Oppenheimer Holdings Inc. Reports Second Quarter 2022 Earnings
Oppenheimer Holdings Inc. reported a net loss of $3.9 million or $(0.32) EPS for Q2 2022, down from a profit of $31.2 million or $2.46 EPS in Q2 2021. Revenue decreased 30.3% to $237.2 million from $340.3 million year-over-year, primarily due to a significant downturn in equity capital market activity. Wealth Management performed relatively well, but overall metrics were affected by high inflation and rising interest rates. The firm repurchased 885,230 shares during the quarter, maintaining strong capital levels despite the loss.
- Wealth Management showed resilience with $144.5 million in revenue despite a 13.4% decrease year-over-year.
- Book value per share reached a record $68.57, increasing due to share repurchases.
- The firm repurchased 885,230 shares at an average price of $34.13, totaling $30.2 million.
- Net loss of $3.9 million compared to a profit of $31.2 million in Q2 2021.
- Revenue decline of 30.3% year-over-year, significantly due to reduced capital market activity.
- Capital Markets revenue dropped by 52%, heavily impacting overall earnings.
NEW YORK, July 29, 2022 /PRNewswire/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported a net loss of
Albert G. Lowenthal, Chairman and CEO commented, "Macroeconomic factors drove lower results for the second quarter. While the economy continued to grow and unemployment remained at a record low level, waning consumer confidence, driven by high inflation and rising interest rates, created significantly higher volatility and markedly lower valuations in both equity and fixed income markets. The results for the quarter reflect the significant downturn in equity capital market issuance, which had an out-sized impact on the Company, compared to the prior year. By quarter's end, interest rates reached the highest levels since 2018 and higher mortgage rates were already impacting construction and home sales. While the Company's pipeline of potential future banking business remains strong, the closing of the window for IPOs and secondary offerings, and the closing down of the SPAC market, dramatically reduced capital markets revenues for the second quarter of 2022 compared to the second quarter of 2021. Higher interest rates and the beginning of quantitative tightening reduced bond issuance across markets, but particularly impacted the high yield and emerging markets as spreads off U.S. Treasuries widened dramatically during the quarter. These factors reduced revenues from capital markets (down
Wealth Management continued to deliver solid results driven by continued high levels of assets under management but below recent all-time highs. The continued performance of our Wealth Management business and the increase in fees from our FDIC program offset some of the impact of lower revenue from capital markets as well as the increase in operating costs reflecting the inflationary environment, with the Firm showing a loss for the period. Declines in the Company's share price and equity prices in general had an outsized impact on the costs associated with deferred compensation plans and share awards during the period.
Despite the unfavorable environment, the Company still maintains the strongest balance sheet and the highest capital level in its history. The Company took advantage of the lower level of its share price to purchase 885,230 shares (
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 2Q-22 | 2Q-21 |
Revenue | $ 237,222 | |
Compensation Expense | $ 177,979 | |
Non-compensation Expense | $ 65,412 | $ 65,985 |
Pre-Tax Income (Loss) | $ (6,169) | $ 43,168 |
Income Taxes Provision (Benefit) | $ (1,449) | $ 12,009 |
Net Income (Loss) (1) | $ (3,874) | $ 31,159 |
Earnings (Loss) Per Share (Basic) (1) | $ (0.32) | $ 2.46 |
Earnings (Loss) Per Share (Diluted) (1) | $ (0.32) | $ 2.28 |
Book Value Per Share | $ 68.57 | $ 59.29 |
Tangible Book Value Per Share (2) | $ 53.62 | $ 45.90 |
Private Client | ||
Revenue | $ 144,471 | |
Pre-Tax Income | $ 38,800 | $ 21,673 |
Assets Under Administration (billions) | $ 104.0 | $ 117.3 |
Asset Management | ||
Revenue | $ 24,315 | $ 25,544 |
Pre-Tax Income | $ 8,120 | $ 8,638 |
Assets Under Management (billions) | $ 37.1 | $ 43.7 |
Capital Markets | ||
Revenue | $ 71,274 | |
Pre-Tax Income (Loss) | $ 39,373 | |
(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 reduced levels at June 30, 2022 and also down from the first quarter of 2022 as well as the same period last year
- Reduced second quarter 2022 gross revenue, net income, and earnings per share reflected a significant decline in industry-wide activity, and lower net revenue in underwriting, trading and M&A fees
- The Company repurchased 885,230 shares of Class A non-voting common stock during the second quarter of 2022 under its previously announced buy-back plan or
7% of shares outstanding at year-end 2021, bringing the total shares purchased during the first 6 months of 2022 to 1,262,543 - Book value and tangible book value per share reached record levels at June 30, 2022 largely as a result of share buybacks
