C » Topics » Smith Barney

This excerpt taken from the C 8-K filed Jan 15, 2008.
Smith Barney

 

·                  Revenues grew 27%, driven by 18% growth in fee-based and net interest revenues and a 43% increase in transactional revenues.  Growth in fee-based revenues was driven by a continued shift toward offering fee-based advisory products and services.  Transactional revenue growth primarily reflected the increased ownership of Nikko Cordial in Japan.

 

·                  Assets under fee-based management increased 30% to $446 billion, primarily driven by acquisitions, positive market action, and net client asset flows.

 

·                  Expenses grew 29%, primarily due to increased customer activity, the impact of acquisitions, and a $41 million pre-tax charge related to headcount reductions.

 

·                  Net income increased 7%, as increased business volumes and the impact of acquisitions were offset by the charge related to headcount reductions.

 

 

7



·                 

This excerpt taken from the C 10-Q filed Nov 3, 2006.

Smith Barney

GRAPHIC

        Smith Barney provides investment advice, financial planning and brokerage services to affluent individuals, companies and non-profits through a network of more than 13,000 Financial Advisors in more than 600 offices primarily in the U.S. Smith Barney generates revenue from managing client assets, acting as a broker for clients in the purchase and sale of securities, financing customers' securities transactions and other borrowing needs through lending and through the sale of mutual funds.

 
  Three Months Ended
September 30,

  %
Change

  Nine Months Ended
September 30,

  %
Change

 
In millions of dollars

  2006
  2005
  3Q06 vs.
3Q05

  2006
  2005
  YTD06 vs.
YTD05

 
Net interest revenue   $ 247   $ 158   56 % $ 659   $ 456   45 %
Non-interest revenue     1,747     1,570   11     5,312     4,588   16  
   
 
 
 
 
 
 
Revenues, net of interest expense   $ 1,994   $ 1,728   15 % $ 5,971   $ 5,044   18 %
Operating expenses     1,565     1,366   15     4,909     3,969   24  
Provision for loan losses     (1 )   7   NM     (1 )   11   NM  
   
 
 
 
 
 
 
Income before taxes   $ 430   $ 355   21 % $ 1,063   $ 1,064    
Income taxes     136     128   6     363     401   (9 )%
   
 
 
 
 
 
 
Net income   $ 294   $ 227   30 % $ 700   $ 663   6 %
   
 
 
 
 
 
 
Average risk capital(1)   $ 1,436   $ 958   50 % $ 1,438   $ 920   56 %
Return on risk capital(1)     81 %   94 %       65 %   96 %    
Return on invested capital(1)     41 %   67 %       33 %   68 %    
   
 
 
 
 
 
 
Key indicators: (in billions of dollars)                                  
Total assets under fee-based management   $ 322   $ 258   25 %                
Total Smith Barney client assets   $ 1,173   $ 1,015   16 %                

Financial advisors (#)

 

 

13,076

 

 

12,111

 

8

%

 

 

 

 

 

 

 

 
Annualized revenue per financial advisor (in thousands of dollars)   $ 606   $ 565   7 %                
   
 
 
                 

(1)
The increase in average risk capital from the 2005 second quarter was primarily attributed to methodology changes implemented during the 2006 first quarter. See footnote 4 to the table on page 4.

NM
Not meaningful

44


Smith Barney (Continued)

3Q06 vs. 3Q05

        Revenues, net of interest expense, increased primarily due to a 32% increase in fee-based and net interest revenues and a 7% decrease in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business. The recurring revenue increase can be attributed to the BDP Tiering program, which was launched in September. It was also due to an increase in business volume in Managed Accounts, Mutual Fund and Annuity.

        Operating expenses were up mainly due to higher compensation expense, including $59 million of SFAS 123(R) accruals, integration costs of the Legg Mason retail brokerage business and higher legal costs.

        Total assets under fee-based management were up from the prior-year period. Assets that increased were both in the Consulting Group and Advisory Accounts and Financial Advisor Managed Accounts aligned with Smith Barney's strategic direction towards advisory business. Total client assets, including assets under fee-based management increased compared to the prior-year quarter. This reflected organic growth and the addition of Legg Mason client assets. Net flows were down compared to the prior-year quarter due to the attrition of financial advisors and market action.

