01—Abstract
Summary
Summary of the 10-K filed November 24, 2020. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. reported fiscal 2020 (year ended September 30, 2020) net revenues of $7.99 billiona, up $250 million, or 3%, while pre-tax income fell $323 million, or 23%, to $1.05 billion and net income decreased $216 million, or 21%, to $818 million.
Diluted earnings per share were $5.83b, a 19% decrease. Return on equity was 11.9%, compared with 16.2% in the prior year. Management attributes the earnings decline mainly to the Federal Reserve's March 2020 rate cuts of 150 basis points, which reduced net interest income and RJBDP fees from third-party banks, and to a $233 million bank loan loss provision, up from $22 million, driven by COVID-19 impacts.
A $46 millionc reduction in workforce expense was also recorded in the fourth quarter. Growth came from asset management and related administrative fees, which rose $342 million, or 12%, in PCG, and from Capital Markets, where net revenues rose 19% to $1.29 billion on stronger fixed income brokerage and underwriting activity. Total client assets under administration reached $883.3 billion, of which $475.3 billion was in fee-based accounts, and the firm had 8,239 financial advisors.
Total assets grew to $47.48 billiond, up $8.65 billion, largely from a $4.56 billion increase in available-for-sale securities and a $4.52 billion increase in bank deposits. The company stated it ended the year with capital ratios well in excess of regulatory requirements, over $2 billion of parent-company cash, and $487 million remaining under its share repurchase authorization.
It repurchased about 3.4 million shares for $263 million during the year. Management expects fiscal 2021 to reflect a full-year impact of the rate cuts, with RJ Bank's net interest margin at approximately 2%.
02—Key points
Key Highlights
- Net revenues rose 3% to $7.99 billion, but pre-tax income fell 23% to $1.05 billion and net income fell 21% to $818 million.
- Diluted EPS was $5.83, down 19%; adjusted diluted EPS, a non-GAAP measure, was $6.11, down 17%.
- Return on equity was 11.9%, versus 16.2% a year earlier; return on tangible common equity was 13.0%, versus 17.8%.
- RJ Bank's bank loan loss provision rose to $233 million from $22 million, and RJ Bank pre-tax income fell 62% to $196 million.
- Capital Markets net revenues increased 19% to $1.29 billion and pre-tax income increased 105% to $225 million, driven by fixed income brokerage.
- Client AUA reached $883.3 billion, with 53.8% in fee-based accounts; the firm had 8,239 financial advisors.
- The company repurchased about 3.4 million shares for $263 million and issued $500 million of 4.65% senior notes due 2030.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed November 24, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $8.17B$8.02B | +1.8% |
| Interest Expense | $178.00M$283.00M | −37.1% |
| Net Income | $818.00M$1.03B | −20.9% |
| EPS (Basic) | $3.96$4.88 | −18.9% |
| EPS (Diluted) | $3.88$4.78 | −18.8% |
| Shares Outstanding (Basic) | 206.40M211.50M | −2.4% |
| Shares Outstanding (Diluted) | 210.30M216.00M | −2.6% |
05—Questions
Frequently Asked Questions
Why did earnings decline despite higher revenues?
Net revenues increased $250 million, but pre-tax income fell $323 million. The filing attributes the decline mainly to lower short-term interest rates after the Federal Reserve's 150 basis point cut in March 2020, which reduced net interest income and RJBDP third-party bank fees, and to a $233 million bank loan loss provision tied to COVID-19 impacts.
What drove growth in the business segments?
PCG net revenues rose 4% to $5.55 billion, mainly from higher asset management and related administrative fees on larger fee-based accounts. Capital Markets net revenues rose 19% to $1.29 billion on higher fixed income brokerage and equity and debt underwriting revenue. Asset Management net revenues rose 3% to $715 million.
How strong is the company's capital and liquidity position?
The filing states that RJF and RJ Bank were categorized as well-capitalized as of September 30, 2020, with RJF's CET1 ratio at 24.2%. The company said it ended the year with over $2 billion of cash at the parent company, and $487 million remained under its share repurchase authorization.
What does management expect for fiscal 2021?
Management expects net interest income and RJBDP fees from third-party banks to reflect the full-year impact of the 150 basis point rate cut, and it does not anticipate short-term rates returning to early fiscal 2020 levels. It expects the average yield on RJBDP third-party bank balances to be approximately 0.30%, and RJ Bank's net interest margin to be approximately 2%. Further loan loss provisions are possible if market conditions deteriorate.
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