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13 Best & Worst Broker-Dealers: Q3 Earnings, 2017

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Large financial institutions had a good third quarter this year, with most reporting stronger earnings and revenues than last year and in the prior quarter.

Some broker-dealers that also have investment banking operations — like Morgan Stanley — saw activities like deal-making improve.

Many — but not all — with large consumer banking businesses, such as Bank of America, JPMorgan and Citi, also had a positive quarter.

Where are their results growing overall? Loans and deposits, according to analysts.

(Related: 10 Best & Worst Broker-Dealers: Q2 Earnings, 2017)

Plus, asset levels have been rising along with the financial markets, while rising interest rates have been boosting margins.

Large financial firms also have been investing in technology, and that has led to improvements in efficiency, net income and operating margins in some cases.

Still, some broker-dealers struggled due to regulatory and legal issues, as well as other challenges — such as asset outflows.

(Related: Best & Worst BDs for Advisors: J.D. Power — 2017)

There may be good news for many of these firms, though, if corporate tax rates of 20-25% make it through Congress. 

“In our view, there could be some general short-term slowdown in deal activity when policies are clarified or finalized, although some companies may be incentivized to accelerate M&A ahead of impending changes,” KBW analysts wrote in a recent note. ”Longer term, we believe that changes to the status quo could drive higher M&A volumes as long as economic growth remains modestly positive and access to free cash remains modest and the financing markets remain healthy,” the analysts explained.

Read on for more details on the 13 best and worst broker-dealers of Q3 2017.


CEO Richard Lampen of Ladenburg Thalmann.

Ladenburg Thalmann (LTS)

13th Place

Ladenburg Thalmann Financial Services said its third-quarter performance improved significantly in the period, but the firm still reported losses, so they get the booby prize.

Its net loss available to shareholders after payment of preferred dividends, was $4.8 million, or -$0.02, per share compared to net loss available to shareholders of $15.3 million, or -$0.08 per share, per share in the year-ago period. Its corporate operations made a profit in the third quarter, with its net income totaling $3.4 million vs. a loss of $7.5 million in the third quarter of 2016.

Third quarter 2017 revenues were $322.3 million, a 17.5% increase from Q3’16. Advisory fee revenue jumped 23% to $146.4 million, while commissions revenue rose 3% to $131.5 million. Also, investment banking revenue improved 233% to $14.7 million.

The company’s operations include several broker-dealers and registered investment advisory firms: Securities American, Triad Advisors, Investacorp, KMS and SSN.

“Ladenburg continues to strengthen its position as a leader in the independent advisory and brokerage business, as our nationwide network of approximately 4,000 financial advisors provides high-quality independent advice, trustworthy financial planning and investment solutions to the mass affluent segment,” explained President & CEO Richard Lampen, in a press release.

Client assets, Lampen says, grew 16% year over year to nearly $153 billion, while advisory assets expanded close to 22% to $66 billion.

(Related: 10 Best & Worst Broker-Dealers: Q2 Earnings, 2017)

Waddell & Reed Financial Inc.'s headquarters is in Overland Park.

Waddell & Reed (WDR)

12th Place

Waddell & Reed Financial had net income of $38.0 million, or $0.45 per share, down 29% from $53.8 million, or $0.65 per share, in the third quarter of 2016.

Operating revenues for Q3’17 were $289.4 million, down 5% from the year-ago period “due primarily to lower average assets under management, which was partly offset by a 2.5 basis point increase in our effective fee rate,” the company said in a press release.

Total assets under management were $80.9 billion at the end of September about the same as the prior quarter and 5% lower than the third quarter of 2016.

Net outflows of $2.8 billion during the current quarter increased slightly compared to net outflows of $2.5 billion in the prior quarter, but improved compared to net outflows of $4.9 billion during the same period last year.

The firm has 1,481 financial advisors with about $55 billion in assets under administration — $20.7 billion of which are in fee-based accounts.

“While we have made progress toward stabilizing our assets under management, we must now increase our focus on reenergizing organic growth,” said CEO Philip J. Sanders, in a statement.

