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News & Media
January 21, 2015

Raymond James Financial reports fiscal 1st quarter 2015 results

Printable version
  • Net revenues of $1.25 billion and net income of $126.3 million, or $0.87 per diluted share
  • Quarter-end records for client assets under administration of $483.0 billion, financial assets under management of $66.7 billion, and net loans of $11.8 billion
  • Private Client Group financial advisors reach 6,336, an increase of 158 over last year’s December and 71 over the preceding quarter
  • Annualized return on equity of 12.0 percent

ST. PETERSBURG, Fla - Raymond James Financial, Inc. (NYSE: RJF) today reported net revenues of $1.25 billion and net income of $126.3 million, or $0.87 per diluted share, for the fiscal first quarter ended December 31, 2014. Net revenues grew 6 percent over the prior year’s fiscal first quarter but fell 3 percent compared to the preceding quarter, which benefited from record investment banking revenues. A seasonal slowdown in the December quarter is not unusual for our business. Pre-tax income of $202.9 million increased 13 percent over the prior year’s fiscal first quarter, resulting in a pre-tax margin on net revenues for the quarter of 16.2 percent.

“Despite a challenging market environment for our Capital Markets segment, we generated satisfactory financial results this quarter,” said CEO Paul Reilly. “More importantly, we continued to deliver on our long-term growth objectives, adding 71 financial advisors during the quarter while also achieving new quarterly records for client assets under administration, financial assets under management, and net loans.”

Segment Results

Private Client Group

  • Net revenues of $845.2 million, up 8 percent compared to the prior year’s fiscal first quarter but down 2 percent compared to the preceding quarter
  • Pre-tax income of $92.7 million, a substantial 30 percent increase over the prior year’s fiscal first quarter but down 7 percent compared to the preceding quarter

Securities commissions and fees in the Private Client Group segment grew 7 percent compared to the prior year’s fiscal first quarter but fell 3 percent compared to the preceding September quarter. The sequential decline in securities commissions and fees in the segment was mostly attributable to a one-time mutual fund commission adjustment. In addition, new issue sales credits declined due to lower equity underwriting activity. Meanwhile, the segment’s client assets grew to $459.1 billion, which was driven by market appreciation and very strong financial advisor retention and recruiting results. Assets in fee-based accounts grew 4 percent over the preceding September to $173.9 billion, representing 37.9 percent of total client assets in the segment. Asset growth in fee-based accounts should provide a tailwind for the segment’s revenues in the March quarter, as most of these accounts are billed based on asset balances at the beginning of each quarter.

“We are very pleased with the net addition of financial advisors during the quarter, which is a testament to our firm’s ability to attract and retain advisors in all of our affiliation platforms,” explained Reilly. “Additionally, average advisor productivity continues to improve as we remain focused on our culture while investing in technology and solutions to help them strengthen and expand their client relationships.”

Capital Markets

  • Net revenues of $231.8 million, down 3 percent compared to the prior year’s fiscal first quarter and down 11 percent from the preceding quarter, which benefited from record investment banking revenues
  • Pre-tax income of $27.7 million, down 17 percent and 30 percent, respectively, compared to the prior year’s fiscal first quarter and the preceding quarter

Despite solid M&A revenues in the quarter of $47.4 million, total investment banking revenues were down compared to both the prior year’s December quarter and the preceding September quarter, primarily due to a decline in both equity and fixed income underwriting revenues. The investment banking environment was particularly difficult in Canada, which was negatively impacted by the sharp decline in oil prices. Institutional equity commissions increased 7 percent compared to the prior year’s December quarter and 10 percent compared to the preceding September quarter, as equity commissions benefited from increased market volatility and the annual release of the firm’s Analysts’ Best Picks® in the quarter. Similarly, fixed income commissions in the segment increased 12 percent compared to the preceding September quarter on increased volatility, although net trading profits declined.

“While investment banking is inherently a lumpy business, we are optimistic about our overall activity levels going forward, although we are cautious about the near-term impact of the energy sector,” added Reilly.