2006 YTD vs. 2005 YTD

        Revenues, net of interest expense, increased primarily due to a 31% increase in fee-based revenues and a 2% increase in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business. The launch of the BDP Tiering program in September caused a large portion of the revenue increase, along with increased in business volume in products such as Managed Accounts, Mutual Fund and Annuity.

        Operating expenses increased mainly due to higher compensation expense, including $286 million of SFAS 123(R) charges, integration costs of the Legg Mason retail brokerage business, and higher legal costs.

        Net flows were down compared to the prior nine months due to attrition and market action.

45


This excerpt taken from the C 10-Q filed Aug 4, 2006.

Smith Barney

GRAPHIC

        Smith Barney provides investment advice, financial planning and brokerage services to affluent individuals, companies, and non-profits through a network of more than 13,000 Financial Advisors in more than 600 offices primarily in the U.S. Smith Barney generates revenue from managing client assets, acting as a broker for clients in the purchase and sale of securities, financing customers' securities transactions and other borrowing needs through lending, and through the sale of mutual funds.

 
  Three Months Ended June 30,
  % Change
  Six Months Ended June 30,
  % Change
 
In millions of dollars

  2006
  2005
  2Q06 vs.
2Q05

  2006
  2005
  YTD06 vs.
YTD05

 
Revenues, net of interest expense   $ 1,990   $ 1,647   21 % $ 3,977   $ 3,316   20 %
Operating expenses     1,624     1,252   30     3,344     2,603   28  
Provision for loan losses     (1 )   4   NM         4   (100 )
   
 
 
 
 
 
 
Income before taxes   $ 367   $ 391   (6 )% $ 633   $ 709   (11 )%
Income taxes     129     152   (15 )   227     273   (17 )
   
 
 
 
 
 
 
Net income   $ 238   $ 239     $ 406   $ 436   (7 )%
   
 
 
 
 
 
 
Average risk capital(1)   $ 1,422   $ 927   53 % $ 1,440   $ 902   60 %
Return on risk capital(1)     67 %   103 %       57 %   97 %    
Return on invested capital(1)     34 %   73 %       29 %   68 %    
   
 
 
 
 
 
 
Key indicators: (in billions of dollars)                                  
Total assets under fee-based management   $ 313   $ 245   28 %                
Total Smith Barney client assets   $ 1,142   $ 987   16                  
Financial advisors (#)     13,177     12,150   8                  
Annualized revenue per financial advisor (in thousands of dollars)   $ 600   $ 538   12                  
   
 
 
 
 
 
 

(1)
The increase in average risk capital from the 2005 second quarter was primarily attributed to methodology changes implemented during the 2006 first quarter. See footnote 4 to the table on page 4.

NM    Not meaningful

42


2Q06 vs. 2Q05

        Revenues, net of interest expense, increased $343 million primarily due to a 29% increase in fee-based revenues and a 9% increase in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business.

        Operating expenses    increased $372 million, or 30%, mainly due to higher compensation expense, including $50 million of SFAS 123(R) accruals, integration costs of the Legg Mason retail brokerage business, and higher legal costs.

        Total assets under fee-based management were $313 billion as of June 30, 2006, up $68 billion, or 28%, from the prior-year period. Total client assets, including assets under fee-based management of $1,142 billion, increased $155 billion, or 16%, compared to the prior-year quarter. This reflected organic growth and the addition of Legg Mason client assets. Net flows were ($5) billion compared to $5 billion in the prior-year quarter due to attrition and market action. Smith Barney had 13,177 financial advisors as of June 30, 2006, compared with 12,150 as of June 30, 2005. Annualized revenue per financial advisor of $600,000 increased 12% from the prior-year quarter.

2Q06 YTD vs. 2Q05 YTD

        Revenues, net of interest expense, increased $661 million primarily due to a 31% increase in fee-based revenues and a 6% increase in transactional revenues, reflecting increased customer volumes and the acquisition of the Legg Mason retail brokerage business.