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

Wells Fargo

11th Place

Wells Fargo had an 18% drop in its earnings, largely due to a $1 billion charge it took for mortgage-related regulatory investigations and other expenses. Its total non-interest expenses for the period were $14.4 billion.

Net income dropped to $4.60 billion, or $0.84 a share, from $5.64 billion, or $1.03 billion a share, a year earlier. Total revenue fell 2% to $21.9 billion.

CEO Tim Sloan said in a statement: Over the past year, we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank.”

The Wealth and Investment Management unit includes 14,564 advisors, down 3 from a year ago. Its revenue grew slightly from a year ago to $4.25 billion from $4.10 billion, while its net income jumped 5% to $710 million.

Total client assets stand at $1.9 trillion, up 9% from a year ago. In the retail brokerage business, which has some $1.6 trillion of assets, advisory assets grew 14% to $522 billion. Average loan balances expanded 10% from last year “largely due to continued growth in non-conforming mortgage loans,” according to Wells Fargo.

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

Goldman Sachs (GS)

10th Place

Goldman Sachs improved its earnings 2% to $2.13 billion, or $5.02 per share, from $2.09 billion, or $4.88 per share, a year ago. Net revenues improved 2% as well in the third quarter to $8.33 billion.

Assets under supervision now stand at $1.46 trillion, including net inflows of $13 billion.

“Our overall performance this year has been solid and provides a good foundation on which to

execute and deliver our growth initiatives,” said Chairman & CEO Lloyd C. Blankfein, in a statement.

Net revenues in Investment Banking rose 17% year over year to $1.80, while this measure in Financial Advisory services was $911 million, 38% higher than the third quarter of 2016 due to an increase in completed mergers and acquisitions.

Net revenues in Institutional Client Services dropped 17% to $3.12 billion in the most-recent period, while results in Fixed Income, Currency and Commodities Client Execution fell 26% to $1.45 billion. Net revenues in Equities declined 7% to $1.67 billion.

On the upside, net revenues in Investing & Lending grew 35% to $1.88 billion, and they expanded 3% in Investment Management to $1.53 billion.

Jamie Dimon of JPMorgan Chase (Photo: AP)

JPMorgan (JPM)

9th Place

JPMorgan said its net income rose 7% in the third quarter to $6.7 billion, or $1.76 per share, from $6.3 billion, or $1.58 per share, a year ago.

Net revenue improved 3% to $26.2 billion, while net interest income grew 10% to $13.1 billion.

“JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform,” said Chairman & CEO Jamie Dimon in a statement. “And for the first time, the firm led the nation in total U.S. deposits as consumers and businesses continue to view us as their partner of choice.”

The Asset & Wealth Management unit had a 6% jump in net revenue to $3.25 billion, while its net income improved 21% to $674 million. Its pre-tax margin in Q3’17 was 33%

Assets under management grew 10% year over year to $1.9 trillion, “reflecting higher market levels and net inflows into liquidity and long-term products,” according to the bank.

This business includes 2,581 financial advisors — up from 2,452 in the prior quarter and 2,560 a year ago.

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

Citigroup (C)

8th Place

Citigroup surpassed estimates with third-quarter profits of $4.13 billion, or $1.42 per share, up 8% from the year-ago period.

“We delivered a very strong quarter, showing the balance of our franchise by both product and geography and highlighting our multiple engines of client-led growth,” Citi CEO Michael Corbat said in a statement.

Revenues improved 2% year over year to $18.2 billion, which also beat expectations. Results benefited from a $355 million gain tied to the sale of Citi’s fixed-income analytics business.

Also, the Institutional Clients Group boosted its revenue 9% to $9.2 billion; its net income jumped 15% to $3 billion. Meanwhile, fixed-income trading declined 16% to $2.9 billion from $3.4 billion.

“We had revenue increases in many of the products we have been investing in, tightly managed our expenses, and again saw loan growth in both our consumer and institutional businesses,” Corbat explained.

Investment banking revenues improved 14% from last year to $1.23 billion, while global consumer banking’s revenues rose 3% to $8.4 billion.

Morgan Stanley headquarters in New York.

Morgan Stanley (MS)

7th Place

Morgan Stanley reported third-quarter earnings that beat analysts’ estimates. Profits grew 11.5% year over year to $1.78 billion, or $0.93 cents a share. Total revenue moved up 3% to $8.91 billion.

