- Domestic Private Client Group net new asset(1) growth of 9.4% over the prior 12 months and 5.4% annualized for the fiscal third quarter
- Quarterly net revenues of $2.72 billion, up 10% over the prior year’s fiscal third quarter and 2% over the preceding quarter
- Quarterly net income available to common shareholders of $299 million, or $1.38 per diluted share, and quarterly adjusted net income available to common shareholders of $348 million(2), or $1.61 per diluted share(2)
- Client assets under administration of $1.13 trillion and financial assets under management of $182.4 billion(3)
- Record net loans in the Bank segment(4) of $41.8 billion(3), which includes 8% sequential growth at Raymond James Bank and $11.8 billion of loans acquired with TriState Capital Bank(4), up 75% over June 2021 and 50% over March 2022
- Net interest income and Raymond James Bank Deposit Program (“RJBDP”) fees from third-party banks of $370 million during the quarter, up 102% over the prior year’s fiscal third quarter and 65% over the preceding quarter
- For the first 9 months of fiscal 2022, annualized return on common equity of 16.3%, annualized return on tangible common equity of 18.7%(2), and annualized adjusted return on tangible common equity of 20.1%(2)
Raymond James Financial, Inc. (NYSE: RJF) today reported net revenues of $2.72 billion and net income available to common shareholders of $299 million, or $1.38 per diluted share, for the fiscal third quarter ended June 30, 2022. Excluding $65 million of expenses related to acquisitions, quarterly adjusted net income available to common shareholders was $348 million(2), or $1.61 per diluted share(2).
Quarterly net revenues grew 10% over the prior year’s fiscal third quarter and 2% over the preceding quarter, largely driven by the benefit of higher short-term interest rates on RJBDP fees from third-party banks and net interest income, which more than offset the declines in total brokerage revenues and investment banking revenues resulting from the challenging market environment. Asset management and related administrative fees increased 13% over the prior year’s fiscal third quarter and declined 3% compared to the preceding quarter.
Quarterly net income available to common shareholders declined 3% compared to the prior year’s fiscal third quarter and 7% compared to the preceding quarter, reflecting increased business development expenses and a higher bank loan provision for credit losses. The growth of business development expenses was primarily attributable to advisor recognition events and conferences as well as increased business travel during the quarter. The higher bank loan provision for credit losses during the quarter was largely driven by the 8% sequential growth of net loans at Raymond James Bank, a weaker macroeconomic outlook, and the $26 million initial provision for credit losses on loans arising from the acquisition of TriState Capital Holdings. This initial provision reflects the purchase accounting requirement to record TriState Capital’s loans at fair value as of the closing date and establish an allowance for loan losses associated with those acquired loans in the first operating period after closing. The effective tax rate for the quarter increased to 27.5%, primarily attributable to nondeductible losses on the corporate owned life insurance portfolio.
For the first nine months of the fiscal year, record net revenues of $8.17 billion increased 16%, record earnings per diluted share of $4.99 increased 8%, and adjusted earnings per diluted share of $5.41(2) increased 5% over the first nine months of fiscal 2021. All four operating segments generated record net revenues, and the Private Client Group, Capital Markets, and Asset Management segments generated record pre-tax income during the first nine months of the fiscal year.
“Despite the challenging economic conditions during the quarter, our solid financial performance reinforces our diversified and client-focused business model. Furthermore, strong financial advisor retention and recruiting results helped us achieve attractive organic growth, with domestic Private Client Group net new asset(1) growth of 9.4% over the prior 12 months,” said Chair and CEO Paul Reilly. “We closed on our acquisitions of TriState Capital Holdings and SumRidge Partners on June 1 and July 1, respectively. I’m pleased to welcome both firms to the Raymond James family and look forward to the unique capabilities they both bring to the firm. Despite sharp equity market declines in the quarter, which are expected to negatively impact asset-based revenues in the fiscal fourth quarter, we are well positioned for the expected continued rise in short-term interest rates. Our strong balance sheet provides flexibility in this challenging and uncertain market environment.”
Segment Results
Private Client Group
- Record quarterly net revenues of $1.96 billion, up 15% over the prior year’s fiscal third quarter and 2% over the preceding quarter
- Record quarterly pre-tax income of $251 million, up 29% over the prior year’s fiscal third quarter and 18% over the preceding quarter
- Private Client Group assets under administration of $1.07 trillion, down 3% compared to June 2021 and 11% compared to March 2022
- Private Client Group assets in fee-based accounts of $606.7 billion, down 2% compared to June 2021 and 11% compared to March 2022
- Private Client Group financial advisors of 8,616(5) increased 203 over June 2021 and decreased 114 compared to March 2022, reflecting the transfer of 188 advisors during the quarter, primarily from one firm, to our Registered Investment Advisor & Custody Services (“RCS”) division where advisors are not included in the advisor count but client assets are generally retained. Adjusting for these transfers, the number of financial advisors increased 74 over the preceding quarter
- Clients’ domestic cash sweep balances of $75.8 billion, up 20% over June 2021 and down 1% compared to March 2022
Record quarterly net revenues grew 15% over the prior-year quarter principally driven by the year-over-year increases in asset management and related administrative fees, RJBDP fees, and net interest income. Sequentially, quarterly net revenues grew 2% as higher RJBDP fees and net interest income more than offset the sequential declines in asset management and related administrative fees and brokerage revenues.
