Q1 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Ameriprise is expanding partnerships in the financial institution channel, including a successful relationship with Comerica, and has a strong pipeline for future deals, which could drive growth.
- The company expects continued growth in bank net investment income and bank assets, contributing significantly to profitability, as they reinvest and launch new products.
- Ameriprise is focusing on organic growth and investing in new product areas such as active ETFs, international property, and CLOs, while also improving operational efficiencies through technology investments in AI, data analytics, cybersecurity, and technology platforms.
- Expected Slowdown in Bank Net Investment Income Growth: The company anticipates that the 30% increase in bank net investment income will not continue, with growth expected to slow as we get into 2025, potentially impacting profitability.
- Rising Expenses and Margin Pressures in Wealth Management: The ratio of distribution expenses to revenues hit an all-time high in the quarter, and G&A expenses increased by 7%, exceeding the mid-single-digit growth target. This may indicate increasing cost pressures that could affect future margins.
- Focus on Cost Savings May Indicate Revenue Pressures: Management's emphasis on achieving further efficiencies and cost savings, particularly in the Asset Management segment, suggests there may be underlying revenue pressures impacting the business.
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Expense Management
Q: Will expense efficiencies reduce G&A growth beyond 2024?
A: Management expects ongoing expense efficiencies to positively impact G&A growth beyond 2024. Initiatives taken in 2024 will carry over, and continued process reengineering will contribute to an improved trajectory. -
Bank Net Investment Income
Q: What are expectations for bank net investment income growth?
A: The prior 30% growth won't recur. Each year, about $3 billion will be reinvested, potentially adding 100–125 basis points. Growth will continue but will slow into 2025, remaining healthy with good profitability. -
Capital Deployment and M&A
Q: How are you prioritizing excess capital deployment and M&A?
A: The company continues strong share buybacks and maintains a healthy balance sheet. While not actively seeking acquisitions, management is open to opportunities that make strategic sense but is primarily focused on organic investments and improving operating efficiencies, especially in Asset Management. -
Client Cash Balances
Q: Are clients pressuring for higher short-term rate benefits?
A: No significant pressure, as what's left in sweep accounts is mainly transactional liquidity. Clients have already moved significant cash into higher-yielding products like money markets and brokered CDs. -
Advisor Recruiting and Loans
Q: How are advisor loans and recruiting expenses trending?
A: Advisor loans grew by 20% last year and are expected to increase as the firm remains competitive in recruitment. Focus remains on quality advisors who value support to build productive practices. -
Institutional Asset Management Mandates
Q: What's the outlook for institutional asset management mandates?
A: While some mandates were delayed or lost in Q1, there's growing interest in fixed income and equities, both domestically and internationally. Management anticipates an uptick in mandates later in the year. -
Long-Term Care Risk Transfer
Q: Any updates on long-term care risk transfer?
A: Management continues to evaluate potential risk transfer opportunities, having seen bid spreads narrow. They are assessing trade-offs but believe the business is performing well with stable income generation. -
Financial Institution Partnerships
Q: Will the pace of financial institution partnerships increase?
A: The partnership with Comerica has been successful, and there's a good pipeline for additional deals. The company is bringing in new partnerships and sees opportunities due to its strong value proposition. -
Lending Solutions Expansion
Q: What's the update on lending solutions offerings?
A: The firm is expanding offerings, including bank CDs, base checking capabilities, new mortgage options, and fixed pledge products. There's an opportunity to further penetrate the pledge lending market. -
Share Repurchases and Payout Ratio
Q: Why not increase the payout ratio above 80%?
A: Although there's capacity to increase the payout ratio, management believes 80% is appropriate. They prefer to be opportunistic and evaluate situations as they arise, balancing capital returns with investments for growth.