The second quarter was rough for investors, and for many financial institutions, including broker-dealers and their parent companies. Overall earnings in the banking sector, for instance, declined 9%, according to Reuters.
Still, Bank of America (BAC) staged a big turnaround in its financial results, which kept the sector's performance way ahead of where it could have been had another quarterly loss been reported by the banking giant.
Many broker-dealers, though, reported earnings declines in the March-to-June period. Hence, the list of the six "best" companies in Q2 with broker-dealer operations includes one with negative shifts in net earnings.
Here are 12 companies, most of which were ranked on AdvisorOne's list of Best & Worst Advisor Partner Firms for Q1, selected as the six best and six worst performers in Q2, based largely on how they out- or underperformed their broker-dealer rivals.
6th Best
JPMORGAN CHASE (JPM)
Despite posting lower profits of $4.96 billion, down some 9% from a year ago (when net income was $5.43 billion), due largely to the chief investment office's trading losses of $4.4 billion in the quarter, JPMorgan came in at sixth best out of the 12 in AdvisorOne's list.
Still, JPM's $1.21 earnings per share versus last year's $1.27 cheered investors and analysts, who had expected per-share earnings of only $0.70.
J.P. Morgan Asset Management saw profits decrease to $391 million, down 10.9% from $439 million a year ago but up from $386 million in the prior quarter. Revenue from private banking was $1.3 billion, up 4% from a year ago.
5th Best
WELLS FARGO (WFC)
Wells Fargo's Q2 profits grew 7%, to $4.62 billion from $3.95 billion a year ago. Earnings stood at $0.82 per share, a penny higher than analysts' expectations.
In Wells' business segment covering wealth, brokerage and retirement, profits rose to $343 million, up 1.8% from $337 million a year ago and up from $296 million in the prior quarter.
The wealth, brokerage and retirement unit includes 15,170 financial advisors as of June 30, an increase over the 15,134 financial advisors reported as of March 31.
4th Best
RAYMOND JAMES FINANCIAL (RJF)
For the quarter ending June 30, Raymond James had net income of $76.4 million, or 55 cents a share, up 63% from $46.8 million, or 37 cents per share, for the year-ago period.
The third-quarter fiscal year results included a $21 million pretax charge for expenses related to its purchase of Morgan Keegan. Without the charge, net income would have been $89.2 million, or 64 cents per share.
Net revenues of $1.09 billion were $214 million higher than the preceding quarter and "slightly better than the anticipated quarterly revenue increment associated with the MK acquisition," the company said in a press release. This represents a sales jump of 25% over the earlier quarter and 28% over last year; analysts had expected revenues of $975.28 million.
The number of U.S.-based financial advisors stands at 5,487—up from 4,532 in the quarter ending March 31, before the Morgan Keegan deal wrapped up. Including reps in Canada and the U.K., Raymond James now has 6,567 advisors.
3rd Best
INVESTORS CAPITAL (ICH)
Investors Capital posted net income of $261,700 for the quarter versus a loss of $1.26 million a year ago. You can't calculate a proper percentage increase from a negative number, and the dollar amount of the turnaround was somewhat small, so we have ranked Investors Cap No. 3.
Specific expense reduction initiatives implemented in the previous quarter led to reduced operating costs. Total revenue decreased 3.0% to $20.80 million compared with revenue of $21.44 million for the year-ago period, as commission revenue fell 4.9% to $16.09 million. Advisory fees, which comprise 19.8% of total revenue, remained fairly consistent with the prior period, declining 1.7%.
Total expenses fell $1.91 million or 8.6%, declining in every expense-related category, resulting in operating income of $0.45 million compared with an operating loss of $0.82 million for the prior period.
2nd Best (sort of)
BANK OF AMERICA (BAC)
(Bank of America could have topped the list, which will be explained shortly.)
BofA reported profits of $2.5 billion for second-quarter 2012, or 19 cents a share, beating analysts' estimates of 14 cents, on revenues that jumped 66%, to $21.97 billion. A year ago, the bank showed a net loss of $8.8 billion, or 90 cents a share, largely due to mortgage-related losses. BofA's results for the second quarter reflect higher mortgage banking income, according to BofA's second-quarter earnings release.
These Q2 results were a massive $11.3 billion turnaround from last year's quarter and probably merit being the best of the bunch, but, again, since you can't calculate a proper percentage increase from a negative number, AdvisorOne decided to give the nod to the little guy for the Best of the 12.
Best
STIFEL FINANCIAL (SF)
Compared to BofA's gargantuan dollar shift, Stifel Financial reported net income of "only" $26.1 million, or $0.42 per diluted share, on net revenues of $374.4 million, versus net income of $3.4 million, or $0.05 per diluted share, on net revenues of $358.9 million for the second quarter of 2011.
This represents a whopping 664% jump in earnings for the company, which has more than 2,000 financial advisors.
"In the quarter, asset management, investment banking advisory and Stifel Bank performed well, while commissions stabilized, and principal transactions and equity capital raising results were lower," said Stifel President & CEO Ronald J. Kruszewski, in a press release.
The Global Wealth Management segment of Stifel Financial generated pre-tax operating income of $61.4 million, compared with $55.4 million in the second quarter of 2011 and $69.2 million in the first quarter of 2012. Net revenues for the quarter were $240.0 million, compared with $225.6 million in the second quarter of 2011, and $248.3 million in the first quarter of 2012.
6th Worst 
5th Worst 
4th Worst 
3rd Worst 
2nd Worst 
Worst
