Oppenheimer Holdings Inc. Reports First Quarter 2022 Earnings
Oppenheimer Holdings reported a net income of $9.3 million or $0.75 per share for Q1 2022, down 76% from $38.7 million or $3.07 per share in Q1 2021. Revenue fell by 28.7% to $266 million, primarily due to a downturn in equity capital market issuance influenced by COVID-19, rising interest rates, and geopolitical tensions. Despite lower capital market revenues, Wealth Management showed resilience with strong AUM and sustained net investor flows. The company repurchased 377,313 shares during the quarter. The board declared a dividend of $0.15 per share payable on May 27, 2022.
- Wealth Management reported solid results with near record AUM and net investor flows.
- Book value and tangible book value per share reached record levels at March 31, 2022.
- Increased advisory fees due to near record high assets under management.
- Net income decreased 76% from Q1 2021.
- Revenue declined 28.7%, primarily in the Capital Markets segment.
- Capital Markets revenue down 53.7%, significantly impacted by reduced activity.
NEW YORK, April 29, 2022 /PRNewswire/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of
Albert G. Lowenthal, Chairman and CEO commented, "The results for the quarter reflect the significant downturn in equity capital market issuance, which had an out-sized impact on the Company during the period. Markets reflected the continuing impact of COVID on the economy, the changed interest rate environment and the impact on consumer confidence of the invasion of Ukraine by Russia early in the quarter. The emerging high inflationary environment, at the highest levels in 40 years, due to continued supply chain issues and higher inflation expectations are propelling consumer prices higher and draining energy from the equity markets. By quarter's end, interest rates reached the highest levels since 2018. While the Company's pipeline of potential future banking business remains strong, the closing of the window for IPO's and secondary offerings, and the closing down of the SPAC market dramatically reduced capital market revenues for the first quarter of 2022 compared to the record number of offerings during the first quarter of 2021.
Wealth Management continued to deliver solid results driven by near record AUM and net investor flows. The continued steady performance of our Wealth Management business offset some of the impact of disappointing revenue, but, nevertheless, the Firm's reported results were significantly reduced from 2021. Concerns around inflation, higher oil prices, the Federal Reserve's announced intention of raising short-term rates and the commencement of the run-off of the FED's balance sheet all weighed on equity markets during the period. These concerns drove up the yield on the 10-Year Treasury to
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 1Q-22 | 1Q-21 |
Revenue | $ 266,028 | $ 373,282 |
Compensation Expense | $ 186,031 | $ 255,601 |
Non-compensation Expense | $ 65,784 | $ 65,554 |
Pre-Tax Income | $ 14,213 | $ 52,127 |
Income Taxes | $ 4,435 | $ 13,469 |
Net Income (1) | $ 9,292 | $ 38,658 |
Earnings Per Share (Basic) (1) | $ 0.75 | $ 3.07 |
Earnings Per Share (Diluted) (1) | $ 0.69 | $ 2.91 |
Book Value Per Share | $ 66.45 | $ 56.74 |
Tangible Book Value Per Share (2) | $ 52.58 | $ 43.34 |
Private Client | ||
Revenue | $ 150,847 | $ 164,023 |
Pre-Tax Income | $ 24,146 | $ 24,263 |
Assets Under Administration (billions) | $ 117.2 | $ 111.4 |
Asset Management | ||
Revenue | $ 27,117 | $ 24,230 |
Pre-Tax Income | $ 9,474 | $ 7,553 |
Assets Under Management (billions) | $ 42.7 | $ 40.2 |
Capital Markets | ||
Revenue | $ 85,051 | |
Pre-Tax Income | $ 1,166 | $ 49,991 |
(1) Attributable to Oppenheimer Holdings Inc. | ||
(2) Represents book value less goodwill and intangible assets divided by number of shares outstanding. | ||
Highlights
- Client assets under administration and under management were both at near record levels at March 31, 2022 and up from the same period in 2021
- Advisory fees increased from the same period last year due to near record high assets under management
- Book value and tangible book value per share reached record levels at March 31, 2022
- Reduced first quarter 2022 gross revenue, net income, and earnings per share reflected a significant decline in industry-wide activity, and lower net revenues in underwriting, trading and M&A fees
- Significantly reduced revenue and earnings in the Capital Markets segment for the first quarter of 2022 were driven by reduced capital markets activity
