NEW YORK, May 1, 2020 /CNW/ - Oppenheimer Holdings Inc.
(NYSE: OPY) (the "Company") today reported net income of
$7.8 million or $0.61 basic net income per share for the first
quarter of 2020 compared with net income of $11.2 million or $0.86 basic net income per share for the first
quarter of 2019. Revenue for the first quarter of 2020 was
$234.8 million compared to revenue of
$251.8 million for the first quarter
of 2019, a decrease of 6.8%.
Summary Operating
Results (Unaudited)
|
('000s, except per
share amounts)
|
For the Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
%
Change
|
Revenue
|
$
|
234,770
|
|
$
|
251,770
|
|
(6.8)
|
Expenses
|
224,547
|
|
235,718
|
|
(4.7)
|
Income Before Income
Taxes
|
10,223
|
|
16,052
|
|
(36.3)
|
Income
Taxes
|
2,405
|
|
4,858
|
|
(50.5)
|
Net
Income
|
$
|
7,818
|
|
$
|
11,194
|
|
(30.2)
|
|
|
|
|
|
|
Net Income Per
Share
|
|
|
|
|
|
Basic
|
$
|
0.61
|
|
$
|
0.86
|
|
(29.1)
|
Diluted
|
$
|
0.58
|
|
$
|
0.81
|
|
(28.4)
|
|
|
|
|
|
|
As
of
|
|
3/31/2020
|
|
12/31/2019
|
|
%
Change
|
Book Value Per
Share
|
$
|
46.16
|
|
$
|
46.31
|
|
(0.3)
|
Tangible Book Value
Per Share (1)
|
$
|
32.79
|
|
$
|
33.03
|
|
(0.7)
|
|
|
|
|
|
|
(1) Represents
book value less goodwill and intangible assets divided by number of
shares outstanding.
|
The performance of the financial markets during the first
quarter of 2020 was a tale of two diametrical halves split almost
equally. The quarter began with financial markets weathering
the threat of war in the Middle
East rallying to new highs by mid-February fueled by an easy
monetary policy, 50-year record low unemployment, solid corporate
earnings, and strong consumer confidence. On February 19, 2020, the S&P 500 index hit an
all-time high of 3386 while the CBOE Volatility Index ("VIX") stood
at 14.38, well below its 20-year average of 19.7. Then, as a
result of the realization of the seriousness of Coronavirus Disease
2019 (the "COVID-19 Pandemic"), the equity markets dramatically
reversed course amidst extreme volatility and fell into "bear
market territory" in record time. At its low point on
March 23, 2020, the S&P 500 was
down almost 34% from its all-time high as a reaction to COVID-19
Pandemic-related news and Federal and state government action taken
to shut down the U.S. economy. The equities markets then
rebounded from their lows during the last week in March in response
to the Congressional passage of a $2
trillion economic rescue package and aggressive steps to
further ease monetary policy by the Federal Reserve with the
S&P 500 closing the quarter down 20%. During this period,
the VIX rose sharply before hitting its peak of 82.69 on
March 16, 2020 and ended the quarter
at 53.54.
As the Federal government and many states began to pass
regulatory mandates such as closures of non-essential businesses,
"shelter-in place", school closures, and social distancing,
economic conditions quickly worsened. The fall-out was
widespread as financial market volatility increased, credit quality
deteriorated, and liquidity concerns mounted.
Unemployment quickly ramped up amid broad declines in
discretionary spending, increasing inventory levels and reduced
manufacturing production due to decreased demand and supply
constraints resulting from decreased imports of essential parts
from China. During the first
quarter of 2020, energy stocks extended already significant
declines as oil prices collapsed due to the impact of the abrupt
halt to economic activity and as the price war between OPEC and
Russia fueled a global oversupply
of oil. In late March, oil prices hit an 18-year intraday low
by dropping below $20 per barrel
before ending the quarter at $20.28.
As the economic toll of the COVID-19 Pandemic began to take hold
during the second half of the quarter, the bond market saw a flight
to safety as the prices of bonds with credit risks, such as low
investment grade and high-yield corporate bonds as well as emerging
markets debt, declined significantly. Meanwhile concerns about
state and local finances related to the impact of lower sales taxes
and much higher expenditures in fighting the COVID-19 Pandemic
resulted in dramatic selling of normally "safe" haven assets in
municipal bonds. Global investors rushed to the safety of the U.S.
government bond market. After beginning the year at 1.92%, the
10-Year Treasury Yield hit an intraday historic low of 0.32% in
early March before ending the quarter at 0.70%.
