01—Abstract
Summary
Summary of the 10-Q filed February 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported results for its fiscal first quarter of 2024, the three months ended December 31, 2023.
Net revenues rose to $3.01 billiona, up 8% from the prior-year quarter, while pre-tax income of $630 million fell $22 million, or 3%. Net income available to common shareholders was $497 million, a 2% decrease, and diluted earnings per share were $2.32, up 1%. Annualized ROCE was 19.1% versus 21.3% a year earlier, and adjusted diluted EPS was $2.40.
The compensation ratio rose to 63.8% from 62.3%, and non-compensation expenses increased $64 millionb, or 16%, partly because the prior-year quarter included a $32 million insurance settlement gain that did not recur. The balance sheet grew modestly, with total assets of $80.13 billion, up $1.77 billion or 2% from September 30, 2023. Bank deposits increased $1.19 billion, driven by growth in the Enhanced Savings Program, and bank loans, net rose to $44.18 billion.
The firm remained well-capitalized, with a Tier 1 leverage ratio of 12.1% and a total capital ratio of 23.0%. Management said it had $2.1 billionc of cash at the parent and $1.39 billion remaining under its common stock repurchase authorization. Net interest income plus RJBDP fees from third-party banks declined $25 million, or 3%, and management expects a further estimated 5% decline in the fiscal second quarter absent rate changes.
The filing also flags several forward-looking pressures. Management expects investment banking activity to remain affected by market uncertainty in the fiscal second quarter, expects continued headwinds in brokerage revenues, and warns that economic deterioration could increase bank loan provisions. Asset management fees are expected to benefit from a 9%d sequential increase in PCG fee-based assets and financial assets under management as of December 31, 2023.
Total client assets under administration reached $1.37 trillion. The filing notes that the Department of Labor's proposed fiduciary rule could have a material adverse effect if finalized.
02—Key points
Key Highlights
- Net revenues of $3.01 billion rose 8% year over year, led by higher asset management and related administrative fees of $1.41 billion, up from $1.24 billion.
- Pre-tax income fell to $630 million from $652 million, a decrease of $22 million or 3%, as non-compensation expenses rose 16% and the compensation ratio increased to 63.8% from 62.3%.
- Diluted EPS was $2.32, up 1%, while adjusted diluted EPS was $2.40, an increase of 5%; annualized ROCE was 19.1% compared with 21.3% a year earlier.
- Net interest income plus RJBDP fees from third-party banks fell $25 million, or 3%, to $698 million, and management expects a further estimated 5% decline in the fiscal second quarter absent rate changes.
- Total assets reached $80.13 billion, and bank deposits rose $1.19 billion to $55.39 billion, driven by growth in the Enhanced Savings Program.
- Capital position remained strong, with a Tier 1 leverage ratio of 12.1% and total capital ratio of 23.0%, and $1.39 billion remained under the stock repurchase authorization after $150 million of repurchases in the quarter.
- Management expects investment banking activity to remain negatively affected by market uncertainty in the fiscal second quarter, and flagged a potential material adverse effect from the proposed DOL fiduciary rule.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 7, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.52B$3.03B | +16.3% |
| Interest Expense | $507.00M$241.00M | +110.4% |
| Net Income | $498.00M$509.00M | −2.2% |
| EPS (Basic) | $2.38$2.36 | +0.8% |
| EPS (Diluted) | $2.32$2.30 | +0.9% |
| Shares Outstanding (Basic) | 208.60M214.70M | −2.8% |
| Shares Outstanding (Diluted) | 213.80M220.40M | −3.0% |
05—Questions
Frequently Asked Questions
How did Raymond James perform in the quarter ended December 31, 2023?
Net revenues were $3.01 billion, up 8% from the prior-year quarter. Pre-tax income was $630 million, down $22 million or 3%. Net income available to common shareholders was $497 million, down 2%, and diluted EPS was $2.32, up 1%.
What drove the decline in pre-tax income despite higher revenues?
Compensation, commissions and benefits rose 11% and the compensation ratio increased to 63.8% from 62.3%. Non-compensation expenses increased $64 million, or 16%, largely because the prior-year quarter included a $32 million insurance settlement that did not recur, along with a $9 million FDIC special assessment and higher technology spending.
What is the outlook for the fiscal second quarter of 2024?
Management expects higher asset management fees, supported by a 9% sequential increase in PCG fee-based assets and financial assets under management. It expects combined net interest income and RJBDP fees from third-party banks to decline an estimated 5% absent rate changes, and expects investment banking activity to remain affected by market uncertainty before improving later in fiscal 2024.
How strong is the firm's capital and liquidity position?
As of December 31, 2023, the Tier 1 leverage ratio was 12.1% and the total capital ratio was 23.0%, both well above well-capitalized requirements. The parent held $2.1 billion of cash, and $1.39 billion remained under the $1.5 billion common stock repurchase authorization.
What regulatory risk does the filing highlight?
The filing states that the Department of Labor's proposed Retirement Security Rule, which amends the definition of fiduciary for investment advice, could have a material adverse effect on the firm's business and results of operations if finalized.
06—Continue