Q2 2024 Raymond James Financial Inc Earnings Call

Operator: Thank you for your patience. Please stay on the line for the next call. Thanks for holding. We have the name of your conference.

Thank you for your patience. Please stay on the line for the <unk>.

Thanks, Raul do you have the name of your conference.

Operator: Yes, it's the Raymond James Financial spelling of the first and last name.

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Operator: The spelling of your first and last name. David Brown, from ERA? Yes. I'll join you now. Thank you.

Spending of your first and last name.

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From era.

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Speaker Change: I'm doing it now.

Speaker Change: Yeah.

Speaker Change: Yeah.

These statements these statements.

Operator: These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions, and our level of success integrating acquired businesses, anticipated results of litigation and regulatory developments, and general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts, and future or conditional verbs, such as may, will, could, should, and would, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Speaker Change: Include but are not limited to information concerning future strategic objectives business prospects financial results industry or market conditions anticipated timing and benefits of our acquisitions and our level of success integrating acquired businesses anticipated results of litigation and regulatory.

Speaker Change: Developments and general economic conditions.

Speaker Change: In addition words such as believes expects anticipates intends plans estimates projects forecasts and future or conditional verbs such as May will could should and would as well as any other statement that necessarily depends on future events are intended to identify forward looking statements.

Operator: Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our website. Now, I'm happy to turn the call over to Chairman and CEO Paul Reilly.

Speaker Change: Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements.

Speaker Change: We urge you to consider the risks described in our most recent Form 10-K, and subsequent forms 10-Q and forms 8-K, which are available on our website.

Speaker Change: Now I'm happy to turn the call over to chair and CEO, Paul Reilly Paul.

Paul Reilly: Good evening, everyone, and thank you for joining us today. Once again, we delivered strong results in the quarter. Highlighting our diversified platform, we generated record results for the fiscal second quarter and the first six months of the fiscal year. We continue to invest in our business, our people, and technology to help drive growth across all our businesses. Before discussing quarterly results, I want to highlight an important announcement made last month. Following a multi-year succession planning process, the Board of Directors appointed Paul Shoukry, our CFO, as President of Raymond James.

Paul Reilly: Thank you Christie.

Paul Reilly: Good evening, everyone and thank you for joining us today.

Paul Reilly: Once again, we delivered strong results in the quarter highlighting.

Paul Reilly: Highlighting our diversified platform, we generated record results for the fiscal second quarter and the first six months of the fiscal year.

Paul Reilly: We continue to invest in our business, our people and technology to help drive growth across all our businesses.

Speaker Change: Before discussing quarterly results I want to highlight an important announcement made last month.

Speaker Change: Following a multiyear succession planning process.

Speaker Change: Board of directors appointed Paul Sugary, our CFO as president of Raymond James.

Paul Reilly: And following a transition period, Paul is expected to become the firm's CEO sometime during the fiscal year 2025, becoming only the fourth chief executive in the company's 60-plus-year history. Paul has been an exceptional leader and a major contributor to Raymond James' steady growth and financial stability. I am confident he will continue to guide the firm with the same conservative, long-term approach and laser focus on our advisors and client-first culture that has helped shape our success over the past many years.

Speaker Change: And following a transition period, Paul is expected to become the firm's CEO sometime during the fiscal year 2025.

Speaker Change: Becoming only the fourth chief executive and the company's 60 plus year history.

Speaker Change: Paula has been an exceptional leader and a major contributor to Raymond James steady growth and financial stability.

Speaker Change: I am confident he will continue to guide the firm with the same conservative long term approach and laser focus on our advisors and client first culture that has helped shape our success over the many years.

Paul Reilly: In addition, we're proud to announce that other key leadership appointments will take effect on October 1st, 2024. Private Client Group President Scott Curtis will become COO of Raymond James Financial, moving into the role following the retirement of Jeff Datil at the end of the fiscal year.

Speaker Change: In addition, we're proud to announce that other key leadership appointments to take effect October one 2024.

Speaker Change: Private client group President Scott Curtis will become C O O of Raymond James financial moving onto the role following the retirement of Jeff Battle at the end of the fiscal year.

