Amid lower brokerage and advisory assets during the 2022 market slump, LPL Financial Holdings boasted another earnings surprise for the fourth quarter ending in December, beating the consensus estimates for four straight quarters in 2022.

LPL, the largest U.S. independent broker-dealer, yesterday released its results for the fourth quarter and full year of 2022. The firm reached $4.21 in quarterly earnings per share (before intangible assets and acquisitions costs). That was 21 cents above the $4 analyst consensus.

The company’s gross profit rose 51% year over year to $972 million, while its EBITDA rose $137% year over year to $533 million. The company’s fourth quarter revenue was $2.3 billion (an 11% increase over the fourth quarter of 2021) and its revenue for all of 2022 was $8.6 billion (an 11% increase over all of 2021).

The ferocious acquirer also said it had increased its advisor count, which was at 21,275, up 231 from the third quarter and up by almost 1,400 from the end of 2021.

The firm’s earnings per share for the entire year was $11.52, an increase of 64% from a year ago, said Dan Arnold, LPL’s president and CEO, in an earnings webcast yesterday morning.

The firm’s net income for the quarter was $319 million, or $3.95 per share, and for the full year it was $846 million, which resulted in diluted earnings per share of $10.40. LPL said that was an 85% increase from a year ago.

"Total organic net new assets were $21 billion, representing 8% annualized growth," the company said.

“Continued solid organic growth was complemented by higher equity markets,” Arnold said, referring to the market’s fourth quarter rebound. “Recruited assets were $15 billion Q4, bringing our total for the full year to $82 billion.” However, that was down 8% from last year, LPL said.

The market slump has taken its toll on all broker-dealers. The firm’s total advisory and brokerage assets of $1.11 trillion represented an 8% year over year decline, while advisory assets fell 9% year over year to $583 billion, LPL said.

According to the firm’s 8-K filing, its advisory revenue was $902.4 million for the fourth quarter, a decline of 2% from the third quarter advisor revenue and 10% from the fourth quarter of 2021. However, advisory revenue for all of 2022 was $3.875 billion, a 10% increase over 2021.

Like all broker-dealers, LPL has benefited from higher interest rates from the spreads they earn on cash—a source of revenue that for many years languished in an age of rates that were effectively zero. All that changed when the Fed turned the ship to fight inflation: In February, the federal funds target range is 4.5% to 4.75%, which has translated into higher interest income for B-Ds.

LPL’s net interest income jumped to $37 million in the fourth quarter of 2022, a 68% increase from the third quarter results. Interest income jumped to $77.1 million for all of 2022, a whopping 170% increase over 2021’s $28.6 million.

“LPL has very high exposure to interest rates and as a result has benefited significantly from the Fed’s aggressive tightening over the last year, similar to Raymond James,” said Michael Elliott, an equity analyst at CFRA Research. “This higher interest income has boosted LPL’s gross profit and helped them to overcome the drop in asset values that impacted results through 2022.”

Arnold said there’s been a slowdown in advisors migrating from firm to firm and that LPL has had to work to improve the efficiency of its relationships. He said that asset retention for the fourth quarter and full year was about 98%.

In November, Moody’s Investors Service upgraded LPL’s senior unsecured debt rating from junk status, raising the rating to "Baa3." Moody's cited the company’s stronger financial profile and its aim to lower its debt leverage.

Moody’s also said that LPL’s appetite for debt-funded acquisitions will likely remain in check. LPL has been an aggressive acquirer to raise its advisor head count. In 2017, it purchased National Planning Holdings and its 3,200 force of advisors, though the firm rather famously failed to retain as much of the assets as it had hoped to. In 2021, LPL acquired Waddell & Reed and its 900 advisors with reportedly more success.

More recently, LPL closed on its acquisition of Boenning & Scattergood and its $4 billion in advisory and brokerage assets. The firm also closed on the acquisition of one of its own branch offices, Financial Rsources Group Investment Services, which had approximately 800 advisors and about $40 billion in advisory and brokerage assets. That deal was reportedly about the firm’s expansion into the banks and credit union space.

“LPL is focused on expanding their banking and lending services to improve their product offerings to advisors,” said Elliott at CFRA. “This does seem to be a general trend in the industry as companies attempt to capture more business from advisors while building stronger partnerships.”