01—Abstract
Summary
Summary of the 10-K filed November 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported fiscal 2023 (year ended September 30, 2023) net revenues of $11.62 billiona, up 6%, and pre-tax income of $2.28 billion, up 13%.
Net income available to common shareholders was $1.73 billionb, 15% higher than the prior year, and diluted earnings per share were $7.97, a 14% increase. Adjusted diluted EPS, a non-GAAP measure, was $8.30. Growth was driven by significantly higher short-term interest rates, which lifted net interest income and RJBDP fees from third-party banks, plus revenue from 2022 acquisitions (Charles Stanley, TriState Capital, SumRidge Partners).
These gains were offset by lower investment banking and brokerage revenues in a more challenging market and lower asset management fees. The Capital Markets segment was the weak spot, with net revenues down 33% to $1.21 billionc and a pre-tax loss of $91 million, as investment banking revenues fell 42%. Bank segment net revenues rose 86% to $2.01 billion, though pre-tax income fell 3%, as deposit costs rose sharply with the launch of the Enhanced Savings Program.
Non-compensation expenses increased 23%, including about $175 milliond of elevated legal and regulatory provisions, part of which related to the SEC industry sweep on off-platform communications. The balance sheet remained well capitalized.
The tier 1 leverage ratio was 11.9% and the total capital ratio was 22.8%, and RJF repurchased 8.35 million shares for $788 million during the year. Management expects fiscal 2024 headwinds from a 2% decline in fee-based account balances since June 30, 2023, an estimated 5% decline in combined net interest income and RJBDP fees, and continued pressure on investment banking and fixed income brokerage.
02—Key points
Key Highlights
- Net revenues of $11.62 billion, up 6%; pre-tax income of $2.28 billion, up 13%.
- Diluted EPS of $7.97, up 14%; adjusted diluted EPS of $8.30, up 11%, excluding $98 million of net acquisition-related expenses and an insurance settlement.
- Bank segment net revenues up 86% to $2.01 billion, driven by higher short-term interest rates; net interest margin rose to 3.28% from 2.39%.
- Capital Markets net revenues fell 33% to $1.21 billion and posted a pre-tax loss of $91 million, as investment banking revenues dropped 42%.
- Total client assets under administration reached $1.20 trillion; PCG advisor count rose to 8,712.
- Strong capital position: tier 1 leverage ratio of 11.9% and total capital ratio of 22.8%; $788 million of share repurchases during the year.
- Non-compensation expenses rose 23%, including about $175 million of elevated legal and regulatory provisions.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed November 21, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $12.99B$11.31B | +14.9% |
| Interest Expense | $1.37B$305.00M | +350.2% |
| Net Income | $1.74B$1.51B | +15.2% |
| EPS (Basic) | $8.16$7.16 | +14.0% |
| EPS (Diluted) | $7.97$6.98 | +14.2% |
| Shares Outstanding (Basic) | 211.80M209.90M | +0.9% |
| Shares Outstanding (Diluted) | 216.90M215.30M | +0.7% |
05—Questions
Frequently Asked Questions
Why did RJF's net revenues grow despite weaker investment banking activity?
Growth came mainly from higher short-term interest rates, which increased net interest income and RJBDP fees from third-party banks. Combined net interest income and RJBDP fees rose $1.47 billion, or 104%. Incremental revenue from the 2022 acquisitions of Charles Stanley, TriState Capital and SumRidge Partners also contributed. These gains offset lower investment banking and brokerage revenues and lower asset management fees.
What drove the decline in Capital Markets results?
Capital Markets net revenues fell 33% to $1.21 billion, with a pre-tax loss of $91 million compared with pre-tax income of $415 million a year earlier. Investment banking revenues decreased $449 million, or 42%, as macroeconomic uncertainty and higher interest rates dampened capital markets activity. Fixed income brokerage revenues also declined as depository institution clients reduced activity.
What is the outlook for fiscal 2024 according to management?
Management expects fiscal first-quarter 2024 asset management fees to be hurt by a 2% decrease in fee-based account balances from June 30 to September 30, 2023. It also estimates a 5% decline in combined net interest income and RJBDP fees, reflecting higher-cost funding such as the Enhanced Savings Program. Investment banking activity may remain slow early in fiscal 2024, and fixed income brokerage faces headwinds from lower depository client cash balances.
Why did legal and regulatory costs increase, and what is the SEC matter?
Non-compensation expenses rose 23%, partly due to elevated provisions for legal and regulatory matters of approximately $175 million. Part of that related to the SEC industry sweep on off-platform communications. The filing states the firm continues to cooperate with the SEC on an investigation of its investment advisory business's compliance with records preservation requirements for business communications sent over unapproved electronic messaging channels, and that it has recorded an accrual for this matter.
How did the Enhanced Savings Program affect the bank and deposit base?
The Enhanced Savings Program, launched in March 2023, raised $13.59 billion of client deposits by September 30, 2023. Bank deposits rose to $54.20 billion, and the firm reduced FHLB borrowings by $190 million. However, the program carries a higher relative cost, which pushed up interest expense and contributed to Bank segment pre-tax income falling 3% despite a large increase in net revenues.
06—Continue