Oppenheimer Holdings Inc. Reports Third Quarter 2023 Earnings
- Net income increased by 206.7% compared to Q3 2022
- Revenue increased by 6.3% to $312.7 million
- Wealth Management business benefits from higher interest rates and increased market volumes
- Capital Markets business generates strong results
- Company completes share repurchase program
- None.
Albert G. Lowenthal, Chairman and CEO commented, "The profitable results for the quarter reflect improved performance across many of our businesses, owing to higher interest rates and increased market volumes emanating from a still resilient economy. The rate of inflation continued to stabilize, while the labor market remained strong despite higher interest rates and labor unrest. The
Our Wealth Management business continued to benefit from recent macroeconomic conditions, with the elevated interest rate environment driving large increases in bank deposit sweep income and margin interest revenue compared to the prior year period. Higher valuations in client portfolios and the addition of new client assets also resulted in meaningful improvements in advisory fees, though these were offset to some extent by the stock market retreat during the quarter and lower transaction-based fees due to subdued client activity. Our Capital Markets business also generated strong results, with higher fixed income sales and trading and somewhat higher equities underwriting revenues offsetting lower M&A advisory fees.
We finished the quarter with a strong balance sheet and ample capital levels that will permit us to continue seeking investment opportunities across our businesses. During the quarter, the Company completed its previously disclosed "Dutch auction" tender offer in which we repurchased 437,183 shares of our Class A non-voting common stock at a price of
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 3Q-23 | 3Q-22 |
Revenue | $ 312,667 | $ 294,111 |
Compensation Expense | $ 195,684 | $ 179,134 |
Non-compensation Expense | $ 95,396 | $ 107,739 |
Pre-Tax Income | $ 21,587 | $ 7,238 |
Income Taxes Provision | $ 7,808 | $ 2,573 |
Net Income (1) | $ 13,861 | $ 4,520 |
Earnings Per Share (Basic) (1) | $ 1.32 | $ 0.40 |
Earnings Per Share (Diluted) (1) | $ 1.21 | $ 0.37 |
Book Value Per Share | $ 75.01 | $ 70.23 |
Tangible Book Value Per Share (2) | $ 58.65 | $ 54.74 |
Private Client | ||
Revenue | $ 193,254 | $ 178,614 |
Pre-Tax Income | $ 65,249 | $ 29,973 |
Assets Under Administration (billions) | $ 110.7 | $ 100.3 |
Asset Management | ||
Revenue | $ 20,830 | $ 24,870 |
Pre-Tax Income | $ 4,951 | $ 8,322 |
Assets Under Management (billions) | $ 40.4 | $ 35.3 |
Capital Markets | ||
Revenue | $ 94,576 | $ 90,947 |
Pre-Tax Income (Loss) | $ (15,254) | $ 2,401 |
(1) Attributable to Oppenheimer Holdings Inc | ||
(2) Represents book value less goodwill and intangible assets divided by number of shares outstanding | ||
Highlights
- Increased revenue for the third quarter of 2023 was primarily driven by a rise in interest sensitive income, including margin interest and bank deposit sweep income, as well as higher fixed income sales and trading and equities underwriting revenues
- Assets under administration and under management were both at higher levels at September 30, 2023 when compared with the same period last year, benefiting from market appreciation and positive net asset flows
- Non-compensation expenses decreased from the prior year quarter largely due to lower legal costs partially offset by higher interest expense
- The Company completed its "Dutch Auction" tender offer, resulting in the repurchase of 437,183 shares of the Company's Class A non-voting common stock. The Company also repurchased 168,904 shares of Class A Stock during the third quarter of 2023 under its previously announced share repurchase program, or approximately
2% of shares outstanding at year-end 2022 - Book value and tangible book value per share reached new record highs as a result of positive earnings and share re-purchases
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
3Q-23 | 3Q-22 | |
Revenue | $ 193,254 | $ 178,614 |
Commissions | $ 44,385 | $ 46,893 |
Advisory Fees | $ 82,774 | $ 78,055 |
Bank Deposit Sweep Income | $ 42,304 | $ 35,769 |
Interest | $ 21,248 | $ 14,471 |
Other | $ 2,543 | $ 3,426 |
Total Expenses | $ 128,005 | $ 148,641 |
Compensation | $ 92,383 | $ 87,555 |
Non-compensation | $ 35,622 | $ 61,086 |
Pre-Tax Income | $ 65,249 | $ 29,973 |
Compensation Ratio | 47.8 % | 49.0 % |
Non-compensation Ratio | 18.4 % | 34.2 % |
Pre-Tax Margin | 33.8 % | 16.8 % |
Assets Under Administration (billions) | $ 110.7 | $ 100.3 |
Cash Sweep Balances (billions) | $ 3.5 | $ 6.5 |
Revenue:
- Retail commissions were reduced compared with the prior year quarter due to continued subdued retail trading activity
- Advisory fees increased
