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Oppenheimer Holdings Inc. Reports Second Quarter 2021 Earnings and Announces Increase in the Quarterly Dividend

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NEW YORK, July 29, 2021 /CNW/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of $31.2 million or $2.46 basic earnings per share for the second quarter of 2021, an increase of 76.5%, compared with net income of $17.6 million or $1.40 basic earnings per share for the second quarter of 2020. Revenue for the second quarter of 2021 was $340.3 million, an increase of 28.5%, compared to revenue of $264.7 million for the second quarter of 2020.

Albert G. Lowenthal, Chairman and CEO commented, "We are extremely pleased with the operating results for the second quarter which helped us post the best first half results in the Firm's history. The results are a reflection of our strong operating model with contributions across the platform. In particular, we had dramatically improved results from investment banking compared to the same period last year. The Investment Banking results reflected robust equity underwriting fees and higher M&A fees. Our Wealth Management business continued to post new records for AUM as investors continued to favor equities amid a strengthening economic recovery. Continued stimulus spending, low interest rates, and lower levels of unemployment powered the broader equity markets to new highs as the S&P 500 increased 8.2% during the second quarter. Operating results in Wealth Management continued to be negatively impacted by low interest rates.

As a result of the strong operating environment and dramatically improved results, the Firm's board of directors has approved a 25% increase in the quarterly dividend to $0.15 per share beginning with the upcoming dividend payment in August. We, once again, want to express our gratitude to our employees who continue to provide superior service to our clients and have continued to support the overall business during these extraordinary times."


Summary Operating Results (Unaudited)


('000s, except per share amounts or otherwise indicated)


Firm

2Q-21

2Q-20


Revenue

$

340,293

$

264,730


Compensation Expense

$

231,140

$

179,594


Non-compensation Expense

$

65,985

$

61,872


Pre-Tax Income

$

43,168

$

23,264


Income Taxes

$

12,009

$

5,615


Net Income

$

31,159

$

17,649


Earnings Per Share (Basic)

$

2.46

$

1.40


Earnings Per Share (Diluted)

$

2.28

$

1.34


Book Value Per Share

$

59.29

$

47.92


Tangible Book Value Per Share (1)

$

45.90

$

34.37


Private Client




Revenue

$

166,863

$

141,825


Pre-Tax Income

$

21,673

$

24,349


Assets Under Administration (billions)

$

117.3

$

89.7


Asset Management




Revenue

$

25,544

$

17,515


Pre-Tax Income

$

8,638

$

3,983


Assets Under Management (billions)

$

43.7

$

32.7


Capital Markets




Revenue

$

147,945

$

105,270


Pre-Tax Income

$

39,373

$

22,322






(1) Represents book value less goodwill and intangible assets divided by number of shares outstanding.


Highlights


  • Record second quarter gross revenue was driven by investment banking revenue and advisory fees

  • Record revenue and earnings in Capital Markets segment for the second quarter was driven by record investment banking results

  • Capital Markets pre-tax profit margin was 26.6% driven by strength in the equities underwriting and M&A advisory businesses

  • Client assets under administration and under management were both at record levels at June 30, 2021

  • Shareholders' Equity reached a record $752.5 million as of June 30, 2021

  • Book value and tangible book value per share reached record levels at June 30, 2021

Private Client

Private Client reported revenue for the current quarter of $166.9 million, 17.7% higher compared with a year ago. Pre-tax income of $21.7 million in the current quarter resulted in a pre-tax profit margin of 13.0% despite the negative impact from increased compensation costs of $12.8 million associated with share-based compensation tied to the Company's stock price, and lower short-term interest rates.

('000s, except otherwise indicated)


2Q-21

2Q-20




Revenue

$

166,863


$

141,825


Commissions

$

53,753


$

50,295


Advisory Fees

$

85,598


$

58,465


Bank Deposit Sweep Income

$

3,712


$

7,122


Interest

$

7,235


$

5,134


Other

$

16,565


$

20,809





Total Expenses

$

145,190


$

117,476


Compensation

$

117,564


$

90,512


Non-compensation

$

27,626


$

26,964





Financial Advisers (#)

1,004


1,029


Assets Under Administration (billions)

$

117.3


$

89.7


Cash Sweep Balances (billions)

$

7.3


$

6.3


Revenue:

