The firm’s retail segment earned a profit of $319,000 in the first quarter of this fiscal year after being down $1.9 million last quarter. Revenue was also higher, rising from $26.6 million to $28 million. Those numbers, however, were still down year-over-year from $29.2 million in revenue and $1.28 million in profit for the first quarter of 2011.
“While there is still work to be done to improve results, we are encouraged by the underlying strength demonstrated by our core operating units and will continue to look for opportunities to increase efficiency and expand our presence in both new and existing markets,” James H. Ross, chief executive officer of SWS Group said in a statement.
Last quarter, Ross said the firm was looking to build out following a drop in advisor headcount, a $1.3 million loss from a court case that came “out of left field,” and a drop in commission revenue.
Some of those problems, including a “challenging” economic environment, cropped up again in the first quarter of this fiscal year, Ross said. Commission revenue was brought down by the departure of two major producers who contributed to a $1.7 million decline. Commission revenue for the firm overall was down from $35.6 million in the first quarter of last year to $32.3 million.
“The departure of two producers in the independent channel contributed to a $1.7 million decline in commission revenue in the retail segment, as compared to the first quarter of fiscal 2012,” Ross said.
Ross also said that the retail division was unable to achieve its full potential because of the fewer number of trading days for the fiscal 2013 first quarter.
Still, revenue was up over the last quarter, driven in part by the increase in net gains on principal transactions, which rose from $6.27 million a year ago to $9,358 million this year.
That helped to boost profits since operating expenses were “flat,” according to the release.
“A $1.0 million decrease in commission and other employee compensation expense in the quarter was offset by increases in legal expense, licenses and fees, and operations and information technology expense,” SWS said in its filing.
Overall, the firm posted a net loss of $5.6 million for the first quarter of its fiscal year. That compares to a profit of $1.7 million a year ago.
“Though economic conditions remain challenging, SWS reported pre-tax profits in each of our four business segments – clearing, retail, institutional and banking – while continuing to reduce classified assets at our banking subsidiary in the first quarter of fiscal 2013,” Ross said.