01—Abstract
Summary
Summary of the 10-K filed November 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported fiscal 2016 (year ended September 30, 2016) net revenues of $5.4 billiona, up $203 million, or 4%, from the prior year.
Net income attributable to RJF was $529 millionb, an increase of $27 million, or 5%, and diluted earnings per share were $3.65, a 6% increase. Excluding acquisition-related expenses, the company reports non-GAAP adjusted net income of $556 million and adjusted diluted EPS of $3.84. Total client assets under administration rose 26% to $604.4 billion, aided by the Alex.
Brown and 3Macs acquisitions, advisor recruiting and market gains. The Private Client Group generated net revenues of $3.62 billionc, while the Capital Markets segment reported $1 billion and RJ Bank reported $494 million, up 19%, with pre-tax income of $337 million. The Other segment posted a pre-tax loss of $149 million, reflecting lower private equity gains and acquisition-related costs.
RJ Bank's total assets were $16.6 billion, and total company assets rose to $31.6 billiond from $26.5 billion, with bank loans, net, rising to $15.2 billion. The filing also highlights risks investors should weigh: the company is subject to the Department of Labor fiduciary rule, Volcker Rule compliance could require selling private equity interests, and the company faces litigation tied to the Jay Peak EB-5 matter, where plaintiffs seek damages and a range of possible loss cannot be estimated.
Morgan Keegan legacy matters are subject to indemnification from Regions. The company's senior long-term debt ratings were BBB (S&P, positive outlook) and Baa2 (Moody's, positive outlook).
02—Key points
Key Highlights
- Net revenues rose 4% to $5.4 billion, and net income attributable to RJF rose 5% to $529 million for fiscal 2016.
- Diluted EPS of $3.65 increased 6%; non-GAAP adjusted diluted EPS, excluding acquisition-related expenses, was $3.84, up 12% from $3.43.
- Total client assets under administration increased 26% to $604.4 billion, driven by the Alex. Brown and 3Macs acquisitions, advisor recruiting and higher equity markets.
- Private Client Group net revenues increased 3% to $3.62 billion, with fee-based account assets up 29% to $231.0 billion; recurring revenue was about 77% of segment revenue.
- RJ Bank net revenues grew 19% to $494 million and pre-tax income rose 21% to $337 million, while total bank loans increased to $15.4 billion.
- Capital Markets pre-tax income rose 30% to $139 million, while the Other segment's pre-tax loss widened to $149 million.
- The company issued $800 million of senior notes in July 2016 and repaid $250 million of 4.25% notes in April 2016; total senior notes payable reached $1.70 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 22, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $5.52B$5.31B | +4.0% |
| Interest Expense | $116.06M$106.07M | +9.4% |
| Net Income | $529.35M$502.14M | +5.4% |
| EPS (Basic) | $3.72$3.51 | +6.0% |
| EPS (Diluted) | $3.65$3.43 | +6.4% |
| Shares Outstanding (Basic) | 141.77M142.55M | −0.5% |
| Shares Outstanding (Diluted) | 144.51M145.94M | −1.0% |
05—Questions
Frequently Asked Questions
How did Raymond James perform financially in fiscal 2016?
Net revenues were $5.4 billion, up $203 million or 4%. Net income attributable to RJF was $529 million, up $27 million or 5%, and diluted EPS was $3.65, up 6%. Excluding acquisition-related expenses, adjusted diluted EPS was $3.84.
What drove growth in client assets and revenue?
Total client assets under administration increased 26% to $604.4 billion, attributed to the Alex. Brown and 3Macs acquisitions, strong financial advisor recruiting and retention, and an increase in U.S. equity markets. Fee-based account revenue increased $116 million, or 8%.
What are the main regulatory and legal risks disclosed?
The filing discusses the Department of Labor fiduciary rule, which will increase compliance costs, and the Volcker Rule, which may require selling certain private equity fund interests at less than carrying value. It also describes Jay Peak EB-5 lawsuits seeking $250 million in one class action, where a range of possible loss cannot be estimated. Morgan Keegan matters are subject to indemnification from Regions.
How strong is the company's balance sheet and liquidity?
Total assets were $31.6 billion and total equity was $5.1 billion. RJF and RJ Bank were categorized as well capitalized at September 30, 2016. Cash and cash equivalents at the parent were $371,978 thousand, and about $810 million of total cash was available to the parent without restrictions. Senior debt ratings were BBB (S&P) and Baa2 (Moody's), both with positive outlooks.
How is the RJ Bank segment's credit quality trending?
Nonperforming assets rose to $85.7 million, or 0.50% of RJ Bank total assets, from 0.39% a year earlier. The allowance for loan losses was $197 million, or 1.30% of total loans, and a $35 million increase in nonperforming C&I loans was partly offset by a decline in nonperforming residential mortgages.
06—Continue