6.0% from a year ago primarily due to higher AUM during the billing period for the current quarter when compared to the third quarter of last year - Bank deposit sweep income increased
$6.5 million 18.3% from a year ago due to higher short-term interest rates partially offset by lower cash sweep balances - Interest revenue increased
46.8% from a year ago due to higher short-term interest rates - Other revenue decreased from a year ago primarily due to lower Company-owned life insurance death benefit proceeds
Total Expenses:
- Compensation expenses increased
5.5% from a year ago primarily due to higher production-related expenses and deferred compensation costs, partially offset by lower share-based compensation expenses - Non-compensation expenses decreased
41.7% from a year ago primarily due to lower legal costs
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
3Q-23 | 3Q-22 | |
Revenue | $ 20,830 | $ 24,870 |
Advisory Fees | $ 25,188 | $ 24,787 |
Other | $ (4,358) | $ 83 |
Total Expenses | $ 15,879 | $ 16,548 |
Compensation | $ 5,585 | $ 6,702 |
Non-compensation | $ 10,294 | $ 9,846 |
Pre-Tax Income | $ 4,951 | $ 8,322 |
Compensation Ratio | 26.8 % | 26.9 % |
Non-compensation Ratio | 49.4 % | 39.6 % |
Pre-Tax Margin | 23.8 % | 33.5 % |
AUM (billions) | $ 40.4 | $ 35.3 |
Revenue:
- Advisory fees increased
1.6% from a year ago due to an increase in management fees resulting from the higher net value of billable AUM during the quarter - Other revenue decreased
$4.4 million
Assets under Management (AUM):
- AUM increased to
$40.4 billion - The increase in AUM was comprised of higher asset values of
$4.4 billion $0.7 billion
Total Expenses:
- Compensation expenses were down
16.7% from a year ago which was due to decreases in incentive compensation - Non-compensation expenses were up
4.6% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in billable AUM
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
3Q-23 | 3Q-22 | |
Revenue | $ 94,576 | $ 90,947 |
Investment Banking | $ 36,000 | $ 36,951 |
Advisory Fees | $ 18,001 | $ 29,270 |
Equities Underwriting | $ 15,246 | $ 5,061 |
Fixed Income Underwriting | $ 2,049 | $ 2,111 |
Other | $ 704 | $ 509 |
Sales and Trading | $ 58,102 | $ 53,093 |
Equities | $ 30,985 | $ 34,877 |
Fixed Income | $ 27,117 | $ 18,216 |
Other | $ 474 | $ 903 |
Total Expenses | $ 109,830 | $ 88,546 |
Compensation | $ 72,933 | $ 60,415 |
Non-compensation | $ 36,897 | $ 28,131 |
Pre-Tax Income (Loss) | $ (15,254) | $ 2,401 |
Compensation Ratio | 77.1 % | 66.4 % |
Non-compensation Ratio | 39.0 % | 30.9 % |
Pre-Tax Margin | (16.1) % | 2.6 % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities decreased
38.5% compared with a year ago due to fewer M&A transactions - Equities underwriting fees increased
201.2% when compared with a year ago due to higher new issuance volumes and deal sizes - Fixed income underwriting fees were relatively flat with the prior year
Sales and Trading
- Equities sales and trading revenue decreased
11.2% compared with a year ago due to reduced volumes as a result of lower market volatility - Fixed income sales and trading revenue increased by
48.9% compared with a year ago primarily due to an increase in trading income attributable to higher volatility and higher volumes
Total Expenses:
- Compensation expenses increased
20.7% compared with a year ago primarily due to costs associated with opportunistic hiring and increased incentive compensation - Non-compensation expenses were
31.2% higher than a year ago primarily due to an increase in interest expense in financing trading inventories
Other Matters
(In millions, except number of shares and per share amounts) | ||
3Q-23 | 3Q-22 | |
Capital | ||
Stockholders' Equity (1) | $ 779.3 | $ 770.7 |
Regulatory Net Capital (2) | $ 437.1 | $ 425.8 |
Regulatory Excess Net Capital (2) | $ 415.4 | $ 399.4 |
Common Stock Repurchases | ||
Share Repurchase Program | ||
Repurchases | $ 6.5 | $ 14.0 |
Number of Shares | 168,904 | 413,052 |
Average Price Per Share | $ 38.30 | $ 33.86 |
"Dutch Auction" Tender Offer | ||
Repurchases | $ 17.5 | $ — |
Number of Shares | 437,183 | — |
Average Price Per Share | $ 40.00 | $ — |
Period End Shares | 10,388,898 | 10,974,655 |
Effective Tax Rate | 36.2 % | 35.5 % |
(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 - Compensation expense as a percentage of revenue was higher at
62.6% during the current period versus60.9% during the same period last year due to opportunistic hiring and the impact of inflation on salary levels during the year - The effective tax rate for the current period was
36.2% compared with35.5% for the prior year period and was impacted by permanent items and non-deductible losses in non-U.S. businesses
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
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, 2022 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, 2023.