        Operating expenses    increased $741 million, or 28%, mainly due to higher compensation expense, including $227 million of SFAS 123(R) charges, integration costs of the Legg Mason retail brokerage business, and higher legal costs.

        Net flows were ($2) billion compared to $18 billion in the prior-year first half due to attrition and market action.

43


This excerpt taken from the C 10-K filed Feb 24, 2006.

Smith Barney


 

 

 


 

 

Smith Barney
Net Income
In billions of dollars
  Smith Barney
Total Assets Under Fee-Based Management
In billions of dollars at December 31
  Smith Barney
Financial Advisors
At December 31
LOGO   LOGO   LOGO

        Smith Barney provides investment advice, financial planning and brokerage services to affluent individuals, companies, and non-profits through a network of more than 13,000 Financial Advisors in more than 600 offices primarily in the U.S. Smith Barney generates revenue from managing client assets, acting as a broker for clients in the purchase and sale of securities, financing customers' securities transactions and other borrowing needs through lending, and through the sale of mutual funds.

 
  2005
  2004
  2003
  % Change
2005 vs. 2004

  % Change
2004 vs. 2003

 
 
  (In millions of dollars)

 
Revenues, net of interest expense   $ 6,825   $ 6,485   $ 5,851   5 % 11 %
Operating expenses     5,405     5,016     4,570   8   10  
Provision for loan losses     12         1     (100 )
   
 
 
 
 
 
Income before taxes   $ 1,408   $ 1,469   $ 1,280   (4 )% 15 %
Income taxes     537     578     485   (7 ) 19  
   
 
 
 
 
 
Net income   $ 871   $ 891   $ 795   (2 )% 12 %
   
 
 
 
 
 
Average risk capital(1)   $ 938   $ 1,156   $ 1,269   (19 )% (9 )%
Return on risk capital(1)     93 %   77 %   63 %        
Return on invested capital(1)     59 %   57 %              
   
 
 
 
 
 
Key indicators: (in billions of dollars)                            
Total assets under fee-based management   $ 321   $ 240   $ 209   34 % 15 %
Total client assets   $ 1,130   $ 978   $ 912   16   7  
Financial advisors     13,414     12,138     12,207   11   (1 )
Annualized revenue per financial advisors (in thousands of dollars)   $ 556   $ 536   $ 473   4   13  
   
 
 
 
 
 

(1)
See footnote 5 to the table on page 3.

47


2005 vs. 2004

        Revenues, net of interest expense, increased primarily due to a $459 million increase in asset-based revenue. Lower client trading volumes drove a decline in transactional revenue, which decreased by $119 million.

        Operating expenses increased, primarily due to higher production-related compensation as a result of increased revenue. The increase also included repositioning charges of $28 million pretax in the first quarter of 2005, higher legal costs, and integration costs related to the acquisition of the Legg Mason retail brokerage business.

        Provision for loan loss increased, primarily reflecting the impact of growth in tailored loans.

        On December 1, 2005, Smith Barney completed the acquisition of Legg Mason's private client business, which added 124 branches, approximately $100 billion of assets under management and more than 1,200 financial advisors, primarily in the Mid-Atlantic and Southeastern states. These branches and financial advisors were converted to Smith Barney's operating platform during the 2006 first quarter.

        Total assets under fee-based management increased, reflecting organic growth and the addition of Legg Mason. Total client assets, including assets under fee-based management, increased primarily due to higher equity market values, the acquisition of Legg Mason and positive net flows of $28 billion.

2004 vs. 2003

        Revenues, net of interest expense, increased in both asset-based fee revenue, reflecting higher assets under fee-based management, and transactional revenue, reflecting equity market appreciation driving trading.

        Operating expenses increased, primarily reflecting higher marketing, legal and compliance costs, as well as continued investment in new client offerings.

        The increase in total assets under fee-based management was primarily due to positive net flows and higher equity market values. Total client assets, including assets under fee-based management, increased primarily due to higher equity market values and positive net flows of $24 billion.

