Oppenheimer Holdings Inc. Reports Third Quarter 2022 Earnings
Oppenheimer Holdings reported third-quarter 2022 net income of $4.5 million ($0.40 per share), a significant decline from $26.3 million ($2.07 per share) in Q3 2021. Revenue fell by 6.7% to $294.1 million, driven by challenging market conditions and an adverse arbitration decision. Key earnings segments showed mixed results: Private Client revenue increased 11% to $178.6 million, while Capital Markets dropped 29.3% to $90.9 million. Despite these challenges, the firm maintained a robust balance sheet, with strong regulatory capital and increased book value per share to $70.23.
- Private Client revenue increased by 11% to $178.6 million.
- Book value per share reached a record $70.23.
- The company repurchased 413,052 shares under its buy-back plan.
- Net income decreased from $26.3 million to $4.5 million.
- Total revenue fell 6.7% to $294.1 million.
- Capital Markets revenue decreased 29.3% compared to the prior year.
- Investment banking advisory fees dropped 43.5% due to decreased deal volumes.
NEW YORK, Oct. 28, 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 were significantly impacted by an adverse arbitration decision, but we were able to deliver profitable results reflecting the diversity and general health of our business. Volatile market conditions and emerging economic headwinds reduced valuations in both equity and fixed income markets. The high rate of inflation resulted in the Federal Reserve raising interest rates at the fastest speed in over 40 years with multiple 75 basis point increases during the quarter. Our Wealth Management business saw a benefit from the higher interest rate environment, as income from our FDIC-insured bank deposit program and interest income on margin loans were markedly greater than the prior year although this was offset to some extent by lower activity levels and lower valuations in client portfolios which drive fee income.
The macroeconomic environment drove all major equity indices into bear market territory during the third quarter. The declining valuations negatively impacted our advisory fee revenues. The volatile markets also led to a marked slowdown in equity IPOs and secondary offerings and a significant decline in capital markets income. Investment banking advisory fees, while lower than the record Q3 results recorded in 2021, picked up considerably from the second quarter.
The Company maintains a strong balance sheet with near record regulatory capital despite the volatile market environment and the impact of an adverse arbitration decision. The Company took advantage of the lower level of its share price to purchase 413,052 shares (
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 3Q-22 | 3Q-21 |
Revenue | ||
Compensation Expense | ||
Non-compensation Expense | $ 71,636 | |
Pre-Tax Income | $ 7,238 | $ 37,394 |
Income Taxes Provision | $ 2,573 | $ 11,144 |
Net Income (1) | $ 4,520 | $ 26,250 |
Earnings Per Share (Basic) (1) | $ 0.40 | $ 2.07 |
Earnings Per Share (Diluted) (1) | $ 0.37 | $ 1.92 |
Book Value Per Share | $ 70.23 | $ 61.43 |
Tangible Book Value Per Share (2) | $ 54.74 | $ 47.95 |
Private Client | ||
Revenue | ||
Pre-Tax Income | $ 29,973 | $ 37,426 |
Assets Under Administration (billions) | $ 100.3 | $ 117.8 |
Asset Management | ||
Revenue | $ 24,870 | $ 26,894 |
Pre-Tax Income | $ 8,322 | $ 9,412 |
Assets Under Management (billions) | $ 35.3 | $ 43.6 |
Capital Markets | ||
Revenue | $ 90,947 | |
Pre-Tax Income | $ 2,401 | $ 17,888 |
(1) Attributable to Oppenheimer Holdings Inc. | ||
(2) Represents book value less goodwill and intangible assets divided by number of shares outstanding. | ||
Highlights
- Gross revenue, net income, and earnings per share for the third quarter of 2022 reflected the positive impact of the rising rate environment on our interest-sensitive revenues offset by lower activity levels and valuations in client portfolios and fewer underwriting and M&A transactions
- Client assets under administration and under management were both at reduced levels at September 30, 2022, down from the second quarter of 2022 as well as the same period last year
- Increased revenues in the Private Client segment are largely attributed to bank deposit sweep income, which exceeded the related revenue recorded during all of 2021 due to higher short-term interest rates
- Non-compensation expenses increased from the prior year quarter, reflecting the impact of an adverse arbitration decision in September 2022, which has since been appealed
- The Company repurchased 413,052 shares of Class A non-voting common stock during the third quarter of 2022 under its previously announced buy-back plan or
3% of shares outstanding at year-end 2021, bringing the total shares purchased under the plan during the first 9 months of 2022 to 1,675,595 - Book value and tangible book value per share reached record levels at September 30, 2022 largely as a result of share buy-backs
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
3Q-22 | 3Q-21 | |
Revenue | ||
Commissions | $ 46,893 | $ 51,348 |
Advisory Fees | $ 78,055 | $ 89,849 |
Bank Deposit Sweep Income | $ 35,769 | $ 3,909 |
Interest | $ 14,471 | $ 7,624 |
Other | $ 3,426 | $ 8,134 |
Total Expenses | ||
Compensation | $ 87,555 | $ 97,522 |