“Financial advisor retention and recruiting remain strong across our multiple affiliation options,” said Reilly. “Adjusting for the transfer of 188 advisors during the quarter, primarily from one firm, to our RCS division where advisors are not included in our advisor count but assets are generally retained, the number of financial advisors increased 74 over the preceding quarter.”
Capital Markets
- Quarterly net revenues of $383 million, down 14% compared to the prior year’s fiscal third quarter and 7% compared to the preceding quarter
- Quarterly pre-tax income of $61 million, down 47% compared to the prior year’s fiscal third quarter and 30% compared to the preceding quarter
- Quarterly investment banking revenues of $217 million, down 18% compared to the prior year’s fiscal third quarter and 4% compared to the preceding quarter given the challenging market environment
Quarterly net revenues declined 14% compared to the prior-year and 7% compared to the preceding quarter, largely driven by lower fixed income brokerage revenues and equity underwriting revenues.
“In the Capital Markets segment, activity continues to be negatively impacted by increased geopolitical and macroeconomic uncertainties,” said Reilly. “The M&A pipeline remains healthy, but market conditions will heavily influence the pace of closings. Following quarter-end, we completed the acquisition of SumRidge Partners, a technology-driven fixed income market maker specializing in investment-grade and high-yield corporate bonds, municipal bonds and institutional preferred securities.”
Asset Management(4)
- Quarterly net revenues of $228 million, up 1% over the prior year’s fiscal third quarter and down 3% compared to the preceding quarter
- Quarterly pre-tax income of $93 million, down 11% compared to the prior year’s fiscal third quarter and 10% compared to the preceding quarter
Financial assets under management of $182.4 billion(3) declined 5% compared to June 2021 and 6% compared to March 2022. The decrease in financial assets under management was primarily attributable to the decline in the equity markets, as the S&P 500 index declined 16% during the quarter, which more than offset net inflows and the benefit from the acquisition of Chartwell Investment Partners(4).
Bank(4)
- Record quarterly net revenues of $276 million, up 63% over the prior year’s fiscal third quarter and 40% over the preceding quarter
- Quarterly pre-tax income of $74 million, down 29% compared to the prior year’s fiscal third quarter and 11% compared to the preceding quarter, largely due to the aforementioned loan loss provision
- Record net loans of $41.8 billion(3), which includes 8% sequential growth for Raymond James Bank and $11.8 billion of loans acquired with TriState Capital Bank(4), up 75% over June 2021 and 50% over March 2022
- Bank segment net interest margin (NIM) of 2.41% for the quarter, up 49 basis points over the prior year’s fiscal third quarter and 40 basis points over the preceding quarter
The Bank segment includes Raymond James Bank and TriState Capital Bank(4), acquired on June 1, 2022. Bank segment net revenue growth was due to higher loan balances, including nearly $11.8 billion of loans acquired with TriState Capital Bank, and NIM expansion during the quarter. In addition to the acquired TriState Capital loans, Raymond James Bank generated strong, broad-based loan growth of 8% over the preceding quarter. The Bank segment’s NIM increased 40 basis points during the quarter to 2.41%, and further NIM expansion is expected from the Federal Reserve’s recent and anticipated future interest rate increases. Despite revenue growth, pre-tax income declined compared to the prior-year quarter due to a higher bank loan loss provision in the current quarter, largely driven by strong loan growth at Raymond James Bank, a weaker macroeconomic outlook, and an initial $26 million provision for credit losses on acquired loans from TriState Capital Bank, in contrast to the bank loan benefit for credit losses in the prior-year quarter. The credit quality of the loan portfolio remained strong, with criticized loans as a percent of total loans held for investment ending the quarter at 1.63%, down from 4.07% at June 2021 and 2.63% at March 2022.
Other
Subsequent to the closing of TriState Capital Holdings, the firm repurchased approximately 1.14 million shares of common stock for $100 million at an average price of approximately $88 per share in June. As of July 27, 2022, approximately $900 million remained available under the Board’s approved share repurchase authorization. At the end of the quarter, the total capital ratio was 21.4%(6) and the tier 1 leverage ratio was 10.8%(6), both well above the regulatory requirements.
A conference call to discuss the results will take place tomorrow morning, Thursday, July 28, at 8:15 a.m. ET. The live audio webcast, and the presentation which management will review on the call, will be available at www.raymondjames.com/investor-relations/financial-information/quarterly-earnings. For a listen-only connection to the conference call, please dial: 800-786-6705 (conference code: 22019800). An audio replay of the call will be available at the same location until October 27, 2022.
Click here to view full earnings results, earnings supplement, and earnings presentation.
About Raymond James Financial, Inc.
Raymond James Financial, Inc. (NYSE: RJF) is a leading diversified financial services company providing private client group, capital markets, asset management, banking and other services to individuals, corporations and municipalities. The company has approximately 8,600 financial advisors. Total client assets are $1.13 trillion. Public since 1983, the firm is listed on the New York Stock Exchange under the symbol RJF. Additional information is available at www.raymondjames.com.
Forward-Looking Statements
Certain statements made in this press release may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions, demand for and pricing of our products, acquisitions (including our acquisition of SumRidge Partners, LLC completed on July 1, 2022), divestitures, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “expects,” “anticipates,” and future or conditional verbs such as “will,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the Securities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.
