TheChek News Flow

Reports Q4 (Dec) earnings of $4.60 per share, $0.42 better than the Capital IQ Consensus Estimate of $4.18; revenues fell 4.9% year/year to $8.78 bln vs the $7.73 bln consensus.

Investment Banking

• Fourth Quarter Net revenues in Investment Banking were $1.72 billion, 22% higher y/y and 47% higher q/q.
• • Net revenues in Financial Advisory were $585 million, 15% higher y/y.
  • Net revenues in Underwriting were $1.13 billion, 26% higher y/y, due to strong net revenues in equity underwriting.
  • Net revenues in equity underwriting were more than double the amount in 4Q12, reflecting an increase in client activity, particularly in initial public offerings.
  • Net revenues in debt underwriting were lower y/y, primarily reflecting lower net revenues from investment-grade activity

Institutional Client Services

• Fourth Quarter Net revenues in Institutional Client Services were $3.41 billion, 22% lower y/y and 19% higher q/q.
• Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.72 billion, 15% lower y/y, reflecting significantly lower net revenues in mortgages and, to a lesser extent, interest rate products, currencies and commodities. Net revenues in credit products, which include a gain on the sale of the firm's European insurance business, were higher compared with the fourth quarter of 2012.
• During the fourth quarter of 2013, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by tighter credit spreads and improved market-making conditions in certain businesses, compared with the third quarter of 2013. However, economic uncertainty persisted and levels of activity generally remained low.
• Net revenues in Equities were $1.68 billion, 27% lower y/y, due to the sale of the firm's Americas reinsurance business in 2013 and the sale of the firm's hedge fund administration business in 2012. Net revenues in equities client execution were significantly higher compared with the same prior year period, including significantly higher net revenues in cash products, partially offset by lower net revenues in derivatives. Commissions and fees were slightly higher compared with the fourth quarter of 2012.
• Securities services net revenues were significantly lower compared with the fourth quarter of 2012, due to a gain of $494 million on the sale of the firm's hedge fund administration business in 2012.

Investing & Lending

• Fourth Quarter Net revenues in Investing & Lending were $2.06 billion, 4% higher y/y and 40% higher q/q. Results for the fourth quarter of 2013 included net gains of $1.40 billion from investments in equities, primarily reflecting company-specific events, including initial public offerings, and net gains in public equities.
• Investment Management-
• Fourth Quarter Net revenues in Investment Management were $1.60 billion, 5% higher y/y and 31% higher q/q. The increase in net revenues compared with the fourth quarter of 2012 reflected higher management and other fees, primarily due to higher average assets under supervision.

Expenses

• Compensation and benefits expenses were $12.61 billion for 2013, 3% lower than 2012. The ratio of compensation and benefits to net revenues for 2013 was 36.9% compared with 37.9% for 2012.
• Non-compensation expenses were $3.04 billion for the fourth quarter of 2013, 3% higher y/y and 40% higher q/q. The increase compared with the fourth quarter of 2012 included an increase in other expenses, due to higher net provisions for litigation and regulatory proceedings, partially offset by lower operating expenses related to consolidated investments.

Capital

• Including the impact of the warrant exercise, book value per common share increased approximately 5% to $152.48 and tangible book value per common share increased approximately 7% to $143.11 compared with the end of 2012, while both decreased approximately 1% compared with the end of the third quarter of 2013.
• Under the regulatory capital requirements applicable to bank holding companies in 2013, the firm's Tier 1 capital ratio was 16.7% and the firm's Tier 1 common ratio was 14.6% as of December 31, 2013, up from 16.3% and 14.2%, respectively, as of September 30, 2013.