01—Abstract
Summary
Summary of the 10-K filed November 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported record fiscal 2013 net revenues of $4.5 billiona ($4,485,427 thousand), up $679 million, or 18%, from the prior year, and net income attributable to RJF of $367.2 million, or $2.58 per diluted share, for the year ended September 30, 2013.
The results include a full twelve months of Morgan Keegan operations compared with six months in fiscal 2012, following the April 2, 2012 acquisition from Regions Financial Corporation. Management reports that all four operating segments achieved record net revenues and pre-tax earnings, and that Morgan Keegan integration initiatives are substantially complete. Acquisition-related expenses were $73.5 millionb, and adjusted (non-GAAP) earnings per share were $2.95.
Balance sheet and capital metrics were solid. Total assets reached $23.19 billionc and shareholders' equity was $3.66 billion, with book value per share of $26.40. RJ Bank, the bank subsidiary, reported pre-tax income of $267.7 million, aided by a sharp reduction in the loan loss provision to $2.6 million from $25.9 million, and both RJF and RJ Bank were categorized as well capitalized at year end.
Client assets under administration rose to a record $425.4 billiond, and the company paid quarterly dividends that rose from $0.13 to $0.14 during fiscal 2013, with a $0.16 quarterly dividend declared in November 2013. Key risks highlighted in the filing include the reliance on Regions Financial to honor indemnification obligations for pre-closing Morgan Keegan litigation, which management estimates could range from $30 million to $250 million, as well as ongoing regulatory change under the Dodd-Frank Act and the Basel III capital rules.
Pricing pressure in fixed income and equity trading, weakness in Canadian capital markets, and sensitivity to interest rates and market conditions also remain relevant. Management estimates that a 100 basis point instantaneous rise in short-term rates could increase pre-tax income by roughly $140 million to $170 million over twelve months.
02—Key points
Key Highlights
- Record net revenues of $4.49 billion, up 18%, with all four operating segments reporting record net revenues and pre-tax earnings.
- Diluted EPS of $2.58 (GAAP) versus $2.20 in fiscal 2012; adjusted non-GAAP diluted EPS of $2.95, up 18%.
- Morgan Keegan acquisition contributed a full year of results; acquisition-related expenses totaled $73.5 million and integration is substantially complete.
- RJ Bank pre-tax income rose 11% to $267.7 million as the loan loss provision fell to $2.6 million from $25.9 million.
- Client assets under administration reached a record $425.4 billion, and Asset Management assets under management in managed programs rose 31% to $56 billion.
- Book value per share was $26.40 and both RJF and RJ Bank were well capitalized at September 30, 2013.
- Regions Financial indemnification for pre-closing Morgan Keegan matters is a key contingent exposure, with estimated potential liability of $30 million to $250 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed November 26, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $4.60B$3.90B | +17.9% |
| Interest Expense | $110.37M$91.37M | +20.8% |
| Net Income | $367.15M$295.87M | +24.1% |
| EPS (Basic) | $2.64$2.22 | +18.9% |
| EPS (Diluted) | $2.58$2.20 | +17.3% |
| Shares Outstanding (Basic) | 137.73M130.81M | +5.3% |
| Shares Outstanding (Diluted) | 140.54M131.79M | +6.6% |
05—Questions
Frequently Asked Questions
What drove the increase in revenues and earnings in fiscal 2013?
Net revenues rose $679 million, or 18%, to $4.49 billion, largely because the results include twelve months of Morgan Keegan operations versus six months in fiscal 2012. Fiscal 2013 also included a $65 million gain on a proprietary capital investment. Pre-tax income increased $93 million, or 20%, to $564 million, while acquisition-related expenses and higher non-interest expenses partly offset these gains.
How did the Morgan Keegan acquisition affect the company?
RJF acquired Morgan Keegan from Regions Financial on April 2, 2012, expanding its private client and capital markets businesses. Morgan Keegan's financial advisors and client accounts were transferred to the RJ&A platform in mid-February 2013, and management considers integration substantially complete as of September 30, 2013. Total client assets under administration reached $425.4 billion.
What are the main risks related to the Morgan Keegan legacy matters?
Certain pre-closing Morgan Keegan litigation, including class actions tied to Regions Morgan Keegan Funds and SEC and state investigations of municipal bond sales, is subject to indemnification by Regions. Management estimates the range of potential liability for these matters, including defense costs, at $30 million to $250 million, and a liability of approximately $169 million is recorded within trade and other payables. RJF relies on Regions to honor these obligations.
How is the bank subsidiary performing and how well capitalized is it?
RJ Bank generated pre-tax income of $267.7 million, up 11%, driven mainly by a sharp decline in the loan loss provision and higher net interest income. Net charge-offs fell to $13.3 million. RJ Bank's total capital ratio to risk-weighted assets was 13.0% at September 30, 2013, above the 10% well-capitalized threshold, and the bank targets at least 12.5%.
What dividend and interest-rate sensitivity information did the company disclose?
Dividends declared per share were $0.56 for fiscal 2013, with quarterly dividends of $0.14 declared in August 2013 and $0.16 declared in November 2013 for payment in January 2014. Management estimates that a 100 basis point instantaneous rise in short-term interest rates could increase pre-tax income by approximately $140 million to $170 million over twelve months.
06—Continue