Raymond James Financial (NYSE:RJF) reported record fiscal third-quarter revenue and earnings, citing growth across its wealth management, asset management and banking businesses, continued advisor recruiting momentum and a stronger investment banking environment, though management said capital markets activity remains below normalized levels.
Chief Executive Officer Paul Shoukry said the company generated record quarterly revenues of $3.93 billion, up 16% from the prior-year quarter and 2% from the preceding quarter. Pre-tax income rose 33% year over year and 2% sequentially to $750 million.
Chief Financial Officer Butch Oorlog said net income available to common shareholders was $595 million, while earnings per diluted share reached a record $3.01. Adjusted net income available to common shareholders, excluding acquisition-related expenses, was $620 million, resulting in record adjusted earnings per diluted share of $3.14.
Private Client Group assets reach record level
The Private Client Group ended the quarter with a record $1.86 trillion in client assets under administration, up 9% from the preceding quarter and 18% from a year earlier. Domestic net new assets were $21.7 billion during the quarter, representing a 5.5% annualized growth rate.
Shoukry said Raymond James recruited financial advisors to its domestic independent contractor and employee channels during the quarter with trailing 12-month production totaling $156 million and nearly $23 billion of client assets at their prior firms. Through the first nine months of the fiscal year, the company recruited advisors with $393 million in trailing 12-month production and more than $56 billion in client assets at previous firms.
During the question-and-answer session, Shoukry said the company’s recruiting pipeline remains broad-based across affiliation options and is not tied to a single competitor or market catalyst. He also emphasized advisor retention, saying Raymond James has a 97% advisor satisfaction rate based on company surveys.
“That retention is the foundation for the growth,” Shoukry said. He added that advisors are attracted to the firm’s combination of culture, technology, product capabilities and affiliation choice.
The Private Client Group generated pre-tax income of $423 million on record quarterly net revenues of $2.84 billion. Oorlog said revenues increased 14% year over year, primarily because of higher assets under administration, market appreciation, strong retention and net new assets. Pre-tax income rose 3% from the year-ago period, with revenue growth partly offset by lower interest rates and investments in growth, including recruiting.
Capital Markets improves, but activity remains below normal
Raymond James’ Capital Markets segment posted quarterly net revenues of $477 million and pre-tax income of $48 million. Oorlog said revenue rose both year over year and sequentially, largely because of higher M&A and advisory revenue and higher debt underwriting revenue.
Shoukry said investment banking results improved in the quarter, but activity levels remain below what the company would consider a normalized environment, particularly in the middle market and sponsor-driven client segments. He said Raymond James entered the fiscal fourth quarter with an “encouraging pipeline.”
Asked what is needed for activity to return to normalized levels, Shoukry pointed to pent-up demand among financial sponsors, portfolio companies held longer than originally expected and buyer dry powder. He also cited industry-specific issues, including concerns around artificial intelligence in software and fintech, and valuation gaps between buyers and sellers.
“We think that there’s going to be significant room for upside in investment banking,” Shoukry said, while noting that timing remains difficult to predict.
Asset Management boosted by market gains, inflows and Clark Capital
The Asset Management segment generated record net revenues of $362 million and pre-tax income of $143 million. Oorlog said results were driven by higher financial assets under management compared with the prior-year quarter, reflecting market appreciation and strong net inflows into Private Client Group fee-based accounts.
Raymond James also completed its acquisition of Clark Capital during the quarter. Shoukry said the acquisition added wealth-focused solutions and approximately $47 billion in combined assets under management and non-discretionary assets to Raymond James’ platform.
In response to an analyst question, Shoukry said Clark Capital is a strong cultural fit and that the company is focused initially on stabilizing the client base and team before pursuing broader revenue synergies.
“Frankly, for the first year or so after you join a family, you really focus on stabilizing your client base, stabilizing your team, and getting everyone comfortable with the new family,” he said.
At the consolidated level, asset management and related administrative fees were $2.08 billion, up 20% from the prior year and 3% from the preceding quarter. Oorlog said fiscal fourth-quarter asset management and related administrative fees are expected to increase approximately 11% from the third-quarter level, primarily because of higher Private Client Group fee-based assets at quarter-end.
Bank loans hit record as securities-based lending grows
The bank segment reported net revenues of $488 million and record pre-tax income of $206 million. Oorlog said revenue increased 7% year over year, largely due to net loan growth. The segment also benefited from a loan loss reserve release tied to stronger credit quality as the loan portfolio shifted toward lower-risk securities-based and residential mortgage loans.
Total bank loans ended the quarter at a record $56.2 billion, up 13% from the year-ago quarter and 3% sequentially. Shoukry said growth was driven primarily by securities-based lending balances, which increased more than $6 billion, or 34%, from a year earlier and 8% sequentially.
Oorlog said securities-based loans and residential mortgages represented 64% of total loans held for investment, at approximately 44% and 20% of the total, respectively.
Client domestic cash sweep and Enhanced Savings Program balances ended the quarter at $58.8 billion, up 2% sequentially and 7% year over year. Oorlog said growth in Enhanced Savings Program balances allowed Raymond James to shift part of its cash sweep program balances from its banks to third-party banks.
Combined net interest income and RJBDP fees from third-party banks were $658 million, up 1% from the prior quarter. Oorlog said Raymond James expects that combined figure to be approximately flat in the fiscal fourth quarter, assuming static interest rates and unchanged quarter-end balances, net of fiscal fourth-quarter fee billing collection.
Technology, AI and capital returns remain priorities
Management highlighted Raymond James’ technology investments, including more than $1.1 billion in annual technology spending. Shoukry said the company completed the enterprise rollout of Rai, its proprietary AI assistant, after a pilot program and phased deployment.
During the Q&A session, Shoukry said Rai had 6,500 unique users shortly after its June 15 rollout and a 99.5% satisfaction rate. He also said nearly 20,000 people had completed the company’s AI Academy four-course module.
“AI will not replace advisors. Advisors who use AI will replace advisors who do not use AI,” Shoukry said, describing the firm’s goal of helping advisors use AI to spend more time developing client relationships.
Raymond James returned $506 million of capital to shareholders during the quarter through dividends and share repurchases. The company repurchased $400 million of common stock at an average price of $152 per share during the quarter. Over the past 12 months, it repurchased 9.8 million shares for about $1.6 billion and returned nearly $2 billion to common shareholders, including dividends.
Oorlog said Raymond James ended the quarter with a Tier 1 leverage ratio of 11.7% and a total capital ratio of 22.5%, remaining above regulatory requirements. Parent company cash was $2.5 billion, including $1.3 billion above the company’s $1.2 billion target.
Shoukry said Raymond James enters the fiscal fourth quarter with momentum from strong business drivers, recruiting, investment banking pipelines and capital and liquidity to support growth.
About Raymond James Financial (NYSE:RJF)
Raymond James Financial is a diversified financial services firm headquartered in St. Petersburg, Florida. Founded in 1962, the company provides a range of services to individual investors, businesses and institutions through a combination of wealth management, capital markets, investment banking, asset management, banking and trust services. Its business model centers on a network of financial advisors and broker-dealer operations that deliver personalized financial planning, investment advisory services and brokerage solutions.
The firm’s core offerings include private client wealth management delivered by independent and employee advisors, equity and fixed-income research, institutional sales and trading, and investment banking services such as mergers and acquisitions advisory and capital raising.