This excerpt taken from the C 8-K filed Dec 16, 2005.
Smith Barney

 

                  Investing in training and technology

 

16



 

3 - Transferring Expertise

 

Leveraging Skills across Businesses and Countries

 

 

 

 

 

 

 

Products /

 

Operations &

 

Decision

 

Credit / Risk

Marketing

 

Technology

 

Management

 

Management

 

17



 

4 - Investing in Technology and People

 

This excerpt taken from the C 10-Q filed Nov 4, 2005.

Smith Barney

 
  Three Months Ended
September 30,

   
  Nine Months Ended
September 30,

   
 
In millions of dollars

  %
Change

  %
Change

 
  2005
  2004
  2005
  2004
 
Revenues, net of interest expense   $ 1,728   $ 1,528   13 % $ 5,044   $ 4,842   4 %
Operating expenses     1,366     1,204   13     3,969     3,759   6  
Provision for credit losses     7           11        
   
 
 
 
 
 
 
Income before taxes   $ 355   $ 324   10 % $ 1,064   $ 1,083   (2 )%
Income taxes     128     126   2     401     422   (5 )
   
 
 
 
 
 
 
Net income   $ 227   $ 198   15 % $ 663   $ 661    
   
 
 
 
 
 
 

Average Risk Capital(1)

 

$

958

 

$

1,110

 

(14

)%

$

920

 

$

1,229

 

(25

)%
Return on Risk Capital(1)     94 %   71 %       96 %   72 %    
Return on Invested Capital(1)     67 %   52 %       68 %   54 %    
   
 
 
 
 
 
 

(1)
See Footnote (5) to the table on page 6 and discussion of Risk Capital on page 42.

        Smith Barney net income of $227 million in the 2005 third quarter increased $29 million, or 15%, from 2004, primarily due to higher asset-based fee revenue and higher transactional revenue, partially offset by increased variable compensation and legal costs. Net income of $663 million in the 2005 nine months increased $2 million from 2004, primarily due to an increase in asset-based revenue, partially offset by lower transactional revenue and higher staff related costs.

        Revenues, net of interest expense, of $1.728 billion in the 2005 third quarter increased $200 million, or 13%, from the prior-year period, primarily due to increases in asset-based fee revenue, reflecting higher assets under fee-based management and increases in transactional revenue reflecting higher customer trading volumes. Revenues, net of interest expense, of $5.044 billion in the 2005 nine-month period, increased $202 million, or 4%, from 2004, reflecting increases in asset-based fee revenue. Fee-based revenue increased $294 million, or 11%, resulting from growth in assets under fee-based management. Transactional revenue decreased $92 million, or 4%, primarily due to lower customer trading volumes.

        Total assets under fee-based management were $258 billion as of September 30, 2005, up $37 billion, or 17%, from the prior-year period. Total client assets, including assets under fee-based management, of $1,015 billion in the 2005 third quarter increased $95 billion, or 10%, compared to the prior-year quarter, principally due to market appreciation. Net inflows were $5 billion in the 2005 third quarter compared to $3 billion in the prior-year quarter. Smith Barney had 12,111 financial consultants as of September 30, 2005, compared with 12,096 as of September 30, 2004. Annualized revenue per financial consultant of $565,000 increased 13% from the prior-year quarter.

        Operating expenses of $1.366 billion in the 2005 third quarter and $3.969 billion in the 2005 nine months increased $162 million, or 13%, and $210 million, or 6%, respectively, from the comparable 2004 periods. The increases were mainly due to higher production-related compensation, reflecting increased revenue, higher legal costs and the 2005 nine months also included repositioning charges of $28 million pretax in the first quarter of 2005. In the 2005 third quarter Smith Barney's credit provision increased $7 million to build loan loss reserves, reflecting the impact of growth in tailored loans.

In billions of dollars

  September 30,
2005

  September 30,
2004

  %
Change

 
Consulting Group and Internally Managed Accounts   $ 168   $ 145   16 %
Financial Consultant Managed Accounts     90     76   18  
   
 
 
 
Total Assets under Fee-Based Management   $ 258   $ 221   17 %
   
 
 
 
Total Client Assets   $ 1,015   $ 920   10 %
   
 
 
 
Annualized Revenue per Financial Consultant (in thousands of dollars)   $ 565   $ 501   13 %
   
 
 
 

35


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