The firm’s wealth management business grew sales 9% year over year to $4.22 billion. Still, Morgan Stanley saw its total advisor headcount decline slightly in the period ended Sept. 30 and said was leaving the Protocol for Broker Recruiting as part of its drive to make new investments in its advisors.

Net income in the wealth group rose 24% year over year, and pretax margin was a record 26.5%.

It had 15,759 financial advisors as of Sept. 30 vs. 15,777 on June 30 and 15,856 a year ago.

As of Sept. 30, Morgan Stanley’s registered reps had average client assets of $146 million; their yearly fees & commissions averaged $1.07 million. Total assets for the wealth unit were $2.31 trillion, 43% of which is fee-based. Loans to clients totaled $78 billion.


LPL Financial (LPLA)

6th Place

LPL Financial had net income of $58.14 million, or $0.63 per share, vs. $51.95 million, or $0.58 per share, a year ago — an increase of about 11.9% meeting equity analysts’ estimates.

Revenue, though, fell short of analysts’ estimates by about $20 million, according to Seeking Alpha, at $1.06 billion, which represents a 4% increase from last year.

In addition, LPL says its total advisor count decreased to 14,253, is down 124 advisors from 2016 and fell 3 from July 30, 2017.

“We remained focused on our strategic priorities of growing our core business and executing with excellence in the third quarter,” said Dan Arnold, president and CEO, in a statement.

LPL’s retention rate for advisor fees & commissions this year stands at 95%. Before several large groups departed, its production retention rate in the first three quarters of 2016 was 97%.

The firms total level of brokerage and advisory assets grew 11% year over year to $560 billion. Total net new assets were $2.9 billion, representing a 2% yearly growth rate.

Net new advisory assets expanded by $6.9 billion, while net new brokerage assets fell (or had outflows of) $4.0 billion.

Paul Reilly, CEO of Raymond James Financial.

Raymond James (RJF)

5th Place

Raymond James’ net income rose 12.7% from last year to $193.5 million on Sept. 30 thanks to improvements in the Private Client Group, Raymond James Bank and Asset Management.

Its beat analyst estimates with adjusted earnings per share of $1.47 and revenue of $1.69 billion in the most-recent quarter.

Across the firm, client assets under administration increased 15% year over year to $692.9 billion, while financial assets under management jumped 25% to $96.4 billion.

CEO Paul Reilly said on a call with analysts that the firm’s advisor headcount and recruiting pipeline “continue to grow.” Advisors who have committed to moving to the firm in the current fiscal year have “about $80 million” in combined yearly fees and commissions, Reilly added.

The Private Client Group had net revenues of $1.17 billion, up 21% from the prior year. Its pre-tax income was $142.3 million, a 34% improvement over the year-ago period.

Assets under administration stood at $659.5 billion, an increase of 15% from September 2016 and 4% over June 2017/

Private Client Group assets in fee-based accounts totaled $294.5 billion, representing growth of 27% over the year-ago period and 6% from the earlier quarter.

The number of financial advisors reached a record 7,346, lifted by exceptionally strong advisor recruiting and retention results as well as the successful integrations of Alex. Brown and 3Macs during the fiscal year,” the firm said in a statement.

Bank of America headquarters (Photo: AP)

Bank of America (BAC)

4th Place

Bank of America’s net income rose a solid 12.8% in the third quarter to $5.59 billion, or $0.48 a share, vs. $4.95 billion, or $0.41 cents, in Q3’16. These results beat analysts’ estimates.

Total revenue, though, improved less than 1% to $21.8 billion, which did not top expectations. Revenue from trading stocks and bonds fell 15% from a year ago. On the bright side, Bank of America said it had $11.4 billion in net interest income.

At the same time, BofA announced a write-off of $900 million in bad loans, mainly associated with U.S. credit-card users, according to the statement.

The Global Wealth & Investment Management had net income of $769 million, up 10% compared to the third quarter of 2016. Revenue of $4.6 billion for the quarter rose 6%.