Non-compensation | $ 61,086 | $ 25,916 |
Pre-Tax Income | $ 29,973 | |
Compensation Ratio | 49.0 % | 60.6 % |
Non-compensation Ratio | 34.2 % | 16.1 % |
Pre-Tax Margin | 16.8 % | 23.3 % |
Assets Under Administration (billions) | $ 100.3 | $ 117.8 |
Cash Sweep Balances (billions) | $ 6.5 | $ 7.7 |
Revenue:
- Retail commissions decreased
8.7% from a year ago due to a decrease in client activity compared to the significantly elevated levels from a year ago - Advisory fees decreased
13.1% from a year ago primarily due to the impact of lower equity and fixed income valuations on assets under administration - Bank deposit sweep income increased
$31.9 million (815% ) from a year ago due to higher short-term interest rates - Interest revenue increased
89.8% from a year ago due to higher short-term interest rates and higher average margin balances - Other revenue decreased from a year ago primarily due to decreases in the cash surrender value of Company-owned life insurance policies
Total Expenses:
- Compensation expenses decreased
10.2% from a year ago primarily due to decreased production, and decreased share-based and deferred compensation costs - Non-compensation expenses increased
$35.2 million from a year ago primarily due to the impact of an adverse arbitration decision
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
3Q-22 | 3Q-21 | |
Revenue | $ 24,870 | $ 26,894 |
Advisory Fees | $ 24,865 | $ 26,890 |
Other | $ 5 | $ 4 |
Total Expenses | $ 16,548 | $ 17,482 |
Compensation | $ 6,702 | $ 6,120 |
Non-compensation | $ 9,846 | $ 11,362 |
Pre-Tax Income | $ 8,322 | $ 9,412 |
Compensation Ratio | 26.9 % | 22.8 % |
Non-compensation Ratio | 39.6 % | 42.2 % |
Pre-Tax Margin | 33.5 % | 35.0 % |
AUM (billions) | $ 35.3 | $ 43.6 |
Revenue:
- Advisory fee revenue decreased
7.5% from a year ago due to the lower net value of assets under management, partially offset by incentive fees earned during the third quarter of 2022
Assets under Management (AUM):
- AUM were at reduced levels of
$35.3 billion at September 30, 2022, which is the basis for advisory fee billings for October 2022 - The decrease in AUM was comprised of lower asset values of
$7.6 billion on existing client holdings and a net distribution of assets of$0.7 billion
Total Expenses:
- Compensation expenses were up
9.5% from a year ago primarily due to increases in fixed and discretionary compensation - Non-compensation expenses were down
13.3% when compared to the prior year period due to lower portfolio manager expenses in line with the decrease in AUM
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
3Q-22 | 3Q-21 | |
Revenue | ||
Investment Banking | $ 82,012 | |
Advisory Fees | $ 51,815 | |
Equities Underwriting | $ 5,061 | $ 26,348 |
Fixed Income Underwriting | $ 2,111 | $ 3,140 |
Other | $ 509 | $ 709 |
Sales and Trading | $ 46,262 | |
Equities | $ 30,861 | |
Fixed Income | $ 15,401 | |
Other | $ 903 | $ 311 |
Total Expenses | ||
Compensation | $ 81,690 | |
Non-compensation | $ 29,007 | |
Pre-Tax Income | $ 2,401 | |
Compensation Ratio | 66.4 % | 63.5 % |
Non-compensation Ratio | 30.9 % | 22.6 % |
Pre-Tax Margin | 2.6 % | 13.9 % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities decreased
43.5% compared with a year ago due to an industry-wide decrease in deal volumes - Equity underwriting fees decreased
80.8% compared with a year ago due to a significant decrease in equity IPOs and secondary offerings, including SPAC issuances - Fixed income underwriting fees were down
32.8% compared with a year ago primarily driven by a decrease in issuances of public finance and emerging market debt during the third quarter of 2022
Sales and Trading
- Equities sales and trading revenue increased
13.0% compared with a year ago due to a marked increase in volatility resulting in increased volumes in the equities market compared to the levels in the prior year period - Fixed income sales and trading revenue increased by
18.3% compared with a year ago primarily due to an increase in trading income attributable to higher trading volumes
Total Expenses:
- Compensation expenses decreased
26.0% compared with a year ago primarily due to decreased incentive compensation - Non-compensation expenses were
3.0% lower than a year ago
Other Matters
(In millions, except number of shares and per share amounts) | ||
3Q-22 | 3Q-21 | |
Capital | ||
Stockholders' Equity (1) | $ 770.7 | $ 775.0 |
Regulatory Net Capital (2) | $ 425.8 | $ 372.6 |
Regulatory Excess Net Capital (2) | $ 399.4 | $ 345.6 |
Common Stock Repurchases | ||
Repurchases | $ 14.0 | $ 4.7 |
Number of Shares | 413,052 | 108,494 |
Average Price Per Share | $ 33.86 | $ 43.46 |
Period End Shares | 10,974,655 | 12,615,399 |
Effective Tax Rate | 35.5 % | 29.8 % |
(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 November 25, 2022 to holders of Class A non-voting and Class B voting common stock of record on November 11, 2022 - Compensation expense as a percentage of revenue was lower at
60.9% during the current period versus65.4% during the same period last year primarily due to lower incentive compensation - The effective tax rate for the current period was
35.5% compared with29.8% for the prior year period and reflects the Company's estimate of the annual effective tax rate
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.