Asset Management

  • Record net revenues of $99.6 million, up 4 percent compared to the prior year’s fiscal first quarter and up 5 percent compared to the preceding quarter
  • Record pre-tax income of $39.8 million, a substantial 25 percent increase over the prior year’s fiscal first quarter and a 13 percent increase over the preceding quarter
  • Record financial assets under management of $66.7 billion, up 10.2 percent over the year-ago December and up 3.3 percent from the preceding quarter

Net revenues in the quarter were lifted by rising asset levels and $5.1 million in annual performance fees. The increase in assets under management was due to both positive net sales and market appreciation. The performance fee coupled with increased operating leverage fueled the segment’s 40-percent pre-tax margin on net revenues in the quarter.

Raymond James Bank

  • Record net revenues of $100.5 million, significant increases of 23 percent and 8 percent over the prior year’s fiscal first quarter and the preceding quarter, respectively
  • Pre-tax income of $64.4 million, up 13 percent compared to the prior year’s fiscal first quarter and essentially flat with the preceding quarter
  • Record net loans of $11.8 billion, a 27 percent increase over the year-ago December and $846 million higher than the preceding September

The Bank grew its loan portfolio 7.7 percent over the preceding quarter, which was driven by robust net loan production as well as the purchase of a $207 million residential mortgage portfolio that closed during the quarter. Despite improving credit metrics, the loan loss provision increased to $9.4 million primarily due to loan loss reserve additions resulting from the substantial net loan growth. The Bank’s net interest margin was 3.04 percent in the quarter, the same as the net interest margin in the prior year’s fiscal first quarter and a 2 basis point improvement compared to the preceding September quarter.

Other

Total revenues in the Other segment decreased $10.3 million compared to the prior year’s fiscal first quarter, which included $10 million of gains on private equity investments and a $5.5 million gain associated with the redemption of certain auction rate securities.

“We are extremely enthusiastic about our record levels of client assets under administration, financial assets under management, and net loans, which are three of the primary drivers of our overall business,” explained Reilly. “The recent spike in market volatility and heightened concerns related to global growth prospects reinforce the value of our conservative, long-term approach that focuses on serving our clients.”

A conference call to discuss the results will take place tomorrow morning, Thursday, January 22, at 8:15 a.m. ET. For a listen only connection, please call: 877-666-1952 (conference code: 64910273), or visit raymondjames.com/analystcall for a live audio webcast. An audio replay of the call will be available until 5:00 p.m. ET on July 15, 2015, under the Investor Relations page of our website at www.raymondjames.com.

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. Its three principal wholly owned broker-dealers, Raymond James & Associates, Raymond James Financial Services, and Raymond James Ltd., have approximately 6,300 financial advisors serving in excess of 2.6 million client accounts in more than 2,600 locations throughout the United States, Canada and overseas. Total client assets are approximately $483 billion. Public since 1983, the firm has been listed on the New York Stock Exchange since 1986 under the symbol RJF. Additional information is available at www.raymondjames.com.

Forward Looking Statements
Certain statements made in this press release and the associated conference call 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 and divestitures, anticipated results of litigation and regulatory developments or general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” 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 from time to time, including our most recent Annual Report on Form 10-K, which is available on 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.


Summary results of operations
  Three months ended
  December 31,
2014
December 31,
2013
%
Change
September 30,
2014
%
Change
  ($ in thousands, except per share amounts)
Total revenues $1,279,844 $1,208,774 6% $1,310,778 (2)%
Net revenues $1,252,460 $1,183,402 6% $1,285,091 (3)%
Pre-tax income $202,908 $178,924 13% $212,414 (4)%
Net income $126,296 $116,633 8% $136,366 (7)%
           
Earnings per common share:          
Basic $0.89 $0.83 7% $0.97 (8)%
Diluted $0.87 $0.81 7% $0.94 (7)%


Consolidated Statements of Income
(Unaudited)
           
  Three months ended
  December 31,
2014
December 31,
2013
%
Change
September 30,
2014
%
Change
  ($ in thousands, except per share amounts)
Revenues:          
     Securities commissions and fees $834,009 $782,180 7% $840,165 (1)%
     Investment banking 77,538 79,797 (3)% 115,019 (33)%
     Investment advisory fees 98,761 93,414 6% 91,772 8%
     Interest 132,109 117,093 13% 126,009 5%
     Account and service fees 111,158 93,574 19% 111,524
     Net trading profit 8,881 18,151 (51)% 14,374 (38)%
     Other 17,388 24,565 (29)% 11,915 46%
          Total revenues 1,279,844 1,208,774 6% 1,310,778 (2)%
           
