12 Best & Worst Broker-Dealers: Q1 Earnings, 2018

The first quarter of 2018 was a strong one for most broker-dealers and their bank parent companies, as they benefited from acquired and recruiting advisors and growing levels of investor assets.

As Keefe, Bruyette & Woods reported earlier this month, “The majority of banks beat or met estimates…. For our sample of 219 banks, … 132 banks (60%) beat, 31 (14%) met and 56 (26%) missed. This compares to Q4’17. when 55% of banks beat estimates and Q1’17 when 56% of banks beat estimates.”

The equity research group says it has raised estimates for about 52% of banks it covers. These estimates grew by about 4% on average, and 45% had their ’19 estimates increase by 3%.

In terms of stock performance, the BDs and many financial-service firms are on a roll.

The iShares U.S. Broker-Dealer ETF (IAI), for instance, is up about 10% this year, while the iShares Financial-Service ETF (IYG) has improved nearly 5% through May 22.

According to KBW, fee income generated by financial firms rose about 5% year over year in the first quarter. Net interest income jumped almost 11%.

Meanwhile, operating income at banks soared close to 34% in Q1’18 vs Q1’17. It was also up about 15% from the prior quarter.

On a call with analysts after reporting its quarterly results, Ameriprise Financial Chairman and CEO Jim Cracchiolo, said the company plans to add more products and services to its wealth business tied to lending but not to commercial loans. “We really want this to be more around supporting our clients’ activities and their individual asset loans …,” he explained.

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