  • Retail commissions increased 6.9% from a year ago amidst continued elevated client trading activity

  • Advisory fees increased 46.4% due to higher assets under management during the billing period for the second quarter of 2021 compared with that of the second quarter of 2020

  • Bank deposit sweep income decreased $3.4 million or 47.9% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances which continue to be near record levels

  • Interest revenue increased 40.9% from a year ago due to higher average margin balances partially offset by lower short-term interest rates

  • Other revenue decreased 20.4% primarily due to lower increases 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 29.9% from a year ago primarily due to increased production and share-based compensation costs partially offset by lower deferred compensation costs

  • Non-compensation expenses increased 2.5% from a year ago primarily due to an increase in allowance for credit losses


Asset Management

Asset Management reported revenue for the current quarter of $25.5 million, 45.8% higher compared with a year ago. Pre-tax income was $8.6 million, an increase of 116.9% compared with the prior year.

('000s, except otherwise indicated)


2Q-21

2Q-20




Revenue

$

25,544


$

17,515


Advisory Fees

$

25,541


$

17,507


Other

$

3


$

8





Total Expenses

$

16,906


$

13,532


Compensation

$

6,261


$

5,676


Non-compensation

$

10,645


$

7,856





AUM (billions)

$

43.7


$

32.7


Revenue:

  • Advisory fee revenue increased 45.9% due to higher assets under management during the billing period for the second quarter of 2021 compared with that of the second quarter of 2020

Assets under Management (AUM):

  • AUM hit a record level of $43.7 billion at June 30, 2021, which is the basis for advisory fee billings for July 2021

  • The increase in AUM was comprised of higher asset values of $9.8 billion on existing client holdings and a net contribution of assets of $1.2 billion

Total Expenses:

  • Compensation expenses were up 10.3% from a year ago which was primarily due to increases in incentive compensation

  • Non-compensation expenses were up 35.5% when compared to the prior period due to higher portfolio manager costs in line with the increase in AUM

Capital Markets

Capital Markets reported revenue for the current quarter of $147.9 million, 40.5% higher when compared with the prior year. Pre-Tax income was $39.4 million compared with pre-tax income of $22.3 million a year ago.

('000s)




2Q-21

2Q-20




Revenue

$

147,945


$

105,270





Investment Banking

$

99,045


$

43,125


Advisory Fees

$

50,515


$

7,244


Equities Underwriting

$

39,371


$

27,787


Fixed Income Underwriting

$

8,835


$

7,685


Other

$

324


$

409





Sales and Trading

$

48,630


$

61,469


Equities

$

30,218


$

34,635


Fixed Income

$

18,412


$

26,834





Other

$

270


$

676





Total Expenses

$

108,572


$

82,948


Compensation

$

85,663


$

62,295


Non-compensation

$

22,909


$

20,653


Revenue:
Investment Banking

  • Advisory fees earned from investment banking activities increased 597.3% compared with a year ago driven by large back-end fees on special purpose acquisition companies (SPAC) for M&A services and private investment in public equity (PIPE) transactions

  • Equity underwriting fees increased 41.7% compared with a year ago due to an increase in equity underwriting activity during the period

  • Fixed income underwriting fees were up 15.0% compared with a year ago primarily driven by new issuances of emerging market debt during the period

Sales and Trading

  • Equities sales and trading revenue decreased 12.8% compared with a year ago due to reduced volatility in the equities market

  • Fixed Income sales and trading decreased 31.4% compared with a year ago driven by lower income from emerging markets and high yield bonds partially offset by higher income from mortgage-backed securities

Total Expenses:

  • Compensation expenses increased 37.5% compared with a year ago primarily due to increased salary and incentive compensation partially offset by lower production-related compensation

  • Non-compensation expenses were 10.9% higher than a year ago due to increased underwriting expenses related to high transaction volumes and moderately higher costs associated with business travel and entertainment and conferences

Other Matters

(In millions, except number of shares and per share amounts)


2Q-21

2Q-20

Capital



Senior Secured Notes

$

124.0


$

148.2


Shareholders' Equity

$

752.5


$

601.1


Regulatory Net Capital (1)

$

344.7


$

251.3


Regulatory Excess Net Capital (1)