The group’s profit margin was 27% vs. 26% in Q3’16. Net interest income was $1.5 billion. Asset flows were nearly $21 billion, and average loan balances were $154 billion. Total client assets stood at close to $2.7 trillion.

Merrill Lynch’s Thundering Herd of advisors grew 286 from Q3’16 and 143 from Q2’17 to 14,954. 

In the third quarter, average fees and commissions fell to $994,000 per advisor from $1.04 million in the prior quarter; veteran reps saw a smaller decline to $1.30 million from $1.35 million. The company said lower net interest income and training-program investments were to blame. 

UBS Bank building entrance and sign.


3rd Place

UBS Group AG reported a 14% jump in net income to 946 million Swiss francs for the third quarter but missed estimates.

Revenues expanded 2% to about 7.15 billion Swiss francs, meeting analysts’ expectations.

“We again saw good results across our business divisions with Asia Pacific as an important driver of profitable growth. We remain focused on disciplined execution and creating long-term value for our shareholders,” CEO Sergio Ermotti, said in a statement.

UBS Wealth Management Americas boosted its total operating income 7% to $2.13 billion. Its operating profit, though, fell1% to $326 million.

The group has 6,861 advisors — down from 6,915 in the earlier quarter and 7,087 a year ago.

Net outflows were $2.3 billion. Including interest and dividend income, though, net inflows were $4.1 billion.

The level of recruitment loans to financial advisors weakened to $2.68 billion in the third quarter of 2017 vs. $2.75 billion in Q2’17 and $3.18 billion in Q3’16.

The level of total client assets stands at $1.25 trillion. The unit has gross loans of $53 billion.

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

Stifel Financial (SF)

2nd Place

In the third quarter, Stifel reported a 29% surge in profits to $66.5 million, or $0.89, vs. $52.8 million, or $0.69 per share, a year ago — beating equity analysts’ estimates.

The firm also topped revenue expectations with sales of $721.20 million for the quarter, a jump of 12% from the year-ago period.

Global wealth management brokerage revenues, however, were $158.3 million as of Sept. 30, a 4% decrease from Q3’16 and a 6% drop from Q2’17. Including asset management & service fees, the broader wealth-management operations had sales of $454 million, a jump of 16% from Q3’17.

When it announced its Q3 results, Stifel explained that it was buying the wealth-management business of Chicago-based Ziegler Wealth Management, which has 57 private advisors and $4.8 billion in client assets, for an undisclosed amount.

According to its third-quarter earnings, Stifel has 2,252 financial advisors with some $265 billion in assets. Earlier this year, the St. Louis-headquartered firm wrapped up its purchase of City Financial, which had roughly 40 financial advisors across eight Indiana offices with roughly $4 billion in client assets at the time.

“We have worked with the management team at Ziegler in the past and we are excited to add not only a growing and profitable business to our platform but one whose culture of integrity and putting the client first is very similar to our own,” Stifel Chairman & CEO Ronald J. Kruszewski, in a statement.


Ameriprise Financial Headquarters in Minneapolis.

Ameriprise Financial (AMP)

1st Place

Ameriprise Financial (AMP) said its net income soared 75% in the third quarter to $503 million, or $3.24 per share, from $288 million, or $1.94 per share. Net revenues were $3.0 billion, down 1% from a year ago.

The Advice & Wealth Management unit had total revenues of $1.4 billion, up 9% from the prior year, and pre-tax income of $298 million, up 29%. The pre-tax profit margin for the group was 21.5%

“Ameriprise delivered a record third quarter driven by significant momentum in our Advice & Wealth Management business and asset growth across the firm,” said Chairman & CEO Jim Cracchiolo in a statement.

The company acquired IPI which recently added 215 advisors and about $743 million in client assets to the group. The group now has 1,994 employee advisors and 7,681 franchise reps for a total headcount of 9,890 (included the IPI reps).

Average 12-month trailing fees & commissions per advisor is $550,000 vs. $511,000 a year ago. 

“We reported new highs in retail client flows, assets and advisor productivity, and for the sixth consecutive quarter, increased client net inflows into fee-based investment advisory accounts,” added Cracchiolo. “We’re serving more clients in our target markets of the affluent and mass affluent, as well as attracting quality advisors to Ameriprise.”

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