In an effort to restore confidence, in an emergency meeting on
Sunday March 16, 2020, the Federal
Reserve announced it would cut its benchmark short-term interest
rate by 100bps along with a $700
billion quantitative easing program. This followed a 50bps
cut to short-term interest rates two weeks prior for a total 150bps
decrease during the first quarter of 2020. The effective fed funds
rate stood at 8bps at March 31, 2020
with a target range of 0bps to 25bps.
Albert G. Lowenthal, Chairman and
CEO commented, "The last six weeks have been among the most
challenging in my career on Wall Street which spans over five
decades. The healthcare challenge requiring the repositioning
of 90% of our employees during a period of high volatility and a
fast paced decline in markets was testimony to the firm's
preparedness and the resiliency of our employees who have made the
transition to remote or alternative work arrangements virtually
seamless. I am greatly appreciative for the commitment and
dedication of our associates and their ability to maintain our high
standards of service to our clients during these trying times.
The operating results for the firm were solid up until mid-March
when the impact of the COVID-19 Pandemic really began to take its
toll on the U.S. economy. The largest impact on our results
for the first quarter of 2020 was the decrease in short-term
interest rates which had begun to take place in the latter part of
2019. This resulted in a decline of bank deposit sweep income
of $15.1 million during the first
quarter of 2020 when compared to first quarter of 2019. We
expect the impact to continue with short-term interest rates
expected to remain near zero. Our investment banking area was
also impacted by the COVID-19 Pandemic's effect on clients' risk
appetite and the resulting cancellation of active mandates,
although the area showed strong results through the first two
months of the year. As a result of early strength in
investment banking, results were limited to an 8% decrease.
We are pleased with the firm's risk management in reducing trading
exposure rapidly as the equities markets experienced extreme
volatility and credit markets saw spreads widen
substantially. As a result, the firm sustained trading losses
of less than $1 million during the
period. Compared to our peers, Oppenheimer is principally a
broker-dealer and investment advisor and is not exposed to
commercial lending and thus there was no need to set aside loan
loss reserves during the period.
The bright spots during the period included transaction-based
commissions on both the retail and institutional sides which were
up significantly as clients repositioned their portfolios.
Commission revenues ended the period up substantially at 30%.
Also, our asset management fees were up 17% during the first
quarter of 2020, based on asset values in client portfolios as of
year-end. Despite the sizable market decline during the first
quarter of 2020 (down 20%), we expect asset management fees to be
reduced by around 12% for the second quarter of 2020 when compared
to the first quarter of 2020 primarily due to a net positive inflow
of client assets which will temper the decline.
As we enter the second quarter of 2020, the government-mandated
shutdowns remain a major concern with no certainty around when the
restrictions will begin to be lifted or when the economy may resume
a normal pattern of growth. The next couple of months will surely
be challenging, however, we believe that we are positioned well to
weather the storm as our balance sheet is strong, liquidity is
solid, and our regulatory capital levels are at all-time
highs. We are confident in our employees' ability to continue
to perform their functions remotely for the indefinite future."
Business Segment
Results (Unaudited)
|
('000s)
|
|
|
|
|
|
For the Three
Months Ended
March
31,
|
|
|
|
2020
|
|
2019
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
Private
Client
|
|
|
$
|
141,418
|
|
$
|
163,527
|
|
(13.5)
|
Asset
Management
|
|
|
19,276
|
|
16,586
|
|
16.2
|
Capital
Markets
|
|
|
75,542
|
|
70,961
|
|
6.5
|
Corporate/Other
|
|
|
(1,466)
|
|
696
|
|
*
|
Total
|
|
|
$
|
234,770
|
|
$
|
251,770
|
|
(6.8)
|
|
|
|
|
|
|
|
|
Income (Loss)
Before Income Taxes
|
|
|
|
|
|
|
Private
Client
|
|
|
33,369
|
|
42,834
|
|
(22.1)
|
Asset
Management
|
|
|
4,305
|
|
2,242
|
|
92.0
|
Capital
Markets
|
|
|
(143)
|
|
(2,647)
|
|
94.6
|
Corporate/Other
|
|
|
(27,308)
|
|
(26,377)
|
|
(3.5)
|
Total
|
|
|
$
|
10,223
|
|
$
|
16,052
|
|
(36.3)
|
* Percentage not
meaningful
|
|
|
|
|
|
|
Private Client
Private Client reported revenue of $141.4
million for the first quarter of 2020, 13.5% lower than the
first quarter of 2019 due to lower bank deposit sweep income and
decreases in the cash surrender value of Company-owned life
insurance partially offset by higher commissions and asset
management fees during the first quarter of 2020. Income
before income taxes was $33.4 million
for the first quarter of 2020, a decrease of 22.1% compared with
the first quarter of 2019.