Paul Reilly: Tosh Elwin, current Raymond James and Associate CEO, will become president of PCG, and Global Equities and Investment Banking President, Jim Bund, will become president of the Capital Markets Segment. These expanded roles are a direct reflection of the significant leadership and contributions that Scott, Tosh, and Jim have made over the years. I am confident, along with Paul, they will continue delivering on our mission to help clients achieve their financial objectives. Now, to review the second quarter results, starting on slide five.

Speaker Change: Josh Elwin current Raymond James and Associates, CEO will become president of P. C G.

Speaker Change: And global equities and investment banking President Jim Bond will become president of our capital markets segment.

Speaker Change: These expanded roles are a direct reflection of the significant leadership and contributions to Scott torsion Jim had made over the years.

I am confident along with Paul They will continue delivering on our mission to help clients achieve their financial objectives.

Speaker Change: Now to review the second quarter results starting on slide five.

Paul Reilly: The firm reported record quarterly net revenues of $3.12 billion, an increase of 9% over the preceding year's quarter, primarily due to higher asset-based revenues. Quarterly net income available to common shareholders was $474 million, or $2.22 per diluted share. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $494 million, or $2.31 per diluted share.

Speaker Change: The firm reported record quarterly net revenues of $3.12 billion, an increase of 9% over the preceding year quarter, primarily due to higher asset based revenues.

Speaker Change: Quarterly net income available to common shareholders was $474 million or $2 22 per diluted share.

Excluding expenses related to acquisitions adjusted net income available to common shareholders was $494 million or $2.31 per diluted share.

Paul Reilly: The quarter included the favorable impact of a legal and regulatory net reserve release of $32 million, predominantly driven by a reduction in the reserve related to the SEC off-platform communications matter. We generated strong returns for the quarter, with an annualized return on common equity of 17.5 percent and annualized adjusted returns on tangible common equity of 21.8 percent, a great result, particularly given our strong capital bid. Moving on to slide five.

Speaker Change: The quarter included the favorable impact of a legal and regulatory net reserve release of $32 million predominantly driven by a reduction in the reserve related to the FCC off platform communications matter.

We generated strong returns for the quarter with annualized return on common equity of 17, 5% and annualized adjusted returns on tangible common equity of 21, 8%.

Speaker Change: A great result, particularly given our strong capital base.

Speaker Change: Yeah.

Speaker Change: Moving on to slide five client assets grew to record levels during the quarter, driven by rising equity markets and solid adviser retention and recruiting and the private client group.

Paul Reilly: Client assets grew to record levels during the quarter, driven by rising equity markets and solid advisor retention and recruitment in the private client group. Total client assets under administration increased 6% sequentially to $1.45 trillion, private client group assets and fee-based accounts grew to $799 billion, and financial assets under management reached $227 billion. Domestic net new assets were $9.6 billion, representing a 3.2% annualized growth rate on the beginning of the period domestic private client group assets.

Total client assets under administration increased 6% sequentially to 1.45 trillion dollars.

Speaker Change: That client group assets and fee based accounts grew to $799 billion in financial assets under management reached $227 billion.

Domestic net new assets were $9 $6 billion, representing a three 2% annualized growth rate on the beginning of the period domestic private client group assets.

Paul Reilly: This quarter does reflect some seasonality typical in the first calendar quarter. And, as we've seen before, net new assets can be volatile quarter to quarter as we onboard newly recruited advisors and have advisors retire or leave the platform from time to time. With our robust technology capabilities, client-first values, and long-term multiple-affiliated options, PCG continues to attract high-quality advisors to the platform.

Speaker Change: This quarter does reflect some seasonality typical in the first calendar quarter.

Speaker Change: And as we've seen before net new assets can be volatile quarter to quarter as we onboard newly recruited advisors and have advisors retire or leave the platform from time to time.

Speaker Change: With our robust technology capabilities client first values and long time multiple affiliated options PSEG continues to attract high quality advisors to the platform.