     Interest expense (27,384) (25,372) 8% (25,687) 7%
          Net revenues 1,252,460 1,183,402 6% 1,285,091 (3)%
           
Non-interest expenses:          
     Compensation, commissions and benefits 841,450 804,945 5% 869,893 (3)%
     Communications and information processing 55,916 61,854 (10)% 57,996 (4)%
     Occupancy and equipment costs 39,227 39,685 (1)% 41,344 (5)%
     Clearance and floor brokerage 9,498 9,954 (5)% 10,710 (11)%
     Business development 36,990 32,244 15% 35,682 4%
     Investment sub-advisory fees 14,255 11,799 21% 13,928 2%
     Bank loan loss provision 9,365 1,636 472% 5,483 71%
     Other 47,110 42,473 11% 44,851 5%
          Total non-interest expenses 1,053,811 1,004,590 5% 1,079,887 (2)%
           
Income including noncontrolling interests and before provision for income taxes 198,649 178,812 11% 205,204 (3)%
     Provision for income taxes 76,612 62,291 23% 76,048 1%
          Net income including noncontrolling interests 122,037 116,521 5% 129,156 (6)%
          Net loss attributable to noncontrolling interests (4,259) (112) NM (7,210) 41%
          Net income attributable to Raymond James Financial, Inc. $126,296 $116,633 8% $136,366 (7)%
           
Net income per common share – basic $0.89 $0.83 7% $0.97 (8)%
Net income per common share – diluted $0.87 $0.81 7% $0.94 (7)%
Weighted-average common shares outstanding – basic 141,246 139,089   140,490  
Weighted-average common and common equivalent shares outstanding – diluted 145,282 142,597   144,521  


Raymond James Financial, Inc.
Segment Results
(Unaudited)
           
  Three months ended
  December 31,
2014
December 31,
2013
%
Change
September 30,
2014
%
Change
  ($ in thousands)
Total revenues:          
     Private Client Group $849,243 $782,749 (1) 8% $866,432 (1) (2)%
     Capital Markets 235,174 241,440 (1) (3)% 264,261 (1) (11)%
     Asset Management 99,630 96,016 4% 94,918 5%
     RJ Bank 102,956 83,873 23% 95,547 8%
     Other (2) 9,766 20,089 (51)% 5,148 90%
     Intersegment eliminations (16,925) (15,393)   (15,528)  
          Total revenues $1,279,844 $1,208,774 6% $1,310,778 (2)%
           
Net revenues:          
     Private Client Group $845,215 $780,222 (1) 8% $864,286 (1) (2)%
     Capital Markets 231,802 238,089 (1) (3)% 260,392 (1) (11)%
     Asset Management 99,624 96,013 4% 94,913 5%
     RJ Bank 100,518 81,928 23% 93,068 8%
     Other (2) (9,612) 820 NM (13,906) 31%
     Intersegment eliminations (15,087) (13,670)   (13,662)  
          Total net revenues $1,252,460 $1,183,402 6% $1,285,091 (3)%
           
Pre-tax income (loss) (excluding noncontrolling interests):          
     Private Client Group $92,744 $71,510 30% $100,180 (7)%
     Capital Markets 27,653 33,445 (17)% 39,540 (30)%
     Asset Management 39,796 31,836 25% 35,280 13%
     RJ Bank 64,356 57,058 13% 64,057
     Other (2) (21,641) (14,925) (45)% (26,643) 19%
          Pre-tax income (excluding noncontrolling interests) $202,908 $178,924 13% $212,414 (4)%


(1) Certain prior period amounts have been reclassified to conform to the current period’s presentation.

(2) The Other segment includes the results of our principal capital and private equity activities as well as various corporate overhead costs of RJF.