- Client assets under administration were $79.1 billion at March 31,
2020 compared with $91.0
billion at December 31, 2019,
a decrease of 13.1%.
- Financial adviser headcount was 1,029 at the end of the first
quarter of 2020, down from 1,062 at the end of the first quarter of
2019.
- Retail commissions were $56.9
million for the first quarter of 2020, an increase of 20.9%
from the first quarter of 2019.
- Advisory fee revenue on traditional and alternative managed
products was $66.9 million for the
first quarter of 2020, an increase of 17.3% from the first quarter
of 2019 (see Asset Management below for further information).
The increase in advisory fees was due to an increase in assets
under management ("AUM") at December 31,
2019 as a result of the increase in the equities markets and
net new assets during the fourth quarter of 2019.
- Bank deposit sweep income was $18.8
million for the first quarter of 2020, a decrease of 44.6%
compared with $34.0 million for the
first quarter of 2019 due to lower short-term interest rates during
the first quarter of 2020.
Asset Management
Asset Management reported revenue of $19.3 million for the first quarter of 2020,
16.2% higher than the first quarter of 2019 due to higher AUM at
December 31, 2019, which is the basis
for advisory fees earned during the first quarter of 2020, as a
result of the increase in the equities markets and net new assets
during the fourth quarter of 2019. Income before income taxes
was $4.3 million for the first
quarter of 2020, an increase of 92.0% compared with the first
quarter of 2019 due to higher AUM at December 31, 2019.
- Advisory fee revenue on traditional and alternative managed
products was $19.3 million for the
first quarter of 2020, an increase of 16.2% from the first quarter
of 2019 primarily due to higher AUM at December 31, 2019.
-
- Advisory fees are calculated based on the value of client AUM
at the end of the prior quarter which totaled $32.1 billion at December
31, 2019 ($26.7 billion at
December 31, 2018) and are allocated
between the Private Client and Asset Management business
segments.
- AUM decreased 5.1% to $28.0
billion at March 31, 2020
compared with $29.5 billion at
March 31, 2019, which is the basis
for advisory fee billings for the second quarter of 2020. The
decrease in AUM was comprised of lower asset values of $2.8 billion on existing client holdings and a
positive net contribution of assets of $1.3
billion.
Capital Markets
Capital Markets reported revenue of $75.5
million for the first quarter of 2020, 6.5% higher than the
first quarter of 2019 primarily due to higher commissions partially
offset by lower trading income and investment banking revenue. Loss
before income taxes was $143,000 for
the first quarter of 2020 compared with loss before income taxes of
$2.6 million for the first quarter of
2019.
- Institutional equities commissions increased 29.6% to
$30.5 million for the first quarter
of 2020 compared with the first quarter of 2019 due to the
significant volatility in the equities markets resulting from the
sharp sell-off during the period.
- Advisory fees earned from investment banking activities
decreased 41.3% to $9.8 million for
the first quarter of 2020 compared with $16.7 million for the first quarter of 2019 due
to a significant slowdown in M&A activity from the economic
fallout related to the COVID-19 Pandemic during the first quarter
of 2020.
- Equities underwriting fees increased 10.7% to $8.3 million for the first quarter of 2020
compared with $7.5 million for the
first quarter of 2019.
- Revenue from taxable fixed income increased to $22.2 million during the first quarter of 2020
from $16.5 million during the first
quarter of 2019 due to higher commissions partially offset by lower
trading income.
- Revenue from public finance and municipal trading decreased to
$2.2 million during the first quarter
of 2020 from $5.2 million during the
first quarter of 2019 primarily due to lower trading income
partially offset by higher gross credits from municipal
trading.
Compensation and Related Expenses
Compensation and related expenses totaled $157.7 million during the first quarter of 2020,
a decrease of 1.7% compared with the first quarter of 2019.
The decrease was due to lower deferred and share-based compensation
costs partially offset by higher salaries and production-related
compensation costs during the first quarter of 2020. The
Company recorded a credit to compensation and related expenses of
$3.4 million related to its OARs Plan
due to the price of its Class A Stock decreasing from $27.48 at the end of the fourth quarter of 2019
to $19.76 at the end of the first
quarter of 2020. Compensation and related expenses as a
percentage of revenue was 67.2% during the first quarter of 2020
compared with 63.7% during the first quarter of 2019.