Paul Reilly: For example, during the quarter, we recruited to our domestic independent contractor and employee channels financial advisors with approximately $80 million of trailing 12-month production and $12.8 billion of client assets at their previous firm. Fiscal year to date, trailing 12-month production of recruited advisors is up 45%, and related assets are up 77% over the prior six-month period. There is a lag between recruiting results and net new assets, as it takes some time for clients to transition to the Raymond James platform, but we are encouraged by the recruiting success so far this fiscal year.

Speaker Change: For example, during the quarter, we recruited to our domestic independent contractor and employee channels financial advisors with approximately $80 million of trailing 12 month production and $12 $8 billion of client assets at their previous firm.

Speaker Change: Fiscal year to date trailing 12 month production of recruited advisors is up 45% and related assets up 77% over the prior six month period.

Speaker Change: There is a lag between recruiting results and net new assets as it takes some time for clients to transition to the Raymond James platform, but we are encouraged by the recruiting success. So far this fiscal year.

Paul Reilly: And these results do not include our RIA and custody services business, which also continues to have recruiting success and finished the quarter with $161 billion of client assets under administration. Looking to our fiscal year-to-date results, domestic net new assets are worth $31.2 billion, representing a 5.7 annualized growth rate on the beginning of period domestic PCG assets, a strong result compared to our peers. Total Clients Domestic Cash Sweep and Enhanced Savings Program balances ended the quarter at $58.2 billion, up slightly over December 2023. Bank loans were essentially flat from the preceding quarter at $44.1 billion, as loan demand remains relatively muted given higher rates. Moving on to slide six.

Speaker Change: And these results do not include our RIAA and custody services business, which also continues to have a recruiting success and finished the quarter with 161 billion of client assets under administration.

Speaker Change: Okay.

Speaker Change: Looking to our fiscal year to date results domestic net new assets were $31 2 billion, representing a five seven annualized growth rate on the beginning of period domestic PC G assets, a strong result, compared to our peers.

Speaker Change: Total clients' domestic cash sweep and enhanced savings program balances ended the quarter at $58 $2 billion up slightly over December 2023.

Speaker Change: Bank loans were essentially flat from the preceding quarter at $44 $1 billion as loan demand remains relatively muted given higher rates.

Speaker Change: Moving on to slide six private client group generated record quarterly net revenues of 2.34 billion and pre tax income of $444 million.

Paul Reilly: The Private Client Group generated record quarterly net revenues of $2.34 billion and pre-tax income of $444 million. Year over year, results were driven by higher asset management fees reflecting the nearly 20% growth of assets in fee-based accounts at the beginning of the current quarter compared with the same prior year period. The capital market segments generated quarterly net revenues of $321 million and a pre-tax loss of $17 million. Net revenues grew 6% compared to a year ago quarter, primarily due to higher M&A and debt underwriting revenue.

Speaker Change: Year over year results were driven by higher asset management fees, reflecting the nearly 20% growth of assets in fee based accounts at the beginning of the current quarter compared with the same prior year period.

Speaker Change: The capital market segments generated quarterly net revenues of $321 million and a pre tax loss of $17 million net.

Speaker Change: Net revenues grew 6% compared to a year ago quarter, primarily due to higher M&A and debt underwriting revenues.

Paul Reilly: Subsequently, revenues declined 5% due to lower fixed income brokerage revenues and M&A and advisory revenues, partially offset by higher debt underwriting revenues. The pre-tax loss in capital markets of $17 million reflects the impact of amortization of deferred compensation granted in preceding periods, which totaled $20 million this quarter. While the timing of closings remains difficult to predict, we are encouraged by the healthy pipelines and new business activity in M&A

Speaker Change: Sequentially revenues declined 5% due to lower fixed income brokerage revenues and M&A and advisory revenues, partially offset by higher debt underwriting revenues.

Speaker Change: The pre tax loss in capital markets of $17 million reflects the impact of amortization of deferred compensation granted in preceding periods, which totaled $20 million this quarter.

While the timing of closings remains difficult to predict we are encouraged by the healthy pipelines of new business activity in M&A.

Paul Reilly: We continue to expect investment banking revenues to improve along with the industry-wide gradual recovery. The asset management segment generated pre-tax income of $100 million on record net revenues of $252 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation and net inflows in the PCG fee-based account. The bank segment generated net revenues of $424 million and pre-tax income of $75 million.