Raymond James Financial, Inc.
Selected key metrics (Unaudited)
Details of certain key revenue and expense components:          
  Three months ended
  December 31,
2014
December 31,
2013
%
Change
September 30,
2014
%
Change
  ($ in thousands)
Securities commissions and fees:          
PCG segment securities commissions and fees $706,684 $657,507 7% $725,791 (3)%
Capital Markets segment institutional sales commissions:          
     Equity commissions 70,214 65,645 7% 63,806 10%
     Fixed Income commissions 63,944 65,068 (2)% 57,246 12%
All other segments 75 88 (15)% 58 29%
Intersegment eliminations (6,908) (6,128)   (6,736)  
          Total securities commissions and fees $834,009 $782,180 7% $840,165 (1)%
           
Investment banking revenues:          
Equity:          
     Underwritings $18,165 $19,504 (1) (7)% $32,019 (43)%
     Mergers & acquisitions and advisory fees 47,411 41,059 15% 57,353 (17)%
Tax credit funds syndication fees 3,590 8,406 (1) (57)% 9,244 (61)%
Fixed Income investment banking revenues 8,375 10,833 (23)% 16,407 (49)%
Other (3) (5) 40% (4) 25%
          Total investment banking revenues $77,538 $79,797 (3)% $115,019 (33)%
           
Other revenues:          
Realized/unrealized gain attributable to private equity investments $5,200 $10,065 (48)% $4,486 16%
All other revenues 12,188 14,500 (2) (16)% 7,429 64%
          Total other revenues $17,388 $24,565 (29)% $11,915 46%
           
Other expenses:          
Losses of real estate partnerships held by consolidated variable interest entities (3) $7,973 $8,922 (1) (11)% $7,524 6%
All other expenses 39,137 33,551 (1) 17% 37,327 5%
          Total other expenses $47,110 $42,473 11% $44,851 5%
           
Net (loss) income attributable to noncontrolling interests:          
Private equity investments $2,689 $6,255 (57)% $(127) NM
Consolidation of low-income housing tax credit funds (8,688) (10,975) 21% (8,371) (4)%
Other 1,740 4,608 (62)% 1,288 35%
          Total net loss attributable to noncontrolling interests $(4,259) $(112) NM $(7,210) 41%


(1) Certain prior period amounts have been reclassified to conform to the current period’s presentation.

(2) Total includes a $5.5 million realized gain on the December 2013 redemption by the issuer of Jefferson County, Alabama Sewer Revenue Refunding Warrants auction rate securities that resulted from the resolution of the Jefferson County, Alabama bankruptcy proceedings.

(3) Nearly all of these losses are attributable to noncontrolling interests. After adjusting for the portion attributable to noncontrolling interests, RJF’s share of these losses is insignificant in all periods presented.


Raymond James Financial, Inc.
Selected key metrics (Unaudited)
Selected key financial metrics:
  As of
  December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
December 31,
2013
Total assets $24.3 bil. $23.3 bil. $23.1 bil. $22.9 bil. $21.9 bil.
Shareholders’ equity (attributable to RJF) $4,271 mil. $4,141 mil. $4,015 mil. $3,888 mil. $3,782 mil.
           
Book value per share $30.09 $29.40 $28.59 $27.75 $27.07
Tangible book value per share (a non-GAAP measure) (1) $27.71 $26.98 $26.15 $25.28 $24.57
           
Return on equity for the quarter (annualized) 12.0% 13.4% 12.4% 10.9% 12.5%
           
Total capital (to risk-weighted assets) 20.9% (2) 20.6% 20.5% 20.0% 20.4%
Tier I capital (to adjusted assets) 16.6% (2) 16.4% 15.8% 15.8% 15.2%
           
Pre-tax margin on net revenues - quarter 16.2% 16.5% 15.8% 14.0% 15.1%
           
Effective tax rate - quarter 37.8% 35.8% 35.8% 36.8% 34.8%
           
Private Client Group financial advisors:
  As of
  December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
December 31,
2013
Raymond James & Associates 2,491 2,462 2,455 2,438 2,430
Raymond James Financial Services 3,379 3,329 3,320 3,288 3,279
Raymond James Limited 380 391 397 397 395
Raymond James Investment Services 86 83 79 79 74
     Total advisors 6,336 6,265 6,251 6,202 6,178
           
Selected client asset metrics:          
  As of
  December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
December 31,
2013
  ($ in billions)
Client assets under administration $483.0 $475.0 $479.0 $458.1 $446.5
Private Client Group assets under administration $459.1 $450.6 $454.1 $434.0 $422.9
Private Client Group assets in fee-based accounts $173.9 $167.7 $168.0 $158.2 $151.2
Financial assets under management $66.7 $64.6 $65.3 $62.3 $60.5
Secured client lending (3) $3.0 $2.8 $2.7 $2.5 $2.4


(1) Tangible book value per share (a non-GAAP measure) is computed by dividing shareholders’ equity, less goodwill and other intangible assets in the amount of $352 million, $354 million, $356 million, $358 million, and $360 million as of December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively, which are net of their related deferred tax balance in the amounts of $14.6 million, $13.2 million, $12.8 million, $11.5 million, and $10.2 million as of December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively, by the number of common shares outstanding. Management believes tangible book value per share is a measure that is useful to investors because it allows them to better assess the capital strength of the company.

