01—Abstract
Summary
Summary of the 10-K filed November 28, 2008. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported record annual gross and net revenues for fiscal 2008 (year ended September 30, 2008), with total revenues of $3.20 billiona, up from $3.11 billion, and net revenues of $2.81 billion, up from $2.61 billion.
Net income declined to $235.1 millionb from $250.4 million, and diluted EPS was $1.97 versus $2.11. The filing states that non-interest expenses grew 9%, which outpaced revenue growth. Pre-tax earnings fell in the Private Client Group ($177.7 million vs. $219.9 million) and Capital Markets ($50.2 million vs. $69.0 million), while RJBank's pre-tax earnings rose to $112.3 million from $27.0 million, with net interest income at RJBank increasing 155%.
Balance sheet growth was driven mainly by RJBank. Total assets reached $20.73 billionc (from $16.25 billion), bank loans rose to $7.10 billion net, and bank deposits increased to $8.77 billion from $5.59 billion. The company also carried a $1.9 billion overnight FHLB advance used to meet thrift qualification requirements, which was repaid on October 1, 2008.
Liquidity was tighter: the filing notes that many lenders reduced or ceased funding, a $200 milliond committed RJF credit line was fully drawn, and the Company was pursuing TLGP eligibility and a Capital Purchase Program application for up to approximately $300 million of preferred equity. Key risk items include auction rate securities investigations by the SEC, FINRA and state regulators, an unresolved Turkish tax assessment that led RJY to halt trading, RJBank's exposure to the residential acquisition and development/homebuilder industry (with $35.7 million in nonaccrual loans from four credits), and the planned conversion of RJBank to a national bank that would make RJF a bank holding company and financial holding company. Asset under management declined 10% to $37.98 billion as market depreciation outweighed net inflows of about $7 billion.
02—Key points
Key Highlights
- Record annual gross and net revenues: total revenues of $3,204,932 thousand (up from $3,109,579 thousand) and net revenues of $2,812,703 thousand (up from $2,609,915 thousand).
- Net income fell to $235,078 thousand from $250,430 thousand; diluted EPS was $1.97 versus $2.11 in fiscal 2007, as non-interest expenses grew 9%.
- RJBank was the only segment to increase pre-tax income, rising to $112,282 thousand from $27,005 thousand, with net interest income up 155% to $215,586 thousand.
- Private Client Group pre-tax earnings declined 19% to $177,696 thousand; its margin fell to 9.8% from 12.6%, and Capital Markets pre-tax earnings fell to $50,169 thousand from $68,966 thousand.
- Total assets grew to $20,731,859 thousand from $16,254,168 thousand, mainly from RJBank bank loans of $7,095,227 thousand net and bank deposits of $8,774,457 thousand.
- Liquidity pressure was significant: a $1.9 billion overnight FHLB advance was repaid October 1, 2008, the $200 million RJF committed credit line was fully drawn, and the Company applied for the U.S. Treasury Capital Purchase Program for up to about $300 million of preferred equity.
- Assets under management fell 10% to $37,984,969 thousand, reflecting market depreciation of about $5.9 billion in non-managed fee-based assets, although net inflows of roughly $7 billion partly offset this.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed November 28, 2008Financial Statements
| Revenue | $3.20B |
| Net Income | $235.08M |
| EPS (Basic) | $1.95 |
| EPS (Diluted) | $1.93 |
| Shares Outstanding (Basic) | 116.11M |
| Shares Outstanding (Diluted) | 117.14M |
05—Questions
Frequently Asked Questions
How did Raymond James perform financially in fiscal 2008?
The company reported record annual gross and net revenues, with total revenues of $3.20 billion and net revenues of $2.81 billion. Net income declined 6% to $235.1 million, because non-interest expenses grew 9%, and diluted EPS fell to $1.97 from $2.11.
Which business segments drove the results?
RJBank was the standout, with pre-tax earnings rising to $112.3 million from $27.0 million on a 155% increase in net interest income. The Private Client Group and Capital Markets segments both saw pre-tax earnings decline, while Emerging Markets posted a pre-tax loss of $3.3 million.
What liquidity and funding risks does the filing disclose?
Lenders had reduced or ceased providing funding, and a $600 million uncommitted repurchase facility was placed on hold. The company used a $1.9 billion overnight FHLB advance for thrift qualification, repaid October 1, 2008, and it is pursuing TLGP eligibility and an application under the Capital Purchase Program.
What legal and regulatory matters could affect investors?
The company faces SEC, FINRA and state investigations, plus a class action, related to auction rate securities; approximately $1.9 billion of ARS was held by customers in April 2008, declining to about $1 billion by September 30, 2008. A Turkish tax assessment led RJY to halt trading, and the company plans to become a bank holding company and financial holding company as RJBank converts to a national bank.
What credit quality trends appeared at RJBank?
Nonperforming assets rose to $62.3 million from $5.7 million, and net loan charge-offs were $13.6 million versus $1.1 million a year earlier. Four credits in the residential acquisition and development/homebuilder industry accounted for $35.7 million of nonaccrual loans, and the company states that RJBank has no exposure to subprime loans.
06—Continue