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Ameriprise Beats on Earnings, Rev Lags

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Ameriprise Financial Inc.’s (AMP - Free Report) first-quarter operating earnings came in at $1.59 per share, marginally surpassing the Zacks Consensus Estimate of $1.57. Also, this rose 9.7% from the year-ago earnings of $1.45.

Better-than-expected results were primarily driven by top-line improvement, partially offset by a rise in operating expenses. Further, assets under management and administration improved in the quarter. 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, unearned revenue amortization, reinsurance accrual and consolidation of certain investment entities, Ameriprise’s net income from continuing operations came in at $336 million or $1.58 per share. This compares favorably with net income of $245 million or $1.06 per share in the year-ago quarter.

Performance in Detail

On an operating basis, total net revenue climbed 3.9% year over year to $2.61 billion. The rise was primarily driven by strong advisor client net inflows and market appreciation, partially offset by a decline in net investment income and discontinuance of certain banking operations. However, it missed the Zacks Consensus Estimate of $2.64 billion by 1.2%.

Operating expenses came in at $2.1 billion, rising 4.5% from the year-ago quarter. The surge largely reflects higher distribution costs and disclosed benefits pertaining to 2012, partially offset by a decline in general and administrative expenses.

Total assets under management and administration were $708 billion, up 5% on a year-over-year basis. The increase was mainly due to market appreciation along with advisor client net inflows.

Capital Deployment Activities

During the reported quarter, Ameriprise bought back 5.2 million shares for $360 million.

Concurrent with the earnings release, Ameriprise announced a hike in its quarterly cash dividend of 15.6% to 52 cents per share. The dividend is payable on May 17 to shareholders of record as of May 6.

Performance of Other Banks

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

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

Lazard Ltd. (LAZ - Free Report) is scheduled to report its earnings on Apr 26, 2013.

Our Viewpoint

Ameriprise’s consistent capital deployment activities continue to boost investors’ confidence. Moreover, the company’s cautious expense management and strong balance sheet will help it improve its bottom line going forward.

However, the existing low interest-rate environment and stringent regulatory landscape are expected to keep the company’s financials slightly strained.

Ameriprise currently carries a Zacks Rank #2 (Buy).


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