Speaker Change: We continue to expect investment banking revenues to improve along with the industry wide gradual recovery.

Speaker Change: The asset management segment generated pretax income of $100 million on record net revenues of $252 million.

Speaker Change: Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation and net inflows into P. C. G fee based accounts.

The bank segment generated net revenues of $424 million and pre tax income of $75 million.

Paul Reilly: The Bank Segment Net Interest Margin of 2.66% declined 8 basis points compared to the preceding quarter, primarily due to the higher cost mix of deposits as the Enhanced Savings Program balances replaced a portion of the lower cost RJ-BDP cash suite balance sheet.

Speaker Change: Bank segment net interest margin of 266% declined eight basis points compared to the preceding quarter, primarily due to the higher cost mix of deposits as the enhanced savings program balances replaced a portion of the lower cost RJ PDP cash sweep balances.

Paul Reilly: Looking to the fiscal year-end results on slide 7, we generated record net revenues of $6.13 billion and record net income available to common shareholders of $971 million, up 8% and 4%, respectively, over the prior year's record. Additionally, we generated a strong annualized return on common equity of 18.3% and an annualized adjusted return on tangible common equity of 22.8% for the six-month period. On slide 8, the strength of the PCG and asset management segment for the first half of the year primarily reflects the strong organic growth in PCG with robust equity markets. And now, I'll turn it over to Paul Shoukry, our CFO and soon-to-be CEO, for the second quarter results. Paul? Thank you.

Speaker Change: Looking to the fiscal year end date results on slide seven we generated record net revenues of $6, one 3 billion and record net income available to common shareholders of $971 million up eight.

Speaker Change: 8% and 4% respectively over the prior year's record.

Speaker Change: Additionally, we generated strong annualized return on common equity of 18, 3% and an annualized adjusted return on tangible common equity of 22, 8% for the six month period.

Speaker Change: On slide eight the strength of the <unk> and asset management segment for the first half of the year, primarily reflects the strong organic growth in P. C G with robust equity markets.

Speaker Change: And now I'll.

Speaker Change: I'll turn it over to Paul <unk>, our CFO and soon to be CEO for the second quarter results Paul.

Paul: Thank you Paul.

Paul: Sure.

Paul Shoukry: Starting on slide 10, Consolidated Net Revenues were $3.12 billion in the second quarter, up 9% over the prior year and up 3% sequentially. Asset management and related administrative fees grew to $1.52 billion, representing 16% growth over the prior year and 8% over the preceding quarter. This quarter, PCG fee-based assets increased 7%, which will be a strong tailwind for asset management and related administrative fees in the fiscal third quarter. Brokerage revenues of $528 million grew 6% year over year, mostly due to higher brokerage revenues in PCG, which were partially offset by lower fixed income brokerage revenues, as depository clients continued to experience flat to declining deposit balances and have less cash available for investing in securities.

Paul: Starting on slide 10.

Paul: <unk> net revenues were $3, one 2 billion in the second quarter up 9% over the prior year and up 3% sequentially.

Paul: Asset management and related administrative fees grew 215 2 billion.

Paul: Representing 16% growth over the prior year and 8% over the preceding quarter.

Paul: This quarter PSEG fee based assets increased 7%, which will be a strong tailwind for asset management and related administrative fees in the fiscal third quarter.

Paul: Brokerage revenues of $528 million grew 6% year over year, mostly due to higher brokerage revenues and PSEG, which were partially offset by lower fixed income brokerage revenues as depository clients continued to experienced flat to declining deposit balances and have less cash available for investing in secure.

Paul: <unk>.

Paul Shoukry: Remember, in our fixed income business, we do not have the same exposure to the higher volatility currency and credit products that have benefited many of the larger players in our industry during the quarter. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $179 million increased 16% year-over-year and declined 1% sequentially. Compared to the prior year quarter, second quarter results benefited from stronger debt underwriting revenues in both fixed income and public finance, as well as improvement in M&A and advisory revenues, which continue to be subdued. Moving to slide 11.