(2) Estimated.

(3) Includes client margin balances held by our broker-dealer subsidiaries and securities based loans available through RJ Bank.


Raymond James Bank
Selected financial highlights (Unaudited)
Selected operating data:
  Three months ended
  December 31,
2014
December 31,
2013
%
Change
September 30,
2014
%
Change
  ($ in thousands)
Net interest income $96,722 $82,114 18% $93,027 4%
Net revenues $100,518 $81,928 23% $93,068 8%
Bank loan loss provision $9,365 $1,636 472% $5,483 71%
Pre-tax income $64,356 $57,058 13% $64,057
Net recoveries $(120) $(291) (59)% $(189) (37)%
Net interest margin (% earning assets) 3.04% 3.04% 3.02% 1%


RJ Bank Balance Sheet data:
  As of
  December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
December 31,
2013
  ($ in thousands)
Total assets (1) $13,563,391 $12,547,902 $12,123,100 $11,798,723 $11,252,420
Total equity $1,388,054 $1,310,098 $1,254,560 $1,202,229 $1,138,374
Total loans, net $11,809,886 $10,964,299 $10,374,274 $10,028,101 $9,312,762
Total deposits (1) $11,449,746 $10,537,672 $10,276,206 $10,442,179 $10,012,324
Available for Sale (AFS) securities, at fair value $345,865 $361,554 $379,529 $424,394 $438,957
Net unrealized loss on AFS securities, before tax $(4,983) $(6,894) $(7,387) $(8,733) $(12,138)
Total capital (to risk-weighted assets) 12.6%(2) 12.5% 12.6% 12.5% 12.7%
Tier I capital (to adjusted assets) 10.9% (2) 10.7% 10.4% 10.4% 10.7%
Commercial and industrial loans (3) $6,767,827 $6,422,347 $6,049,340 $5,917,009 $5,518,307
Commercial Real Estate (CRE) and CRE construction loans (3) $1,714,153 $1,783,358 $1,683,831 $1,620,704 $1,446,684
Residential mortgage loans (3) $1,971,778 $1,751,793 $1,751,310 $1,741,965 $1,765,321
Securities based loans (3) $1,160,956 $1,023,702 $907,912 $772,926 $667,307
Tax-exempt loans (3) $242,029 $122,218 $94,855 $30,370 $—
Loans held for sale (3) (4) $134,529 $42,012 $61,746 $109,622 $86,223
           
Credit metrics:          
  As of
  December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
December 31,
2013
  ($ in thousands)
Allowance for loan losses $156,767 $147,574 $142,309 $137,940 $138,124
Allowance for loan losses (as % of loans) 1.33% 1.33% 1.36% 1.37% 1.46%
Nonperforming loans (5) $76,153 $80,665 $90,485 $94,464 $97,623
Other real estate owned $5,421 $5,380 $3,740 $2,968 $2,863
Total nonperforming assets $81,574 $86,045 $94,225 $97,432 $100,486
Nonperforming assets (as % of total assets) 0.60% 0.69% 0.78% 0.83% 0.89%
Total criticized loans (6) $178,053 $204,801 $247,296 $186,435 $310,704
1-4 family residential mortgage loans over 30 days past due (as a % 1-4 family residential loans) 1.91% 2.34% 2.49% 2.60% 2.81%


(1) Includes affiliate deposits.

(2) Estimated.

(3) Outstanding loan balances are shown gross of unearned income and deferred expenses.

(4) Primarily comprised of the guaranteed portions of Small Business Administration section 7(a) loans purchased from other financial institutions.

(5) Nonperforming loans includes 90+ days past due plus nonaccrual loans.

(6) Represents the loan balance for all loans in the Special Mention, Substandard, Doubtful and Loss classifications as utilized by the banking regulators. In accordance with its accounting policy, RJ Bank does not have any loan balances within the Loss classification as loans or a portion thereof, which are considered to be uncollectible, are charged-off prior to assignment to this classification.