- The Company repurchased 377,313 shares of Class A non-voting common stock during the first quarter of 2022 under its previously announced buy-back plan or
3% of shares outstanding at year-end
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
1Q-22 | 1Q-21 | |
Revenue | ||
Commissions | ||
Advisory Fees | ||
Bank Deposit Sweep Income | ||
Interest | ||
Other | ||
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Income | ||
Compensation Ratio | 66.2 % | 67.9 % |
Non-compensation Ratio | 17.8 % | 17.3 % |
Pre-Tax Margin | 16.0 % | 14.8 % |
Assets Under Administration (billions) | ||
Cash Sweep Balances (billions) | $ 8.1 | $ 7.4 |
Revenue:
- Retail commissions decreased
10.3% from a year ago due to a decrease in client activity compared to the significantly elevated levels of a year ago - Advisory fees increased
10.3% due to higher assets under management - Bank deposit sweep income increased
$0.3 million or8.6% from a year ago due to higher balances and higher short-term interest rates - Interest revenue increased
25.8% from a year ago due to higher short-term interest rates and higher average margin balances - Other revenue decreased primarily due to decreases in the cash surrender value of Company-owned life insurance policies during the current period compared to increases in the value of those policies in the prior period a year ago
Total Expenses:
- Compensation expenses decreased
10.4% from a year ago primarily due to decreased production, share-based and deferred compensation costs - Non-compensation expenses decreased
5.4% from a year ago primarily due to a decrease in the allowance for credit losses partially offset by higher interest and travel expenses
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
1Q-22 | 1Q-21 | |
Revenue | $ 27,117 | $ 24,230 |
Advisory Fees | $ 27,113 | $ 24,227 |
Other | $ 4 | $ 3 |
Total Expenses | $ 17,643 | $ 16,677 |
Compensation | $ 7,086 | $ 7,259 |
Non-compensation | $ 10,557 | $ 9,418 |
Pre-Tax Income | $ 9,474 | $ 7,553 |
Compensation Ratio | 26.1 % | 30.0 % |
Non-compensation Ratio | 38.9 % | 38.9 % |
Pre-Tax Margin | 34.9 % | 31.2 % |
AUM (billions) | $ 42.7 | $ 40.2 |
Revenue:
- Advisory fee revenue increased
11.9% due to higher assets under management during the first quarter of 2022 compared with the first quarter of 2021 and positive net asset flows - The Firm changed its advisory fee billings from quarterly in advance to monthly in advance starting on April 1, 2021
Assets under Management (AUM):
- AUM was near a record level of
$42.7 billion at March 31, 2022, which is the basis for advisory fee billings for April 2022 - The increase in AUM was comprised of higher asset values of
$1.9 billion on existing client holdings and a net contribution of assets of$0.6 billion
Total Expenses:
- Compensation expenses were down
2.4% from a year ago which was primarily related to decreases in incentive compensation - Non-compensation expenses were up
12.1% when compared to the prior year period due to a higher communication and technology expenses and portfolio manager expense
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
1Q-22 | 1Q-21 | |
Revenue | $ 85,051 | |
Investment Banking | $ 32,975 | |
Advisory Fees | $ 21,905 | $ 35,922 |
Equities Underwriting | $ 11,236 | $ 74,582 |
Fixed Income Underwriting | $ 1,987 | $ 5,487 |
Other | $ (2,153) | $ 845 |
Sales and Trading | $ 51,603 | $ 66,063 |
Equities | $ 35,928 | $ 43,556 |
Fixed Income | $ 15,675 | $ 22,507 |
Other | $ 473 | $ 700 |
Total Expenses | $ 83,885 | |
Compensation | $ 60,223 | |
Non-compensation | $ 23,662 | $ 21,678 |
Pre-Tax Income | $ 1,166 | $ 49,991 |
Compensation Ratio | 70.8 % | 61.0 % |
Non-compensation Ratio | 27.8 % | 11.8 % |
Pre-Tax Margin | 1.4 % | 27.2 % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities decreased
39.0% compared with a year ago. The high advisory fees from the prior year period were driven by large completed M&A transactions in healthcare, technology, and consumer products - Equity underwriting fees decreased
84.9% compared with a year ago due to a significant decrease in equity underwriting activity in the healthcare and technology sectors, particularly for companies utilizing the SPAC framework to access the public markets - Fixed income underwriting fees were down
63.8% compared with a year ago primarily driven by a decrease in public finance issuances during the 2022 period
Sales and Trading
- Equities sales and trading revenue decreased
17.5% compared with a year ago due to a marked decline in volumes in the equities market compared to the elevated levels in the prior year period - Fixed Income sales and trading revenues declined significantly by
