01—Abstract
Summary
Summary of the 10-K filed November 23, 2021. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported strong fiscal 2021 results for the year ended September 30, 2021, with net revenues of $9.76 billiona, an increase of 22% compared with the prior year, and pre-tax income of $1.79 billion, an increase of 70%.
Net income was $1.40 billionb, 72% higher than the prior year, and diluted earnings per share were $6.63, which reflected a 3-for-2 stock split in September 2021. Return on equity was 18.4%, compared with 11.9% for the prior year. Growth was driven by higher asset management and related administrative fees, largely from higher PCG assets in fee-based accounts, and by strong Capital Markets results, with investment banking revenues of $1.10 billion, up 80%.
Net interest income and RJBDP fees from third-party banks declined because of lower short-term interest rates, and the firm expects near-zero rates to continue into fiscal 2022. The firm ended the year with total client assets under administration of $1.12 trillionc and total assets of $61.89 billion. Its total capital ratio was 26.2% and its tier 1 leverage ratio was 12.6%, and both RJF and Raymond James Bank were categorized as well-capitalized.
RJF completed a $750 milliond 3.75% senior notes offering due 2051, used it to early-redeem $750 million of higher-coupon notes, and recognized $98 million in losses on extinguishment of debt. The firm also completed three acquisitions during fiscal 2021 (NWPS, Financo and Cebile) and announced the pending acquisitions of Charles Stanley Group PLC and TriState Capital Holdings, Inc., which it expects to close in fiscal 2022. Management also stated that it does not expect to repurchase shares until after the TriState Capital closing, due to regulatory restrictions.
Management highlighted several headwinds for fiscal 2022, including near-zero short-term interest rates, economic uncertainty tied to inflation and supply chain issues, pandemic-related uncertainty including the Delta variant, and expected volatility in brokerage and investment banking revenues. Management also expects expenses to continue rising as travel and technology investment increase.
02—Key points
Key Highlights
- Net revenues rose 22% to $9.76 billion and pre-tax income rose 70% to $1.79 billion for fiscal 2021.
- Net income was $1.40 billion, up 72%; diluted EPS was $6.63, up 71%, reflecting the 3-for-2 stock split in September 2021.
- Adjusted net income was $1.49 billion and adjusted EPS was $7.05, excluding $98 million of debt extinguishment losses and $19 million of acquisition-related expenses.
- Return on equity was 18.4% versus 11.9% in the prior year; return on tangible common equity was 20.4%.
- Private Client Group client assets under administration reached $1.12 trillion, with $627.1 billion in fee-based accounts; the firm had 8,482 financial advisors.
- Capital Markets net revenues rose 46% to $1.89 billion, with investment banking revenues up 80% to $1.10 billion.
- Capital position remained strong, with a total capital ratio of 26.2% and tier 1 leverage ratio of 12.6%; $1.16 billion of parent-level cash was reported.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed November 23, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $9.91B$8.17B | +21.3% |
| Interest Expense | $150.00M$178.00M | −15.7% |
| Net Income | $1.40B$818.00M | +71.5% |
| EPS (Basic) | $6.81$3.96 | +72.0% |
| EPS (Diluted) | $6.63$3.88 | +70.9% |
| Shares Outstanding (Basic) | 205.70M206.40M | −0.3% |
| Shares Outstanding (Diluted) | 211.20M210.30M | +0.4% |
05—Questions
Frequently Asked Questions
What drove the increase in Raymond James's fiscal 2021 results?
The filing attributes the increase in net revenues mainly to higher asset management and related administrative fees, which rose $894 million or 28% in the Private Client Group, largely due to higher assets in fee-based accounts. Strong investment banking and brokerage revenues in Capital Markets also contributed, and private equity valuation gains of $74 million helped the Other segment.
How did the pending acquisitions affect the firm's capital plans?
RJF announced the acquisition of TriState Capital Holdings, Inc. in a combination cash and stock transaction valued at approximately $1.1 billion, and the acquisition of Charles Stanley Group PLC at about £279 million. The firm set aside $400 million of cash for the Charles Stanley closing and stated it does not expect to repurchase shares until after the TriState Capital closing due to regulatory restrictions.
What risks does management highlight for fiscal 2022?
Management expects continued headwinds from near-zero short-term interest rates, which reduce net interest income and RJBDP fees from third-party banks. It also cites economic uncertainty from inflation, supply chain issues and U.S. economic policy, pandemic-related uncertainty, possible volatility in brokerage and investment banking revenues, and rising expenses. The firm also noted that a Moody's review for upgrade was in progress.
How strong is the firm's capital and liquidity position?
As of September 30, 2021, RJF's total capital ratio was 26.2% and its tier 1 leverage ratio was 12.6%, both more than double the regulatory requirements to be considered well-capitalized. The firm had $1.16 billion of cash at the parent company, and Raymond James Bank was categorized as well-capitalized.
06—Continue