Knight Capital’s Q3 Revenue Boosted by Urban Sales

Knight Capital Group, Inc. reported a net income of $26.9 million, or $0.29 per diluted share for the third quarter ending on Sept. 30, 2011, and its CEO mentioned Urban Financial’s contributions to overall quarterly revenue in the conference call.

The third quarter included a pre-tax restructuring charge for severance, write-down of assets, and related costs of $28.6 million, equivalent to $0.19 per diluted share.

Third quarter net income increased substantially from $203,000 in the same period in 2010, although Knight posted a nearly 9% decrease in income to $75 million for the first three quarters of 2011, compared to $82.4 million nine months into 2010.

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Knight’s revenues from continuing operations for the third quarter were $397.4 million, about 66% more than 2010’s $239.5 million in the same period.

“In the third quarter of 2011, Knight generated strong financial results as market conditions played into our core strengths,” said Thomas Joyce, Chairman and Chief Executive Officer of Knight Capital Group, in a statement. “Consolidated revenues and pre-tax earnings were significantly higher than the same period a year ago due to contributions from market making and electronic execution services.”

During the third quarter, Knight recorded a restructuring change as a result of measures to cut back in underperforming areas and discontinue certain initiatives, Joyce explained. The company also created new financial reporting segments that better reflects how it manages the business and provides a greater level of detail on performance for shareholders.

One of the new financial reporting segments was Institutional Sales and Trading, encompassing full-service institutional research, sales and trading as well as equity and debt capital markets, reverse mortgage origination and asset management.

“In Institutional Sales and Trading, Knight worked to reposition resources given secular trends in institutional trading activity,” said Joyce. “Revenues rose 34% year over year as institutions aggressively adjusted holdings in response to economic events.”

Urban Financial was one of the primary contributors, said Joyce, and increased its market share of both reverse mortgage origination and HMBS issuance.

However, Knight incurred a pre-tax loss of $15.6 million in this segment due to the restructuring charges announced on August 4, 2011, he said, as revenues came to $145.4 million while expenses amounted to $161 million.

Written by Alyssa Gerace

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  • When it comes to the segment where Knight placed Urban, it seems Mr. Joyce is “putting lipstick on a pig.”  When does management love a segment which increases sales but decreases the bottom line?  The real question is whether Urban  on a separate entity basis had a positive or negative bottom line.

    Oh well, depend on an accountant to bring rain to an picnic.

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