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
2Q-22 | 2Q-21 | |
Revenue | ||
Commissions | ||
Advisory Fees | ||
Bank Deposit Sweep Income | $ 3,712 | |
Interest | $ 7,235 | |
Other | ||
Total Expenses | ||
Compensation | ||
Non-compensation | $ 27,626 | |
Pre-Tax Income | ||
Compensation Ratio | 53.5 % | 70.5 % |
Non-compensation Ratio | 19.6 % | 16.6 % |
Pre-Tax Margin | 26.9 % | 13.0 % |
Assets Under Administration (billions) | ||
Cash Sweep Balances (billions) | ||
Revenue:
- Retail commissions decreased
14.6% from a year ago due to a decrease in client activity compared to the significantly elevated levels from a year ago - Advisory fees decreased
2.9% due to lower assets under management - Bank deposit sweep income increased
$11.1 million or300% from a year ago due to higher balances and higher short-term interest rates - Interest revenue increased
43.3% 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 same period last year
Total Expenses:
- Compensation expenses decreased
34.2% from a year ago primarily due to decreased production, and decreased share-based and deferred compensation costs - Non-compensation expenses increased
2.5% from a year ago primarily due to higher interest, travel and legal expenses, offset by a decrease in allowance for credit losses
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
2Q-22 | 2Q-21 | |
Revenue | $ 24,315 | $ 25,544 |
Advisory Fees | $ 24,311 | $ 25,541 |
Other | $ 4 | $ 3 |
Total Expenses | $ 16,195 | $ 16,906 |
Compensation | $ 6,697 | $ 6,261 |
Non-compensation | $ 9,498 | $ 10,645 |
Pre-Tax Income | $ 8,120 | $ 8,638 |
Compensation Ratio | 27.5 % | 24.5 % |
Non-compensation Ratio | 39.1 % | 41.7 % |
Pre-Tax Margin | 33.4 % | 33.8 % |
AUM (billions) | $ 37.1 | $ 43.7 |
Revenue:
- Advisory fee revenue decreased
4.8% due to lower net value of assets under management during the second quarter of 2022 compared with the second quarter of 2021
Assets under Management (AUM):
- AUM was at reduced levels of
$37.1 billion at June 30, 2022, which is the basis for advisory fee billings for July 2022 - The decrease in AUM was comprised of lower asset values of
$6.0 billion on existing client holdings and a net distribution of assets of$0.6 billion
Total Expenses:
- Compensation expenses were up
7.0% from a year ago primarily due to increases in fixed compensation - Non-compensation expenses were down
10.8% when compared to the prior year period due to lower portfolio manager expense
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
2Q-22 | 2Q-21 | |
Revenue | ||
Investment Banking | ||
Advisory Fees | $ 8,284 | |
Equities Underwriting | $ 2,751 | |
Fixed Income Underwriting | $ 3,259 | $ 8,835 |
Other | $ 405 | $ 324 |
Sales and Trading | ||
Equities | ||
Fixed Income | ||
Other | $ 597 | $ 270 |
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Income (Loss) | ||
Compensation Ratio | 94.2 % | 57.9 % |
Non-compensation Ratio | 30.9 % | 15.5 % |
Pre-Tax Margin | (25.2) % | 26.6 % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities decreased
83.6% 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
93.0% compared with a year ago due to a significant decrease in equity underwriting activity in the healthcare and technology sectors, particularly for SPAC issuances to access the public markets - Fixed income underwriting fees were down
63.1% compared with a year ago primarily driven by a decrease in public finance issuances and emerging market debt during second quarter of 2022
Sales and Trading
- Equities sales and trading revenue increased
22.9% compared with a year ago due to a marked increase in volatility in the equities market compared to the levels in the prior year period - Fixed Income sales and trading revenues increased by
2.4% compared with a year ago
Total Expenses:
- Compensation expenses decreased
21.6% compared with a year ago primarily due to decreased incentive compensation - Non-compensation expenses were
3.8% lower than a year ago due to a decrease in underwriting expenses, partially offset by an increase in business travel and entertainment expense
Other Matters
(In millions, except number of shares and per share amounts) | ||
2Q-22 | 2Q-21 | |
Capital | ||
Shareholders' Equity (1) | $ 779.7 | $ 752.5 |
Regulatory Net Capital (2) | $ 435.6 | $ 344.7 |
Regulatory Excess Net Capital (2) | $ 404.0 | $ 319.1 |
Common Stock Repurchases | ||
Repurchases | $ 30.2 | $ — |
Number of Shares | 885,230 | — |
Average Price Per Share | $ 34.13 | $ — |
Period End Shares | 11,370,609 | 12,692,311 |
Effective Tax Rate | 23.5 % | 27.8 % |
(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 August 26, 2022 to holders of Class A non-voting and Class B voting common stock of record on August 12, 2022 - Compensation expense as a percentage of revenue was higher at
75.0% during the current period versus67.9% 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
23.5% compared with27.8% for the prior year period and reflects the Company's estimate of the annual effective tax rate.
