Oppenheimer Holdings Inc. Reports Third Quarter 2021 Earnings
Oppenheimer Holdings reported a 67.8% increase in net income for Q3 2021, totaling $26.3 million or $2.07 EPS, up from $15.6 million or $1.25 EPS in Q3 2020. Revenue rose 14.1% to $315.3 million, driven by strong investment banking demand. The Capital Markets segment saw a 68.7% rise in advisory fees. Notably, assets under administration hit a record $117.8 billion. Despite concerns over inflation and interest rates, the firm's equity reached a record high of $775 million.
- Net income up 67.8% to $26.3 million.
- Revenue increased 14.1% to $315.3 million.
- Strong demand for investment banking services drove revenue.
- Record assets under administration at $117.8 billion.
- Advisory fees increased 68.7% in Capital Markets.
- Shareholders' Equity reached a record high of $775 million.
- Concerns over inflation and higher oil prices affecting market sentiment.
- Decreased underwriting fees in equity and fixed income.
NEW YORK, Oct. 29, 2021 /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 impact of our investment in the Capital Markets franchise over the past several years. Robust demand for investment banking services continues to propel revenue and earnings in the Capital Markets business. These results, coupled with the continued steady performance of our Wealth Management business, led to the Firm's best first nine months in its history. Wealth management continued to deliver solid results driven by near record AUM and strong net investor flows, despite being negatively impacted by lower interest rates, while a significant increase in M&A advisory and placement fees in Capital Markets topped off a very successful quarter. Concerns around inflation, higher oil prices, the Federal Reserve's tapering of bond buying, and congressional uncertainty 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 | 3Q-21 | 3Q-20 | ||||
Revenue | $ | 315,342 | $ | 276,259 | ||
Compensation Expense | $ | 206,312 | $ | 189,654 | ||
Non-compensation Expense | $ | 71,636 | $ | 64,887 | ||
Pre-Tax Income | $ | 37,394 | $ | 21,718 | ||
Income Taxes | $ | 11,144 | $ | 6,079 | ||
Net Income | $ | 26,250 | $ | 15,639 | ||
Earnings Per Share (Basic) | $ | 2.07 | $ | 1.25 | ||
Earnings Per Share (Diluted) | $ | 1.92 | $ | 1.19 | ||
Book Value Per Share | $ | 61.43 | $ | 49.20 | ||
Tangible Book Value Per Share (1) | $ | 47.95 | $ | 35.61 | ||
Private Client | ||||||
Revenue | $ | 160,864 | $ | 141,097 | ||
Pre-Tax Income | $ | 37,426 | $ | 25,764 | ||
Assets Under Administration (billions) | $ | 117.8 | $ | 94.3 | ||
Asset Management | ||||||
Revenue | $ | 26,894 | $ | 20,632 | ||
Pre-Tax Income | $ | 9,412 | $ | 6,426 | ||
Assets Under Management (billions) | $ | 43.6 | $ | 34.5 | ||
Capital Markets | ||||||
Revenue | $ | 128,585 | $ | 114,289 | ||
Pre-Tax Income | $ | 17,888 | $ | 19,369 | ||
(1) Represents book value less goodwill and intangible assets divided by number of shares outstanding. | ||||||
Highlights
- Record revenue, net income, and earnings per share for the first nine months of the year
- Record third quarter gross revenue was driven by investment banking revenue and advisory fees from near record high assets under management
- Record revenue in Capital Markets segment for the third quarter was driven by strong M&A advisory and placement fees in investment banking
- Client assets under administration at record level while client assets under management near record level at September 30, 2021
- Shareholders' Equity reached a record high of
$775.0 million at September 30, 2021 - Book value and tangible book value per share reached record levels at September 30, 2021
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | |||||
3Q-21 | 3Q-20 | ||||
Revenue | $ | 160,864 | $ | 141,097 | |
Commissions | $ | 51,348 | $ | 48,839 | |
Advisory Fees | $ | 89,849 | $ | 67,949 | |
Bank Deposit Sweep Income | $ | 3,909 | $ | 4,618 | |
Interest | $ | 7,624 | $ | 5,940 | |
Other | $ | 8,134 | $ | 13,751 | |
Total Expenses | $ | 123,438 | $ | 115,333 | |
Compensation | $ | 97,522 | $ | 89,562 | |
Non-compensation | $ | 25,916 | $ | 25,771 | |
Financial Advisers (#) | 1,003 | 1,010 | |||
Assets Under Administration (billions) | $ | 117.8 | $ | 94.3 | |
Cash Sweep Balances (billions) | $ | 7.7 | $ | 6.6 | |
Revenue:
- Retail commissions increased
5.1% from a year ago amidst continued elevated client trading activity - Advisory fees increased
32.2% due to higher assets under management during the billing period for the third quarter of 2021 compared with that of the third quarter of 2020 - Bank deposit sweep income decreased
$0.7 million or15.4% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances which are at record levels - Interest revenue increased
28.4% from a year ago due to higher average margin balances partially offset by lower short-term interest rates - Other revenue decreased
40.8% primarily due to decreases in the cash surrender value of Company-owned life insurance policies during the current quarter compared to a year ago
Total Expenses:
- Compensation expenses increased
8.9% from a year ago primarily due to increased production-related compensation costs partially offset by lower share-based and deferred compensation costs - Non-compensation expenses increased
0.6% from a year ago.