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 June 30, 2022.
Oppenheimer Holdings Inc. | ||||||||||||
('000s, except number of shares and per share amounts) | ||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 89,608 | $ 90,889 | (1.4) | $ 282,307 | $ 300,531 | (6.1) | ||||||
Advisory fees | 102,927 | 116,751 | (11.8) | 326,098 | 332,399 | (1.9) | ||||||
Investment banking | 38,393 | 86,901 | (55.8) | 93,516 | 316,144 | (70.4) | ||||||
Bank deposit sweep income | 35,769 | 3,909 | 815.0 | 54,968 | 11,629 | 372.7 | ||||||
Interest | 17,361 | 9,340 | 85.9 | 38,667 | 26,915 | 43.7 | ||||||
Principal transactions, net | 6,502 | 4,494 | 44.7 | 10,124 | 21,664 | (53.3) | ||||||
Other | 3,551 | 3,058 | 16.1 | (8,319) | 19,635 | * | ||||||
Total revenue | 294,111 | 315,342 | (6.7) | 797,361 | 1,028,917 | (22.5) | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 179,134 | 206,312 | (13.2) | 543,144 | 693,053 | (21.6) | ||||||
Communications and technology | 21,500 | 19,718 | 9.0 | 63,981 | 59,497 | 7.5 | ||||||
Occupancy and equipment costs | 15,457 | 14,964 | 3.3 | 44,701 | 45,371 | (1.5) | ||||||
Clearing and exchange fees | 6,705 | 5,237 | 28.0 | 18,923 | 16,667 | 13.5 | ||||||
Interest | 7,018 | 2,468 | 184.4 | 13,158 | 7,563 | 74.0 | ||||||
Other | 57,059 | 29,249 | 95.1 | 98,172 | 74,077 | 32.5 | ||||||
Total expenses | 286,873 | 277,948 | 3.2 | 782,079 | 896,228 | (12.7) | ||||||
Pre-tax Income | 7,238 | 37,394 | (80.6) | 15,282 | 132,689 | (88.5) | ||||||
Income taxes provision | 2,573 | 11,144 | (76.9) | 5,559 | 36,622 | (84.8) | ||||||
Net Income | $ 4,665 | $ 26,250 | (82.2) | $ 9,723 | $ 96,067 | (89.9) | ||||||
Less: Net income (loss) attributable to | 145 | — | * | (215) | — | * | ||||||
Net income attributable to Oppenheimer Holdings Inc. | $ 4,520 | $ 26,250 | (82.8) | $ 9,938 | $ 96,067 | (89.7) | ||||||
Earnings per share attributable to | ||||||||||||
Basic | $ 0.40 | $ 2.07 | (80.7) | $ 0.84 | $ 7.59 | (88.9) | ||||||
Diluted | $ 0.37 | $ 1.92 | (80.7) | $ 0.78 | $ 7.10 | (89.0) | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 11,270,589 | 12,690,386 | (11.2) | 11,901,727 | 12,653,310 | (5.9) | ||||||
Diluted | 12,190,425 | 13,664,214 | (10.8) | 12,809,000 | 13,539,373 | (5.4) | ||||||
Period end number of common | 10,974,655 | 12,615,399 | (13.0) | 10,974,655 | 12,615,399 | (13.0) | ||||||
* Percentage not meaningful |
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SOURCE Oppenheimer Holdings Inc.
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