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Morningstar | Interest Rates Aren't Helping Ameriprise as Much as Some Peers

Similar to other financial firms with material wealth management segments, Ameriprise had decent growth from the previous year, but results are flattish over the past several quarters. The company reported net income of $462 million, or $3.10 per diluted share, on $3.2 billion of net revenue in the second quarter of 2018. On an operating basis that primarily excludes the effect of model assumption changes for the company’s insurance and annuity businesses, operating earnings were $536 million, or $3.60 per share, compared with $441 million, or $2.80 per share, a year ago. Operating return on equity excluding accumulated other comprehensive was a strong 31.1%. We don’t expect to make a material change to our $148 fair value estimate for narrow-moat Ameriprise, and we believe that shares are currently fairly valued.

With about 70% of net revenue from Ameriprise's wealth and asset management segments, the company's revenue and earnings are strongly tied to the state of the securities markets. While markets are generally higher from a year ago, leading to 6% growth in total net revenue to $3.2 billion in the year-ago quarter, net revenue has been stuck at $3.2 billion since fourth-quarter 2017. One area that has helped other investment service firms, such as Raymond James and Charles Schwab, has been the effect of higher interest rates and growth in net interest income, but this has been only a marginal contributor to Ameriprise. At the consolidated level, net investment income only increased to $419 million from $391 million a year ago. Additionally, Ameriprise is exhibiting a similar trend to peers where client cash balances are flat or declining, as clients invest their cash, which means any increase from higher rates is being partially offset by lower cash and investment balances. Ameriprise isn't exhibiting the positive interest-rate sensitivity seen at certain peers.