Knight Earnings Slump, CEO Notes Strong Reverse Mortgage Performance

Knight Capital Group (NYSE: KCG), parent company of reverse mortgage lender Urban Financial Group saw earnings of $6.5 million or $.01 per diluted share in the quarter ending December 31, 2011. 

Earnings were impacted by several factors noted by the company as pre-tax income of $6.8 million during the fourth quarter includes an $11.4 million non-cash write-down of an investment and $7.7 million in legal fees relating to a merger announced during the quarter and a technology glitch that led Knight near bankruptcy in August. 

While earnings fell from $40.2 million in the fourth quarter of 2011, the company noted several performance highlights, among them Urban’s reverse mortgage originations and securities businesses. 

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“Despite unprecedented challenges, Knight finished the year strong,” said Tom Joyce, Knight Capital chairman and CEO. “…The firm’s electronic trading products gained market share year over year across institutional equities, institutional spot foreign exchange and retail fixed income. Subsidiary Urban Financial Group ranked second in reverse mortgage origination and accounted for nearly a quarter of all HMBS issuance during the year.”

Further, Urban’s contributions were up from the previous year, Joyce noted. 

“In Institutional Sales and Trading, Knight resumed the turnaround effort and recorded a profitable quarter,” said Joyce. “The results are due to a combination of year over year segment revenue growth and expense reductions across the sales and trading desks. Urban made a major contribution from increased origination and securitization compared to a year ago.”

In December Urban agreed to a merger with GETCO LLC under which the two entities will be combined under a new publicly traded holding company with Getco CEO Daniel Coleman to become CEO of the combined firm. The deal was valued at $1.4 billion. 

Written by Elizabeth Ecker

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