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.
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.
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.
WORST BROKER-DEALER
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.
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
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.
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.
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.
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 (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.
