KBW Inc. said Thursday that it is reducing its workforce by 13 percent after reporting a surprising third-quarter loss. The investment bank also said long-time CEO John Duffy was stepping down after being diagnosed with prostate cancer
The New York company, which is known as Keefe, Bruyette & Woods Inc. and specializes in the financial services industry, blamed the disappointing quarter on the decline in bank and financial stocks.
For the three months ended Sept. 30, the company said it lost $15.7 million, or 51 cents per share. That's compared with a profit of $3.8 million, or 11 cents per share, in the year-ago period. Not including one-time items, the company lost 47 cents per share. Analysts on average had expected a profit of 2 cents per share, according to FactSet.
Quarterly revenue dropped to $50.4 million, from $89.6 million. The company lost $19.9 million from principal transactions, compared with a $12 million gain a year ago. Investment banking revenue fell to $32.1 million, from $38.4 million.
Revenue from commissions rose to $35.1 million, from $28.2 million. Although advisory fees from investment banking mergers and acquisitions rose, the company noted that activity was still "muted" amid concerns about asset values.
As part of a broader cost-cutting measure, the company noted that it began the process of cutting 80 of its 600 full-time positions in the quarter through layoffs and attrition. The company said it expects to record severance costs of about $5 million; $1.8 million was included the third quarter and the remainder is expected to be included in the fourth quarter results.
KBW also noted that it is reducing its use of consultants and temporary employees and trimming other non-compensation expenses.
Chief Operating Officer Thomas Michaud, 47, was named to succeed Duffy, who led the company for the past 10 years. Andrew Senchak, vice chairman and president, will take over Duffy's role as board chairman; Duffy, 62, will stay on the board as vice chairman.
The company declared a quarterly dividend of 5 cents per share.
Shares of KBW rose $1.22 per share, or 8.5 percent, to close at $15.50 Thursday.