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Ameriprise Beats on Both Earnings & Revenues

Zacks Equity Research

Ameriprise Financial Inc.’s (AMP) second-quarter operating earnings came in at $1.69 per share, surpassing the Zacks Consensus Estimate of $1.62. Moreover, results improved 49.6% from $1.13 earned in the year-ago quarter.

Better-than-expected results were primarily driven by top-line growth, partially offset by higher operating expenses. Further, assets under management (:AUM) and assets under administration showed improvement. The company’s capital deployment activities were also impressive.

After taking into consideration net realized gains or losses, integration and restructuring charges, market impact on variable annuity guaranteed living benefits, amortization of deferred acquisition costs (DAC) and deferred sales inducement costs (:DSIC), market impact on index universal life benefits, DAC and unearned revenue amortization, reinsurance accrual and consolidation of certain investment entities, Ameriprise’s net income from continuing operations came in at $322 million or $1.54 per share. This compared favorably with net income of $224 million or $0.99 per share in the year-ago quarter.

Performance in Detail

On an operating basis, net revenue climbed 8.7% year over year to $2.7 billion, beating the Zacks Consensus Estimate of $2.66 billion by 3.0%. The improvement was primarily driven by strong client net inflows, rise in client activity and market appreciation, partially offset by a decline in net investment income.

Operating expenses came in at $2.3 billion, rising 6.0% from the year-ago quarter. The increase reflected higher distribution costs.

Total AUM and assets under administration were $577.7 million and $125.6 million respectively, rising 6.3% and 12.9% on a year-over-year basis. The increase was mainly due to market appreciation and advisor client net inflows.

Capital Deployment Activities

During the reported quarter, Ameriprise bought back 4.9 million shares for $380 million.

Along with the earnings release, Ameriprise announced a regular quarterly cash dividend of 52 cents per share. The dividend will be paid on Aug 16 to shareholders of record as of Aug 5.

Notably, in the said quarter, the company returned $488 million to its shareholders through share repurchases and dividends.

Performance of Other Banks

BlackRock, Inc.’s (BLK) second-quarter 2013 adjusted earnings surpassed the Zacks Consensus Estimate. The results were primarily attributable to increased top line, partially offset by higher operating expenses.

The Blackstone Group L.P.’s (BX) second-quarter 2013 economic net income (ENI) beat the Zacks Consensus Estimate. Better-than-expected results were aided by substantial top-line growth, offset by higher operating expenses.

Invesco Ltd. (IVZ) is scheduled to report its second-quarter earnings on Jul 31, 2013.

Our Viewpoint

Ameriprise’s consistent capital deployment activities continue to boost investors’ confidence. Moreover, the company’s prudent expense management and strong balance sheet will drive bottom-line improvement going forward.

However, the existing low interest-rate environment coupled with stringent regulations is expected to keep the company’s financials under pressure.

Ameriprise currently carries a Zacks Rank #3 (Hold).

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