30.4% compared with a year ago driven by lower trading volumes in the fixed income and municipal market
Total Expenses:
- Compensation expenses decreased
46.2% compared with a year ago primarily due to decreased incentive compensation - Non-compensation expenses were
9.2% higher than a year ago due to increased interest costs and increased costs associated with business travel and entertainment and conferences
Other Matters
(In millions, except number of shares and per share amounts) | ||
1Q-22 | 1Q-21 | |
Capital | ||
Shareholders' Equity (1) | $ 814.4 | $ 719.7 |
Regulatory Net Capital (2) | $ 440.4 | $ 314.4 |
Regulatory Excess Net Capital (2) | $ 411.4 | $ 290.0 |
Common Stock Repurchases | ||
Repurchases | $ 16,157,876 | $ — |
Number of Shares | 377,313 | — |
Average Price | $ 42.82 | $ — |
Period End Shares | 12,255,839 | 12,685,708 |
Effective Tax Rate | 31.2 % | 25.8 % |
(1) Attributable to Oppenheimer Holdings Inc. | ||
(2) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||
- The Board of Directors announced a quarterly dividend in the amount of
$0.15 per share payable on May 27, 2022 to holders of Class A non-voting and Class B voting common stock of record on May 13, 2022 - Compensation expense as a percentage of revenue was higher at
69.9% during the current period versus68.5% during the same period last year due primarily to higher fixed compensation associated with salary increases granted in an inflationary environment and lower revenue - The effective tax rate for the current period was
31.2% compared with25.8% for the prior year period and reflects the Company's estimate of the annual effective tax rate. The effective tax rate for the first quarter of 2022 was negatively impacted by unfavorable permanent items
Company Information
Oppenheimer Holdings Inc., through its operating subsidiaries, is a leading middle market investment bank and full service broker-dealer that is engaged in a broad range of activities in the financial services industry, including retail securities brokerage, institutional sales and trading, investment banking (corporate and public finance), equity and fixed income research, market-making, trust services, and investment advisory and asset management services. With roots tracing back to 1881, the Company is headquartered in New York and has 93 retail branch offices in the United States and institutional businesses located in London, Tel Aviv, and Hong Kong.
Forward-Looking Statements
This press release includes certain "forward-looking statements" relating to anticipated future performance. For a discussion of the factors that could cause future performance to be different than anticipated, reference is made to Factors Affecting "Forward-Looking Statements" and Part 1A – Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Oppenheimer Holdings Inc. | ||||||
Consolidated Income Statements (Unaudited) | ||||||
('000s, except number of shares and per share amounts) | ||||||
For the Three Months Ended March 31, | ||||||
2022 | 2021 | % Change | ||||
REVENUE | ||||||
Commissions | $ 98,321 | $ 113,471 | (13.4) | |||
Advisory fees | 115,766 | 104,496 | 10.8 | |||
Investment banking | 38,470 | 124,501 | (69.1) | |||
Bank deposit sweep income | 4,354 | 4,008 | 8.6 | |||
Interest | 9,517 | 8,666 | 9.8 | |||
Principal transactions, net | 2,364 | 10,865 | (78.2) | |||
Other | (2,764) | 7,275 | * | |||
Total revenue | 266,028 | 373,282 | (28.7) | |||
EXPENSES | ||||||
Compensation and related expenses | 186,031 | 255,601 | (27.2) | |||
Communications and technology | 21,585 | 20,607 | 4.7 | |||
Occupancy and equipment costs | 14,690 | 15,182 | (3.2) | |||
Clearing and exchange fees | 5,976 | 6,275 | (4.8) | |||
Interest | 2,512 | 2,647 | (5.1) | |||
Other | 21,021 | 20,843 | 0.9 | |||
Total expenses | 251,815 | 321,155 | (21.6) | |||
Pre-tax Income | 14,213 | 52,127 | (72.7) | |||
Income taxes | 4,435 | 13,469 | (67.1) | |||
Net Income | $ 9,778 | $ 38,658 | (74.7) | |||
Less: Net income attributable to non-controlling interest, net of tax | 486 | — | * | |||
Net income attributable to Oppenheimer Holdings Inc. | $ 9,292 | $ 38,658 | (76.0) | |||
Earnings per share attributable to Oppenheimer Holdings Inc. | ||||||
Basic | $ 0.75 | $ 3.07 | (75.6) | |||
Diluted | $ 0.69 | $ 2.91 | (76.3) | |||
Weighted average number of common shares outstanding | ||||||
Basic | 12,467,632 | 12,579,130 | (0.9) | |||
Diluted | 13,499,334 | 13,299,243 | 1.5 | |||
* Percentage not meaningful |
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SOURCE Oppenheimer Holdings Inc.
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