Three financial services giants posted quarterly earnings gains — some strong, some not so strong— despite continued pressure from low interest rates. A few bright spots helped.
Low interest rates kept pressure on three financial services industry giants that reported quarterly earnings this week, but some bright spots such as advice, wealth management and trading helped the firms improve results over the year-ago period.
Fighting bond market head winds, Raymond James Financial Inc. posted modest profit gains for its fiscal third quarter ended June 30, just missing analyst estimates.
Net revenue of $1.11 billion rose 2% from a year ago, and net income rose 7% to $84 million. Excluding nonrecurring items, Raymond James posted earnings of $0.65 per share, up 2% from the prior year's quarter but just shy of the $0.66 a share analysts were expecting, according to Thomson Reuters' Institutional Brokers' Estimate System.
The bond market sell-off put a damper on results.
“It was an extremely difficult quarter” for the firm's fixed-income unit, chief executive Paul Reilly said in the company's earnings report. Higher rates “led to low commission volumes and a net trading loss,” particularly in municipal bond inventories, he said.
The firm's retail business “showed modest improvement” from the preceding quarter, Mr. Reilly said. Revenue in the private-client group were up 2%, and pretax income rose 8%.
Retail was also hit by rising rates, as well as Canada-based client assets that declined in U.S. dollar terms, the firm said.
Asset management continues to be a bright spot. Assets under management rose to a record $52.2 billion, the company said. Raymond James has another $405 billion under administration, overseen by a total of 6,300 advisers in its various channels.
At Ameriprise Financial Inc., advice and wealth management operations helped drive second-quarter pretax operating earnings up 37% — or $152 million — over the same quarter in 2012.
“All of our business segments performed well, most notably advice and wealth management,” Ameriprise chairman and chief executive Jim Cracchiolo said in a statement. “We're experiencing good growth in client acquisition and strong client net inflows, which are key drivers of adviser productivity gains. Even with the pressure of low interest rates, we're delivering meaningful growth in profitability.”
Net revenue for the advice and wealth management businesses for the quarter ended June 30 were almost $1.1 billion, an increase of 13% vs. the same quarter last year.
The company also added 88 financial advisers during the quarter, which was consistent with the number of advisers added during the second quarter last year. In total, the company has a network of 10,000 financial advisers.
The earnings growth for Ameriprise's wealth management business came despite an “unfavorable impact” of $15 million in the quarter from lower interest rates, the company said in its earnings report.
TD Ameritrade Holding Corp. posted better-than-expected results, which company officials attributed to an improved trading environment in the individual investor business, expense controls, and higher fee-based revenue from the adviser referral program and managed-account offering.
The firm brought in $10.8 billion in net new assets in the quarter. About three-quarters of net new flows come from registered investment advisers that hold assets in custody with TD Ameritrade Institutional, president and chief executive Fred Tomczyk said in an interview.
TD Ameritrade finished the quarter with $523.5 billion in total assets. The firm's 4,500 RIAs control about 40% of that total, or around $210 billion. The company does not separately report data from its RIA custody business.
Since the fiscal year began in September, the RIA custody unit has landed 310 breakaway advisers, said Tom Nally, president of TD Ameritrade Institutional, a run rate about 4% less than the 441 recruits attracted in the one-year period ended September 2012.
The slight slowdown “is a timing situation,” Mr. Nally said. Advisers “are making a significant jump” in breaking away, he said. “They have to make sure they have all their ducks in a row.”
