Raymond James Financial Reports Third Quarter of Fiscal 2023 Results
- Domestic Private Client Group net new assets(1)(2) of $14.4 billion for the fiscal third quarter, 5.4% annualized growth rate from beginning of period assets
- Record quarterly net revenues of $2.91 billion, up 7% over the prior year's fiscal third quarter and 1% over the preceding quarter
- Quarterly net income available to common shareholders of $369 million, or $1.71 per diluted share, and quarterly adjusted net income available to common shareholders of $399 million(3), or $1.85 per diluted share(3)
- Record client assets under administration of $1.28 trillion and financial assets under management of $200.7 billion
- Net interest income and Raymond James Bank Deposit Program ("RJBDP") fees from third-party banks of $708 million during the quarter, up 91% over the prior year's fiscal third quarter and down 3% compared to the preceding quarter
- Record net revenues of $8.57 billion and record net income available to common shareholders of $1.30 billion for the first nine months of fiscal 2023, up 5% and 22%, respectively, over the first nine months of fiscal 2022
- Annualized return on common equity of 17.9% and annualized adjusted return on tangible common equity of 22.7%(3) for the first nine months of fiscal 2023
ST. PETERSBURG, Fla – Raymond James Financial, Inc. (NYSE:RJF) today reported record net revenues of $2.91 billion and net income available to common shareholders of $369 million, or $1.71 per diluted share, for the fiscal third quarter ended June 30, 2023. Excluding $40 million of expenses related to acquisitions, quarterly adjusted net income available to common shareholders was $399 million(3), or $1.85 per diluted share(3).
Record quarterly net revenues increased 7% over the prior year's fiscal third quarter. The benefit of higher short-term interest rates on net interest income and RJBDP fees from third-party banks more than offset declines in investment banking revenues, brokerage revenues, and asset management and related administrative fees. The 1% sequential increase in quarterly net revenues was primarily due to higher asset management and related administrative fees.
Quarterly net income available to common shareholders increased 23% over the prior year's fiscal third quarter, driven primarily by higher net interest income and RJBDP fees from third-party banks which were partially offset by elevated provisions for legal and regulatory matters. Sequentially, net income available to common shareholders decreased 13%. Quarterly results were negatively impacted by elevated provisions for legal and regulatory matters of approximately $65 million and bank loan provision for credit losses of $54 million.
For the first nine months of the fiscal year, record net revenues of $8.57 billion increased 5%, record earnings per diluted common share of $5.95 increased 19%, and adjusted earnings per diluted common share of $6.17(3) increased 14% over the first nine months of fiscal 2022. The Private Client Group segment generated record net revenues and record pre-tax income during the first nine months of the fiscal year. Annualized return on common equity was 17.9% and annualized adjusted return on tangible common equity was 22.7%(3).
"Through the strength of our businesses and perseverance of our advisors and associates, we generated record net revenues and record net income to common shareholders during the first nine months of the fiscal year, up 5% and 22%, respectively, over fiscal 2022 despite challenging macroeconomic conditions," said Chair and CEO Paul Reilly. "Importantly, our strong capital ratios and flexible balance sheet keep us well-positioned as we look forward."
Segment Results
Private Client Group
- Domestic Private Client Group net new assets(1)(2) of $14.4 billion for the fiscal third quarter, 5.4% annualized growth rate from beginning of period assets
- Record quarterly net revenues of $2.18 billion, up 11% over the prior year's fiscal third quarter and 2% over the preceding quarter
- Quarterly pre-tax income of $411 million, up 64% over the prior year's fiscal third quarter and down 7% compared to the preceding quarter
- Record Private Client Group assets under administration of $1.23 trillion, up 15% compared to June 2022 and 5% over March 2023
- Record Private Client Group assets in fee-based accounts of $697.0 billion, up 15% compared to June 2022 and 5% over March 2023
- Total clients' domestic cash sweep and Enhanced Savings Program ("ESP") balances of $58.0 billion, down 24% compared to June 2022 and up 11% over March 2023
The year-over-year growth in quarterly net revenues and pre-tax income was driven primarily by increases in RJBDP fees and net interest income, which more than offset market-driven declines in asset management and related administrative fees and brokerage revenues. Sequentially, quarterly net revenues grew 2% driven by higher asset management and related administrative fees, which were offset by a decline in RJBDP fees due to lower cash sweep balances, and lower brokerage revenues. However, quarterly pre-tax income declined 7% compared to the preceding quarter driven by higher provisions for legal and regulatory matters and seasonally higher advisor recognition events and conference expenses.
