise’s successful growth strategy in Advice and Wealth Management. The group will become part of a new institutions channel.
“We have a talented team and resources in place to make this a seamless transition, and we are confident our new colleagues will enjoy the many benefits of working with Ameriprise,” said Pat O’Connell, head of the Ameriprise Advisor Group, in a statement.
In its earnings announcement, Ameriprise said it has 9,668 advisors with average trailing 12-month fees and commissions of $529,000. The firm is down about 100 reps from a year ago and seven from the prior quarter.
The wealth and advisor unit boosted assets to $500 billion from $450 billion a year ago. It also raised total revenue to roughly $1.3 billion from $1.2 billion.
The group’s pretax operating margin was 19.2% in the most recent period vs. 17.1% in Q1’16. Total pretax profits were up 21% year over year to $248 million.