$

319.1


$

228.3





Common Stock Repurchases



Repurchases

$


$

3.8


Number of Shares


191,044


Average Price

$


$

20.06





Period End Shares

12,692,311

12,445,479

Effective Tax Rate

27.8

%

24.1

%




(1) Attributable to Oppenheimer & Co. Inc. broker-dealer

  • Shareholders' equity reached a record high of $752.5 million on June 30, 2021

  • The Board of Directors announced a $0.03, or 25%, increase in the quarterly dividend to $0.15 per share effective for the second quarter of 2021 payable on August 26, 2021 to holders of Class A non-voting and Class B voting common stock of record on August 12, 2021

  • There were no common stock repurchases during the period under the Company's stock repurchase program

  • Level 3 assets, comprised of auction rate securities, were $31.4 million as of June 30, 2021 compared with $29.6 million as of June 30, 2020

  • Compensation expense as a percentage of revenue was slightly higher at 67.9% during the current quarter versus 67.8% last year

  • The effective tax rate for the current quarter was 27.8% compared with 24.1% for the prior year period primarily driven by higher non-deductible permanent items in the current quarter as well as the resolution of tax audits on a favorable basis in the prior year period

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 is reliant on the continued ability to have the vast majority of employees work remotely. To date, there have been no significant disruptions to our business or control processes as a result of this dispersion of employees. Over the last several months, there has been widespread distribution and inoculation of the U.S. population with vaccines that have been proven to be both safe and effective. We are continuing to monitor the vaccination rollout as well as the risk of the many new variants and whether the vaccines are effective against the new variants. At the current rate of progress, we anticipate that a large number of our employees will continue to work remotely for the remainder of the summer and are planning for a broader re-entry to our offices in mid-September.

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 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, 2020.

Oppenheimer Holdings Inc.

Consolidated Income Statements (Unaudited)

('000s, except number of shares and per share amounts)




















For the Three Months Ended

June 30,


For the Six Months Ended

June 30,



2021


2020


% Change


2021


2020


% Change

REVENUE













Commissions

$

96,171


$

101,636


(5.4)


$

209,642


$

204,885


2.3


Advisory fees

111,152


75,981


46.3


215,648


162,145


33.0


Investment banking

104,742


46,186


126.8


229,243


71,914


218.8


Bank deposit sweep income

3,712


7,122


(47.9)


7,720


25,948


(70.2)


Interest

8,909


6,220


43.2


17,575


17,110


2.7


Principal transactions, net

6,305


12,064


(47.7)


17,170


11,196


53.4


Other

9,302


15,521


(40.1)


16,577


6,302


163.0


Total revenue

340,293


264,730


28.5


713,575


499,500


42.9

EXPENSES













Compensation and related expenses

231,140


179,594


28.7


486,741


337,270


44.3


Communications and technology

19,172


21,324


(10.1)


39,779


41,215


(3.5)


Occupancy and equipment costs

15,225


15,334


(0.7)


30,407


31,412


(3.2)


Clearing and exchange fees

5,155


6,191


(16.7)


11,430


11,850


(3.5)


Interest

2,448


2,890


(15.3)


5,095


9,440


(46.0)


Other

23,985


16,133


48.7


44,828


34,826


28.7


Total expenses

297,125


241,466


23.1


618,280


466,013


32.7

Pre-Tax Income

43,168


23,264


85.6


95,295


33,487


184.6

Income taxes

12,009


5,615


113.9


25,478


8,020


217.7

Net income

$

31,159


$

17,649


76.5


$

69,817


$

25,467


174.1














Earnings per share













Basic

$

2.46


$

1.40


75.7


$

5.53


$

1.99


177.9


Diluted

$

2.28


$

1.34


70.1


$

5.17


$

1.92


169.3













Weighted average number of common shares outstanding








Basic

12,689,191


12,640,463


0.4


12,634,464


12,768,096

(1.0)


Diluted

13,681,146


13,124,655


4.2


13,495,589


13,269,494

1.7

Cision
Cision

View original content:https://www.prnewswire.com/news-releases/oppenheimer-holdings-inc-reports-second-quarter-2021-earnings-and-announces-increase-in-the-quarterly-dividend-301343533.html

SOURCE Oppenheimer Holdings Inc.

Cision
Cision

View original content: http://www.newswire.ca/en/releases/archive/July2021/29/c7196.html