Ameriprise Financial, a renowned company, delivered impressive second-quarter results. While its asset management business faced challenges, its wealth management division thrived, driving the company’s overall success.
Captivating New Clients in Wealth Management
CEO Jim Cracchiolo highlighted the success of Ameriprise’s wealth management business. He attributed its positive performance to the ability of advisors to attract new clients with investible assets ranging from $500,000 to $1 million. This demographic holds significant importance for Ameriprise (ticker: AMP).
Cracchiolo emphasized the role of strategic investments in empowering advisors to engage prospects and clients effectively. This approach has enabled advisors to run highly efficient practices, leading to positive outcomes.
Impressive Financial Results
Ameriprise witnessed a remarkable 30% surge in adjusted earnings per share during the second quarter. The figure rose from $5.72 in the previous year to an impressive $7.44. This outcome surpassed the average Wall Street analysts’ expectation of $7.38 per share.
Year-over-year, net income also experienced a substantial increase of 45%, amounting to $890 million. Of this, the wealth management unit contributed 68% of pretax income. Additionally, the unit saw a remarkable growth in net revenue by 14%, reaching $2.3 billion. Furthermore, pretax adjusted operating earnings soared by 49%, and the pretax adjusted operating margin peaked at a record high of 31.2%.
Acquisition of Net New Money
According to Ameriprise, the company’s 10,274 advisors successfully attracted net new money during the reported quarter. Net client flows recorded a commendable 10% increase, amounting to $9.4 billion. Consequently, total client assets reached $833 billion at the end of the quarter, exhibiting a substantial 13% surge from the same period of the previous year.
Ameriprise’s impressive wealth management business played a pivotal role in bolstering the company’s overall performance.
Ameriprise Faces Challenges in Asset Management, While Retirement & Protection Solutions See Growth
The asset management unit of Ameriprise, a company based in Minneapolis, encountered difficulties during the second quarter, with net revenue experiencing an 8% decline to $808 million. Conversely, the Retirement & Protection Solutions business of Ameriprise, which offers annuities, life insurance, and disability insurance products, witnessed a boost in net revenue, rising by 13% compared to the previous year, reaching $858 million.
Ameriprise reported that adjusted operating expenses jumped by 3% to $1.6 billion, primarily driven by increasing administrative costs. While the company has maintained a focus on expense discipline, it plans to implement additional cost-cutting measures in the future, according to CEO Cracchiolo.
Highlighting the rising administrative costs as a weak point in Ameriprise’s financial results, UBS analyst Brennan Hawken maintains a positive outlook on the stock. In a research note dated July 27, Hawken rates Ameriprise as a buy and asserts that the “fundamental case for Ameriprise remains strong,” largely due to the growth of the company’s wealth management unit. He also believes that Ameriprise is undervalued, noting that it currently trades at approximately 10.5x consensus 2024 estimates, which he considers too low.
William Blair analyst Jeff Schmitt notes that cash balances at Ameriprise are stabilizing after clients moved their cash out of bank sweep accounts to higher-paying alternatives. In a note published on July 27, Schmitt indicates that he continues to rate Ameriprise as an outperformer. He expects expanding spread income, significant capital return, and expense discipline to drive substantial growth in the company’s earnings per share (EPS) over the next few years.
Following the release of the financial results, Ameriprise shares witnessed a decline of 1.7% on Thursday. However, by midday Friday, the shares had risen to $348.68, a modest increase of 0.1%.
