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KBW, Inc. Announces 2012 Third Quarter Results And Declares Quarterly Cash Dividend

In the third quarter, the firm continued to focus on costs and right sizing our efforts given current market conditions. Also, since the close of the third quarter, the firm has made the decision to exit its Asian operations. Business conditions have significantly changed since the launch of this effort and the firm will continue to focus on its core businesses in the United States and Europe.

KBW continues to have a strong balance sheet, the firm remains capitalized above industry standards and has $48.7 million remaining on it share repurchase program. Today, the firm also declared its regular quarterly dividend.”

Key points for the quarter include:
  • Investment banking revenue was $21.3 million compared with $25.3 million for the second quarter or a decrease of $4.0 million, primarily due to lower advisory fee revenue. Investment banking revenue for the third quarter of 2012 decreased $10.8 million compared with the third quarter of 2011, primarily due to lower M&A and advisory revenue, partially offset by higher capital markets revenue.
  • Commissions revenue was $21.0 million compared with $24.6 million for the second quarter, a decrease of $3.6 million, or 14.8%, reflecting lower trading volumes for financial services companies’ stocks. Commissions revenue decreased $14.1 million compared with $35.1 million for the third quarter of 2011, primarily due to lower traded volume.
  • Principal transactions revenue increased $0.1 million, or 4.2%, compared with $3.5 million for the second quarter of 2012. Principal transactions revenue was $3.6 million compared with negative $19.9 million for the third quarter of 2011.
  • Non-GAAP operating total expenses (excludes restructuring charges) decreased $18.9 million, or 25.6%, to $54.9 million compared with $73.8 million for the third quarter of 2011, primarily due to a decrease in non-compensation expenses excluding restructuring charges of 31.0%. Non-GAAP operating total expenses decreased $8.0 million, or 12.7%, compared with non-GAAP operating total expenses of $62.9 million for the second quarter of 2012 with compensation expense decreasing 16.7% and non-compensation expenses excluding restructuring charges decreasing 5.4%.
  • As of September 30, 2012, preliminary stockholders’ equity, which was all tangible, amounted to $381.2 million and preliminary book value per share was $12.63.

Total revenues were $175.2 million with a non-GAAP operating net loss of $6.0 million, or $0.22 per diluted share. This compares with total revenues of $209.6 million and a non-GAAP operating net loss of $14.2 million, or $0.46 per diluted share, for the first nine months of 2011. The GAAP net loss for the first nine months of 2012 and 2011 was $10.1 million, or $0.36 per diluted share, and $15.3 million, or $0.49 per diluted share, respectively.

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