Ameriprise Earnings: Net Investment Income Plateaued; Expenses Well Controlled

Ameriprise AMP reported net income of $872 million, or $8.14 per diluted share, on $3.9 billion of net revenue for the third quarter of 2023. On a company-provided adjusted operating basis, which excludes the effect of changes in interest rates on some of its products, Ameriprise reported pro forma operating earnings per share of $7.68, up 21% from the previous year. Adjusted operating return on equity, excluding accumulated other comprehensive income, was a strong 49.6% for the quarter. We don’t anticipate making a material change to our $379 per share fair value estimate for narrow-moat-rated Ameriprise and assess shares as being slightly undervalued right now.

Client assets were $1.2 trillion in the third quarter, down 3% from the previous quarter and consistent with the 3% decline in the Morningstar US Market Index. Client cash-related revenue, or net investment income after interest expenses, had been a bright spot for Ameriprise in the first half of 2023, but as we have expected, this revenue has seen its peak. The third quarter’s net investment income after interest expenses came in at $705 million, 3% lower sequentially companywide (up 4% in the wealth management segment). We think this client cash-related revenue will continue to flatline or move slightly down, as we see firms continue to compete for client cash by raising rates on deposits.

We are pleased that Ameriprise demonstrated expense control, with the general and administrative line decreasing 2% from a quarter ago. After closing the acquisition of BMO EMEA asset management in 2021, the firm has been integrating the business, with major progress made in the last quarter. The management team expects 2024 expenses to be flat compared with 2023.