Total clients' domestic cash sweep and ESP balances grew 11% over March 2023. The increase reflects strong growth in ESP balances which more than offset a modest decline in cash sweep balances largely due to quarterly fee billings and income tax payments. Reflecting higher short-term interest rates, the average yield on RJBDP third-party bank balances increased 12 basis points to 3.37% in the fiscal third quarter.
"Financial advisor retention and recruiting are strong across our multiple affiliation options driven by our advisor and client-focused culture and leading technology and product solutions," said Reilly. "For example, our recently-launched Enhanced Savings Program ended the quarter at $11.2 billion, as advisors and their clients continue to value this attractive offering."
Capital Markets
- Quarterly net revenues of $276 million, down 28% compared to the prior year's fiscal third quarter and 9% compared to the preceding quarter
- Quarterly pre-tax loss of $34 million
- Quarterly investment banking revenues of $141 million, down 35% compared to the prior year's fiscal third quarter and 3% compared to the preceding quarter
The year-over-year decline in quarterly net revenues and pre-tax income was largely attributable to lower investment banking and fixed income brokerage revenues. Compensation expense declined 9% driven by lower variable compensation, partially offset by amortization of deferred compensation and additional compensation related to growth investments.
"Investment banking activity across the industry remains muted," said Reilly. "While the investment banking pipeline remains healthy and new business activity is solid, the timing of closings is largely dependent on improving market conditions."
Asset Management
- Quarterly net revenues of $226 million, down 1% compared to the prior year's fiscal third quarter and up 5% over the preceding quarter
- Quarterly pre-tax income of $89 million, down 4% compared to the prior year's fiscal third quarter and up 9% over the preceding quarter
- Financial assets under management of $200.7 billion, up 10% over June 2022 and 3% over March 2023
Financial assets under management of $200.7 billion grew 10% over the prior-year quarter and 3% over the preceding quarter. The increase in financial assets under management was primarily the result of higher equity markets, along with net inflows into fee-based accounts in the Private Client Group.
Bank
- Quarterly net revenues of $514 million, up 86% over the prior year's fiscal third quarter and down 5% compared to the preceding quarter
- Quarterly pre-tax income of $66 million, down 11% compared to the prior year's fiscal third quarter and 27% compared to the preceding quarter
- Bank segment net interest margin ("NIM") of 3.26% for the quarter, up 85 basis points over the prior year's fiscal third quarter and down 37 basis points compared to the preceding quarter
- Net loans of $43.3 billion, up 4% over June 2022 and down 1% compared to March 2023
Quarterly net revenues increased over the prior-year quarter driven by higher asset balances and the favorable impact from higher short-term interest rates. Sequentially, quarterly net revenues declined 5% due to lower net interest income. The Bank segment's NIM decreased 37 basis points during the quarter to 3.26%, primarily due to increased interest expense from higher-cost funding as ESP balances replaced a portion of lower-cost RJBDP client cash sweep balances. Net loans increased 4% over the prior-year quarter and declined 1% compared to the preceding quarter primarily driven by lower corporate loans. Quarterly bank loan provision for credit losses of $54 million increased over the preceding quarter primarily due to weaker macroeconomic assumptions for the Moody's CRE Price Index in the Current Expected Credit Loss ("CECL") model. Despite a higher provision, the credit quality of the loan portfolio is solid, with criticized loans as a percent of total loans held for investment ending the quarter at 0.94%, down from 1.63% at June 2022 and up slightly from 0.92% at March 2023. Bank loan allowance for credit losses as a percent of total loans held for investment was 1.04%, and bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.90%.
Other
During the fiscal third quarter, the firm repurchased 3.31 million shares of common stock for $300 million at an average price of $91 per share. As of July 26, 2023, approximately $750 million remained available under the Board's approved common stock repurchase authorization. At the end of the quarter, the total capital ratio was 22.0%(4) and the tier 1 leverage ratio was 11.4%(4), both well above regulatory requirements.
A conference call to discuss the results will take place today, Wednesday, July 26, at 5:00 p.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: 877-252-3031 (conference code: 22027631). An audio replay of the call will be available at the same location until October 26, 2023.
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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 8,700 financial advisors. Total client assets are $1.28 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, divestitures, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, future or conditional verbs such as "will," "may," "could," "should," and "would," as well as any other statement that necessarily depends on future events, is 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.
Media Contact: Steve Hollister Raymond James 727.567.2824 Investor Contact: Kristina Waugh Raymond James 727.567.7654