Oppenheimer Holdings Inc. Reports Third Quarter 2021 Earnings

The following excerpt is from the company's SEC filing.
New York, October 29, 2021
– Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of $26.3 million or $2.07 basic earnings per share for the third quarter of 2021, an increase of 67.8%, compared with net income of $15.6 million or $1.25 basic earnings per share for the third quarter of 2020. Revenue for the third quarter of 2021 was $315.3 million, an increase of 14.1%, compared to revenue of $276.3 million for the third quarter of 2020.
Albert G. Lowenthal
Chairman and CEO commented, "The results for the quarter reflect the significant impact of our investment in the Capi tal 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 1.52% as the period of ultra-low interest rates may be coming to an end.”
Summary Operating Results (Unaudited)
('000s, except per share amounts or otherwise indicated)
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)
Earnings Per Share (Diluted)
Book Value Per Share
61.43 
49.20 
Tangible Book Value Per Share
47.95 
35.61 
Private Client
160,864 
141,097 
Pre-Tax Income
37,426 
25,764 
Assets Under Administration (billions)
117.8 
Asset Management
26,894 
20,632 
9,412 
6,426 
Assets Under Management (billions)
128,585 
114,289 
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 reported revenue for the current quarter of $160.9 million, 14.0% higher than the previous year. Pre-tax income of $37.4 million in the current quarter resulted in a pre-tax profit margin of 23.3%.
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 or 15.4% 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.
('000s, except otherwise indicated)
Commissions
51,348 
48,839 
Advisory Fees
89,849 
67,949 
Bank Deposit Sweep Income
3,909 
4,618 
7,624 
5,940 
8,134 
13,751 
123,438
115,333
97,522 
89,562 
25,916 
25,771 
Financial Advisers (#)
Cash Sweep Balances (billions)
Asset Management reported revenue for the current quarter of $26.9 million, 30.4% higher compared with a year ago. Pre-tax income was $9.4 million, an increase of 46.5% compared with the prior year.
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
26,890 
17,482
14,206
6,120 
5,997 
11,362 
8,209 
AUM (billions)
Capital Markets reported revenue for the current quarter of $128.6 million, 12.5% higher when compared with the prior year. Pre-Tax income was $17.9 million compared with pre-tax income of $19.4 million a year ago.
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
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
('000s)
82,012
62,890
51,815 
30,706 
Equities Underwriting
26,348 
27,969 
Fixed Income Underwriting
3,140 
3,608 
46,262
50,679
30,861 
30,497 
15,401 
20,182 
110,697
94,920
81,690 
71,328 
29,007 
23,592 
Other Matters
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 versus 68.7% last year
The effective tax rate for the current quarter was 29.8% compared with 28.0% for the prior year period due to favorable permanent items in the third quarter of 2020
(In millions, except number of shares and per share amounts)
124.0 
123.9 
775.0 
615.2 
Regulatory Net Capital
372.6 
268.7 
Regulatory Excess Net Capital
345.6 
242.9 
Common Stock Repurchases
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
Attributable to Oppenheimer & Co. Inc. broker-dealer
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.
Consolidated Income Statements (Unaudited)
('000s, except number of shares and per share amounts)
For the Three Months Ended
For the Nine Months Ended
% Change
REVENUE
90,889 
92,241 
300,531 
297,126 
116,751 
88,595 
332,399 
250,740 
Investment banking
86,901 
66,245 
316,144 
138,159 
4,619 
(15.4)
11,629 
30,567 
(62.0)
9,340 
7,540 
26,915 
24,650 
Principal transactions, net
4,494 
7,703 
(41.7)
21,664 
18,899 
3,058 
9,316 
(67.2)
19,635 
15,618 
Total revenue
1,028,917 
775,759 
EXPENSES
Compensation and related expenses
693,053 
526,924 
Communications and technology
19,718 
19,474 
59,497 
60,689 
Occupancy and equipment costs
14,964 
15,199 
45,371 
46,611 
Clearing and exchange fees
5,237 
6,211 
(15.7)
16,667 
18,061 
2,468 
3,461 
(28.7)
7,563 
12,901 
(41.4)
29,249 
20,542 
74,077 
55,368 
Total expenses
277,948 
254,541 
896,228 
720,554 
132,689 
55,205 
Income taxes
36,622 
14,099 
Net income
96,067 
41,106 
Earnings per share
Weighted average number of common shares outstanding
12,690,386 
12,553,802 
12,653,310
12,696,143
13,664,214 
13,146,586 
13,539,373
13,194,434

The above information was disclosed in a filing to the SEC. To see the filing, click here.

To receive a free e-mail notification whenever Oppenheimer Holdings makes a similar move, sign up!

Auto Refresh

Feedback