Non-Compensation Expenses
Non-compensation expenses were $66.9
million during the first quarter of 2020, a decrease of
11.3% compared with $75.4 million
during the first quarter of 2019 due primarily to lower legal and
regulatory costs, conference and seminar costs, and interest costs
partially offset by higher occupancy and equipment costs and
external portfolio management costs during the first quarter of
2020.
Provision for Income Taxes
The effective income tax rate for the first quarter of 2020 was
23.5%, 6.8% lower when compared with 30.3% for the first quarter of
2019. The lower effective tax rate for the first quarter of
2020 was primarily due to tax windfalls related to the vesting of
restricted stock awards during the first quarter of 2020 as well as
a lower estimate of non-deductible items for the 2020 year.
Equity and Book Value Per Share
- At March 31, 2020, total equity
was $586.7 million compared with
$592.7 million at December 31, 2019.
- At March 31, 2020, book value per
share was $46.16 (compared with
$46.31 at December 31, 2019) and tangible book value per
share was $32.79 (compared with
$33.03 at December 31, 2019).
Dividend Announcement
The Company announced a quarterly dividend in the amount of
$0.12 per share effective for the
first quarter of 2020 and payable on May 29,
2020 to holders of Class A non-voting and Class B voting
common stock of record on May 15,
2020.
Company Information
Oppenheimer Holdings Inc., through its operating subsidiaries,
is a leading middle market investment bank and full service
broker-dealer that provides a wide range of financial services
including retail securities brokerage, institutional sales and
trading, investment banking (both corporate and public finance),
research, market-making, trust, and investment management.
With roots tracing back to 1881, the firm is headquartered in
New York and has 93 retail branch
offices in the United States and
has 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 the
COVID-19 pandemic; the pandemic's impact on the U.S. and global
economies; and Federal, state and local governmental responses to
the pandemic. 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,
2019.
Oppenheimer
Holdings Inc.
|
Consolidated
Statements of Income (Unaudited)
|
('000s, except
number of shares and per share amounts)
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
March
31,
|
|
|
|
2020
|
|
2019
|
|
%
Change
|
REVENUE
|
|
|
|
|
|
|
|
Commissions
|
|
|
$
|
103,249
|
|
$
|
79,409
|
|
30.0
|
Advisory
fees
|
|
|
86,164
|
|
73,647
|
|
17.0
|
Investment
banking
|
|
|
25,728
|
|
28,043
|
|
(8.3)
|
Bank deposit sweep
income
|
|
|
18,826
|
|
33,968
|
|
(44.6)
|
Interest
|
|
|
10,890
|
|
12,727
|
|
(14.4)
|
Principal
transactions, net
|
|
|
(868)
|
|
11,438
|
|
*
|
Other
|
|
|
(9,219)
|
|
12,538
|
|
*
|
Total
revenue
|
|
|
234,770
|
|
251,770
|
|
(6.8)
|
EXPENSES
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
|
|
157,676
|
|
160,355
|
|
(1.7)
|
Communications and
technology
|
|
|
19,891
|
|
20,086
|
|
(1.0)
|
Occupancy and
equipment costs
|
|
|
16,078
|
|
15,273
|
|
5.3
|
Clearing and exchange
fees
|
|
|
5,659
|
|
5,332
|
|
6.1
|
Interest
|
|
|
6,550
|
|
12,986
|
|
(49.6)
|
Other
|
|
|
18,693
|
|
21,686
|
|
(13.8)
|
Total
expenses
|
|
|
224,547
|
|
235,718
|
|
(4.7)
|
Income before income
taxes
|
|
|
10,223
|
|
16,052
|
|
(36.3)
|
Income
taxes
|
|
|
2,405
|
|
4,858
|
|
(50.5)
|
Net
income
|
|
|
$
|
7,818
|
|
$
|
11,194
|
|
(30.2)
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.61
|
|
$
|
0.86
|
|
(29.1)
|
Diluted
|
|
|
$
|
0.58
|
|
$
|
0.81
|
|
(28.4)
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,895,729
|
|
13,020,344
|
|
(1.0)
|
Diluted
|
|
|
13,456,233
|
|
13,851,321
|
|
(2.9)
|
* Percentage not
meaningful
|
View original
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SOURCE Oppenheimer Holdings Inc.