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | |||||
3Q-21 | 3Q-20 | ||||
Revenue | $ | 26,894 | $ | 20,632 | |
Advisory Fees | $ | 26,890 | $ | 20,632 | |
Other | $ | 4 | $ | — | |
Total Expenses | $ | 17,482 | $ | 14,206 | |
Compensation | $ | 6,120 | $ | 5,997 | |
Non-compensation | $ | 11,362 | $ | 8,209 | |
AUM (billions) | $ | 43.6 | $ | 34.5 | |
Revenue:
- Advisory fee revenue increased
30.3% due to higher assets under management during the billing period for the third quarter of 2021 compared with that of the third quarter of 2020
Assets under Management (AUM):
- AUM was
$43.6 billion at September 30, 2021, which is the basis for advisory fee billings for October 2021 - The increase in AUM was comprised of higher asset values of
$7.7 billion on existing client holdings and a net contribution of assets of$1.4 billion
Total Expenses:
- Compensation expenses were up
2.1% from a year ago which was primarily due to increases in incentive compensation - Non-compensation expenses were up
38.4% when compared to the prior period due to higher portfolio management costs in line with the increase in AUM
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | |||||
3Q-21 | 3Q-20 | ||||
Revenue | $ | 128,585 | $ | 114,289 | |
Investment Banking | $ | 82,012 | $ | 62,890 | |
Advisory Fees | $ | 51,815 | $ | 30,706 | |
Equities Underwriting | $ | 26,348 | $ | 27,969 | |
Fixed Income Underwriting | $ | 3,140 | $ | 3,608 | |
Other | $ | 709 | $ | 607 | |
Sales and Trading | $ | 46,262 | $ | 50,679 | |
Equities | $ | 30,861 | $ | 30,497 | |
Fixed Income | $ | 15,401 | $ | 20,182 | |
Other | $ | 311 | $ | 720 | |
Total Expenses | $ | 110,697 | $ | 94,920 | |
Compensation | $ | 81,690 | $ | 71,328 | |
Non-compensation | $ | 29,007 | $ | 23,592 | |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
68.7% compared with a year ago driven by higher M&A advisory and placement fees - Equity underwriting fees decreased
5.8% compared with a year ago as underwriting activity tapered off in August and September 2021 - Fixed income underwriting fees decreased
13.0% compared with a year ago primarily driven by lower fees from public finance transactions during the current period
Sales and Trading
- Equities sales and trading revenue increased
1.2% compared with a year ago due to increased trading activity by our institutional clients - Fixed Income sales and trading decreased
23.7% compared with a year ago primarily driven by lower income from municipal commissions and trading during the current period
Total Expenses:
- Compensation expenses increased
14.5% compared with a year ago primarily due to increased salary and incentive compensation partially offset by lower production-related compensation - Non-compensation expenses were
23.0% higher than a year ago due to increased underwriting expenses related to high transaction volumes and higher costs associated with business travel and entertainment and conferences
Other Matters
(In millions, except number of shares and per share amounts) | ||||||
3Q-21 | 3Q-20 | |||||
Capital | ||||||
Senior Secured Notes | $ | 124.0 | $ | 123.9 | ||
Shareholders' Equity | $ | 775.0 | $ | 615.2 | ||
Regulatory Net Capital (1) | $ | 372.6 | $ | 268.7 | ||
Regulatory Excess Net Capital (1) | $ | 345.6 | $ | 242.9 | ||
Common Stock Repurchases | ||||||
Repurchases | $ | 4.7 | $ | 2.0 | ||
Number of Shares | 108,494 | 84,290 | ||||
Average Price | $ | 43.46 | $ | 23.28 | ||
Period End Shares | 12,615,399 | 12,504,092 | ||||
Effective Tax Rate | 29.8 | % | 28.0 | % | ||
(1) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||||||
- Shareholders' Equity reached a record high of
$775.0 million on September 30, 2021 - The Board of Directors announced a quarterly dividend of
$0.15 per share effective for the third quarter of 2021 payable on November 26, 2021 to holders of Class A non-voting and Class B voting common stock of record on November 12, 2021 - The Company repurchased 108,494 shares of Class A non-voting common stock during the period under the Company's stock repurchase program
- Moody's upgraded the Company's Corporate Family rating and rating of the Senior Secured Notes from "B1" with a stable outlook to "Ba3" with a stable outlook
- Level 3 assets, comprised of auction rate securities, were
$31.8 million as of September 30, 2021 compared with$30.7 million as of September 30, 2020 - Compensation expense as a percentage of revenue was lower at
65.4% during the current quarter versus68.7% last year - The effective tax rate for the current quarter was
29.8% compared with28.0% for the prior year period due to favorable permanent items in the third quarter of 2020
Coronavirus ("COVID-19") Pandemic
The Company continues to monitor the effects of the pandemic both on a national level as well as regionally and locally and is responding accordingly. In addition, we continue to provide frequent communications to clients, employees, and regulators. We have adopted enhanced cleaning practices and other health protocols in our offices and taken measures to significantly restrict non-essential business travel and have practices in place to mandate that employees who may have been exposed to COVID-19, or show any relevant symptoms, self-quarantine. In early March 2020, the Company executed on its Business Continuity Plan whereby the vast majority of our employees began to work remotely with only "essential" employees reporting to our offices. We accomplished this by significantly expanding the use of technology infrastructure that facilitates remote operations. Our ability to avoid significant business disruptions was reliant on the continued ability to have the vast majority of employees work remotely. Due to the widespread distribution and inoculation of the U.S. population with vaccines that have proven to be safe and effective, the Company implemented a re-entry plan for our fully vaccinated employees at our corporate headquarters in New York City on October 4, 2021. For employees outside of our corporate headquarters, the Company will be implementing a re-entry plan for other locations in the U.S. that will be in accordance with applicable state and local regulations. Vaccinated employees have begun re-engaging with clients and traveling for business purposes.
