01—Abstract
Summary
Summary of the 10-K filed November 22, 2022. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported fiscal 2022 (year ended September 30, 2022) net revenues of $11.00 billiona, up 13%, and pre-tax income of $2.02 billion, also up 13%.
Net income available to common shareholders was $1.51 billionb, up 7%, and diluted earnings per share were $6.98, up 5%. Return on common equity was 17.0%, compared with 18.4% in the prior year. Management attributes the revenue growth to higher fee-based client assets, higher short-term interest rates benefiting net interest income and RJBDP fees, and acquisitions of TriState Capital, Charles Stanley, and SumRidge Partners.
Brokerage and investment banking revenues declined from a strong prior year due to market uncertainty. Acquisition-related expenses totaled $147 millionc, and adjusted earnings per diluted share, a non-GAAP measure, were $7.49. The balance sheet grew substantially, with total assets of $80.95 billion, up 31%, driven largely by the TriState Capital acquisition, which added bank loans, deposits, and preferred stock.
Bank deposits rose to $51.36 billiond. The firm reported a tier 1 leverage ratio of 10.3% and a total capital ratio of 20.4%, and it stated that RJF, Raymond James Bank, and TriState Capital Bank were well-capitalized. Management expects fiscal 2023 to benefit from the full-year effect of Federal Reserve rate increases, while noting expected declines in client cash balances and continued market uncertainty.
The Bank segment's provision for credit losses rose to $100 million from a benefit of $32 million in the prior year. The filing reports that the firm is cooperating with an SEC investigation of its investment advisory business's compliance with records preservation requirements for electronic messaging channels. The independent auditor, KPMG LLP, issued an unqualified opinion on both the financial statements and internal control over financial reporting, which excluded TriState Capital and SumRidge Partners from management's assessment.
02—Key points
Key Highlights
- Net revenues of $11.00 billion rose 13% and pre-tax income of $2.02 billion rose 13% for fiscal 2022.
- Diluted EPS was $6.98, up 5%; adjusted diluted EPS (non-GAAP) was $7.49, up 3%, excluding $147 million of acquisition-related expenses.
- Return on common equity fell to 17.0% from 18.4%; adjusted ROCE was 18.2%, compared with 20.0% in the prior year.
- Total assets reached $80.95 billion, up 31%, largely from the June 1, 2022 TriState Capital acquisition, which added $12.13 billion of net bank loans.
- Client assets in fee-based accounts were $586.0 billion and total PCG client assets under administration were $1.04 trillion as of September 30, 2022.
- Tier 1 leverage ratio was 10.3% and total capital ratio was 20.4%; RJF and both banks were categorized as well-capitalized.
- The firm repurchased about 2.1 million shares through November 17, 2022 for $200 million, and $800 million remained under its repurchase authorization.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 22, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $11.31B$9.91B | +14.1% |
| Interest Expense | $305.00M$150.00M | +103.3% |
| Net Income | $1.51B$1.40B | +7.6% |
| EPS (Basic) | $7.16$6.81 | +5.1% |
| EPS (Diluted) | $6.98$6.63 | +5.3% |
| Shares Outstanding (Basic) | 209.90M205.70M | +2.0% |
| Shares Outstanding (Diluted) | 215.30M211.20M | +1.9% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and earnings for fiscal 2022?
Net revenues rose 13% to $11.00 billion, driven by higher PCG client assets in fee-based accounts, higher short-term interest rates that lifted net interest income and RJBDP fees from third-party banks, and incremental revenue from the Charles Stanley, TriState Capital, and SumRidge Partners acquisitions. Brokerage and investment banking revenues declined compared with a strong prior year due to market uncertainty.
How did the TriState Capital acquisition affect the balance sheet?
The acquisition, completed June 1, 2022, brought in $12.13 billion of bank loans, net, and $1.55 billion of available-for-sale securities, and contributed $13.17 billion of bank deposits. Total bank deposits rose to $51.36 billion, and total assets increased to $80.95 billion.
What did the firm say about its outlook for fiscal 2023?
Management expects fiscal 2023 to benefit from a full year of the Fed's rate increases, including the 75-basis-point increase in November 2022. It also expects further declines in domestic client cash balances as clients shift cash to higher-yielding investments, continued market uncertainty affecting brokerage and investment banking revenues, and rising bank loan provisions if loan growth continues.
Are there any notable legal or regulatory matters disclosed?
The firm is cooperating with the SEC in an investigation of its investment advisory business's compliance with records preservation requirements for business communications sent over unapproved electronic messaging channels. The filing says the SEC is reportedly conducting similar investigations at other financial institutions. Management believes the outcome of litigation and regulatory proceedings will not have a material adverse effect on consolidated financial condition, though it could be material to results for a particular period.
Why is adjusted earnings different from GAAP earnings?
Adjusted measures exclude $147 million of acquisition-related expenses in fiscal 2022, including acquisition-related retention, amortization of acquired intangibles, and the initial credit loss provision on acquired loans. Adjusted diluted EPS was $7.49 compared with GAAP diluted EPS of $6.98. The filing presents these as non-GAAP measures and provides a reconciliation to GAAP results.
06—Continue