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 91 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 and Factors Affecting "Forward-Looking Statements" in Part I, Item 2 in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.
Oppenheimer Holdings Inc. | ||||||||||||
Consolidated Income Statements (Unaudited) | ||||||||||||
('000s, except number of shares and per share amounts) | ||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 94,378 | $ 96,171 | (1.9) | $ 192,699 | $ 209,642 | (8.1) | ||||||
Advisory fees | 107,405 | 111,152 | (3.4) | 223,171 | 215,648 | 3.5 | ||||||
Investment banking | 16,653 | 104,742 | (84.1) | 55,123 | 229,243 | (76.0) | ||||||
Bank deposit sweep income | 14,845 | 3,712 | 299.9 | 19,199 | 7,720 | 148.7 | ||||||
Interest | 11,789 | 8,909 | 32.3 | 21,306 | 17,575 | 21.2 | ||||||
Principal transactions, net | 1,258 | 6,305 | (80.0) | 3,622 | 17,170 | (78.9) | ||||||
Other | (9,106) | 9,302 | * | (11,870) | 16,577 | * | ||||||
Total revenue | 237,222 | 340,293 | (30.3) | 503,250 | 713,575 | (29.5) | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 177,979 | 231,140 | (23.0) | 364,010 | 486,741 | (25.2) | ||||||
Communications and technology | 20,896 | 19,172 | 9.0 | 42,481 | 39,779 | 6.8 | ||||||
Occupancy and equipment costs | 14,554 | 15,225 | (4.4) | 29,244 | 30,407 | (3.8) | ||||||
Clearing and exchange fees | 6,242 | 5,155 | 21.1 | 12,218 | 11,430 | 6.9 | ||||||
Interest | 3,628 | 2,448 | 48.2 | 6,140 | 5,095 | 20.5 | ||||||
Other | 20,092 | 23,985 | (16.2) | 41,113 | 44,828 | (8.3) | ||||||
Total expenses | 243,391 | 297,125 | (18.1) | 495,206 | 618,280 | (19.9) | ||||||
Pre-tax Income (Loss) | (6,169) | 43,168 | * | 8,044 | 95,295 | (91.6) | ||||||
Income taxes provision (benefit) | (1,449) | 12,009 | * | 2,986 | 25,478 | (88.3) | ||||||
Net Income (Loss) | $ (4,720) | $ 31,159 | (115.1) | $ 5,058 | $ 69,817 | (92.8) | ||||||
Less: Net income (loss) attributable to non-controlling interest, net of tax | (846) | — | * | (360) | — | * | ||||||
Net income (loss) attributable to Oppenheimer Holdings Inc. | $ (3,874) | $ 31,159 | * | $ 5,418 | $ 69,817 | (92.2) | ||||||
Earnings (Loss) per share attributable to Oppenheimer Holdings Inc. | ||||||||||||
Basic | $ (0.32) | $ 2.46 | * | $ 0.44 | $ 5.53 | (92.0) | ||||||
Diluted | $ (0.32) | $ 2.28 | * | $ 0.41 | $ 5.17 | (92.1) | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 11,980,115 | 12,689,191 | (5.6) | 12,222,527 | 12,634,464 | (3.3) | ||||||
Diluted | 11,980,115 | 13,681,146 | (12.4) | 13,141,538 | 13,495,589 | (2.6) | ||||||
Period end number of common shares outstanding | 11,370,609 | 12,692,311 | (10.4) | 11,370,609 | 12,692,311 | (10.4) | ||||||
* Percentage not meaningful
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SOURCE Oppenheimer Holdings Inc.
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