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 92 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 including the projected impact of COVID-19 on the Company's business, financial performance, and operating results. The following factors, among others, could cause actual results to vary from the forward-looking statements: the severity and duration of COVID-19; COVID-19's impact on the U.S. and global economies; and Federal, state and local governmental responses to COVID-19. For a discussion of other 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, 2020.
Oppenheimer Holdings Inc. | ||||||||||||||||||||
Consolidated Income Statements (Unaudited) | ||||||||||||||||||||
('000s, except number of shares and per share amounts) | ||||||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||
REVENUE | ||||||||||||||||||||
Commissions | $ | 90,889 | $ | 92,241 | (1.5) | $ | 300,531 | $ | 297,126 | 1.1 | ||||||||||
Advisory fees | 116,751 | 88,595 | 31.8 | 332,399 | 250,740 | 32.6 | ||||||||||||||
Investment banking | 86,901 | 66,245 | 31.2 | 316,144 | 138,159 | 128.8 | ||||||||||||||
Bank deposit sweep income | 3,909 | 4,619 | (15.4) | 11,629 | 30,567 | (62.0) | ||||||||||||||
Interest | 9,340 | 7,540 | 23.9 | 26,915 | 24,650 | 9.2 | ||||||||||||||
Principal transactions, net | 4,494 | 7,703 | (41.7) | 21,664 | 18,899 | 14.6 | ||||||||||||||
Other | 3,058 | 9,316 | (67.2) | 19,635 | 15,618 | 25.7 | ||||||||||||||
Total revenue | 315,342 | 276,259 | 14.1 | 1,028,917 | 775,759 | 32.6 | ||||||||||||||
EXPENSES | ||||||||||||||||||||
Compensation and related expenses | 206,312 | 189,654 | 8.8 | 693,053 | 526,924 | 31.5 | ||||||||||||||
Communications and technology | 19,718 | 19,474 | 1.3 | 59,497 | 60,689 | (2.0) | ||||||||||||||
Occupancy and equipment costs | 14,964 | 15,199 | (1.5) | 45,371 | 46,611 | (2.7) | ||||||||||||||
Clearing and exchange fees | 5,237 | 6,211 | (15.7) | 16,667 | 18,061 | (7.7) | ||||||||||||||
Interest | 2,468 | 3,461 | (28.7) | 7,563 | 12,901 | (41.4) | ||||||||||||||
Other | 29,249 | 20,542 | 42.4 | 74,077 | 55,368 | 33.8 | ||||||||||||||
Total expenses | 277,948 | 254,541 | 9.2 | 896,228 | 720,554 | 24.4 | ||||||||||||||
Pre-Tax Income | 37,394 | 21,718 | 72.2 | 132,689 | 55,205 | 140.4 | ||||||||||||||
Income taxes | 11,144 | 6,079 | 83.3 | 36,622 | 14,099 | 159.7 | ||||||||||||||
Net income | $ | 26,250 | $ | 15,639 | 67.8 | $ | 96,067 | $ | 41,106 | 133.7 | ||||||||||
Earnings per share | ||||||||||||||||||||
Basic | $ | 2.07 | $ | 1.25 | 65.6 | $ | 7.59 | $ | 3.24 | 134.3 | ||||||||||
Diluted | $ | 1.92 | $ | 1.19 | 61.3 | $ | 7.10 | $ | 3.12 | 127.6 | ||||||||||
Weighted average number of common shares outstanding | ||||||||||||||||||||
Basic | 12,690,386 | 12,553,802 | 1.1 | 12,653,310 | 12,696,143 | (0.3) | ||||||||||||||
Diluted | 13,664,214 | 13,146,586 | 3.9 | 13,539,373 | 13,194,434 | 2.6 | ||||||||||||||
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SOURCE Oppenheimer Holdings Inc.
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