Oppenheimer Holdings Inc | ||||||||||||
Condensed 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, | |||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 83,933 | $ 89,608 | (6.3) | $ 259,174 | $ 282,307 | (8.2) | ||||||
Advisory fees | 107,969 | 102,927 | 4.9 | 310,214 | 326,098 | (4.9) | ||||||
Investment banking | 37,411 | 38,393 | (2.6) | 95,354 | 93,516 | 2.0 | ||||||
Bank deposit sweep income | 42,304 | 35,769 | 18.3 | 135,273 | 54,968 | 146.1 | ||||||
Interest | 26,430 | 17,361 | 52.2 | 78,691 | 38,667 | 103.5 | ||||||
Principal transactions, net | 16,892 | 6,502 | 159.8 | 46,635 | 10,124 | 360.6 | ||||||
Other | (2,272) | 3,551 | * | 15,195 | (8,319) | * | ||||||
Total revenue | 312,667 | 294,111 | 6.3 | 940,536 | 797,361 | 18.0 | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 195,684 | 179,134 | 9.2 | 589,200 | 543,144 | 8.5 | ||||||
Communications and technology | 22,590 | 21,500 | 5.1 | 67,813 | 63,981 | 6.0 | ||||||
Occupancy and equipment costs | 17,281 | 15,457 | 11.8 | 49,622 | 44,701 | 11.0 | ||||||
Clearing and exchange fees | 6,051 | 6,705 | (9.8) | 18,241 | 18,923 | (3.6) | ||||||
Interest | 19,744 | 7,018 | 181.3 | 50,353 | 13,158 | 282.7 | ||||||
Other | 29,730 | 57,059 | (47.9) | 136,369 | 98,172 | 38.9 | ||||||
Total expenses | 291,080 | 286,873 | 1.5 | 911,598 | 782,079 | 16.6 | ||||||
Pre-Tax Income | 21,587 | 7,238 | 198.2 | 28,938 | 15,282 | 89.4 | ||||||
Income taxes provision | 7,808 | 2,573 | 203.5 | 10,262 | 5,559 | 84.6 | ||||||
Net Income | $ 13,779 | $ 4,665 | 195.4 | $ 18,676 | $ 9,723 | 92.1 | ||||||
Less: Net income (loss) attributable to | (82) | 145 | * | (403) | (215) | 87.4 | ||||||
Net income attributable to | $ 13,861 | $ 4,520 | 206.7 | $ 19,079 | $ 9,938 | 92.0 | ||||||
Earnings per share attributable to Oppenheimer Holdings Inc | ||||||||||||
Basic | $ 1.32 | $ 0.40 | 230.0 | $ 1.75 | $ 0.84 | 108.3 | ||||||
Diluted | $ 1.21 | $ 0.37 | 227.0 | $ 1.62 | $ 0.78 | 107.7 | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 10,519,431 | 11,270,589 | (6.7) | 10,874,055 | 11,901,727 | (8.6) | ||||||
Diluted | 11,440,229 | 12,190,425 | (6.2) | 11,746,337 | 12,809,000 | (8.3) | ||||||
Period end number of common | 10,388,898 | 10,974,655 | (5.3) | 10,388,898 | 10,974,655 | (5.3) | ||||||
* Percentage not meaningful | ||||||||||||
Media Contact:
oppenheimer@haventower.com
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SOURCE Oppenheimer Holdings Inc.
FAQ
What was the net income for Oppenheimer Holdings Inc. in Q3 2023?
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What were the results of the Capital Markets business in Q3 2023?
Did the company complete any share repurchase program?