Paul: Remember in our fixed income business, we do not have the same exposure to the higher volatility currency and credit products that had benefited many of the larger players in our industry during the quarter.

Paul: I'll discuss accountant service fees and net interest income shortly.

Paul: Investment banking revenues of $179 million increased 16% year over year and declined 1% sequentially.

Paul: Compared to the prior year quarter second quarter results benefited from stronger debt underwriting revenues in both fixed income and public finance as well as improvement in M&A and advisory revenues, which continued to be subdued.

Paul: Yeah.

Paul: Moving to slide 11.

Paul Shoukry: The client's Domestic Cash Sweep and Enhanced Savings Program balances ended the quarter at $58.2 billion, up slightly over the preceding quarter and representing 4.6% of domestic PCG client assets. Sweep balances were essentially flat, and ESP balances increased 3% sequentially, both outperforming our expectations on the last call. Since the beginning of this quarter, domestic cash sweep balances have declined about $1.7 billion, mostly due to quarterly fee billings along with income tax payments. Turning to slide 12.

Paul: Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $58 $2 billion.

Paul: Up slightly over the preceding quarter, and representing four 6% of domestic <unk> client assets.

Paul: <unk> balances were essentially flat and ESP balances increased 3% sequentially.

Paul: Both outperforming our expectations on the last call.

Paul: Since the beginning of this quarter domestic cash sweep balances have declined about $1 7 billion.

Paul: Mostly due to quarterly fee billings, along with income tax payments.

Paul: Turning to slide 12.

Paul Shoukry: Combined net interest income and RJBDP fees from third-party banks were $689 million, down 1% from the preceding quarter, largely reflecting one fewer billable day. However, again, this result outperformed our guidance on last quarter's call given the more stable client cash balance. Going forward, net interest income and RJBDP third-party fees will largely be dependent on the level of short-term interest rates, the stability of client cash balances, and the trajectory of loan growth, which has been subdued in this rate environment.

Paul: Combined net interest income and RJ <unk> fees from third party banks was $689 million down.

Paul: Down 1% from the preceding quarter, largely reflecting one fewer billable day.

Paul: Again, this result outperformed our guidance on last quarter's call given the more stable client cash balances.

Paul: Going forward net interest income and RJ <unk> third party fees will largely be dependent on the level of short term interest rates the stability of client cash balances and the trajectory of loan growth, which has been subdued in this rate environment.

Paul Shoukry: Fortunately, we are well positioned for the eventual recovery in loan growth with ample capital and funding flexibility. Moving to consolidated expenses on slide 13, compensation expense was $2.04 billion, and the total compensation ratio for the quarter was 65.5%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 65.2%.

Paul: Fortunately, we are well positioned for the eventual recovery in loan growth with ample capital and funding flexibility.

Paul: Moving to consolidated expenses on slide 13.

Paul: Compensation expense was 2.04 billion and the total compensation ratio for the quarter was 65, 5%.

Paul: Excluding acquisition related compensation expenses, the adjusted compensation ratio was 65, 2%.

Paul Shoukry: As is typical in the first calendar quarter, compensation expenses were impacted by annual salary increases and the reset of payroll taxes. All in, an adjusted compensation ratio close to 65 percent is in line with our current target and is a satisfactory result given the challenging environment for the capital market segment. Non-compensation expenses of $466 million increased 1% sequentially, largely due to higher communications and information processing expenses and a higher bank loan loss provision, which were partially offset by a favorable legal and regulatory net reserve release of $32 million in the quarter, which Paul mentioned earlier. For the fiscal year, we still expect non-compensation expenses, excluding provision for credit losses, unexpected legal and regulatory items, or non-GAAP adjustments, to be around $1.9 billion.

Paul: As is typical in the first calendar quarter compensation expenses were impacted by annual salary increases and the reset of payroll taxes.

Paul: All in an adjusted compensation ratio close to 65% is in line with our current target and as a satisfactory result, given the challenging environment for the capital market segment.

Non compensation expenses of $466 million increased 1% sequentially, largely due to higher communications and information processing expenses.

And a higher bank loan loss provision.

Paul: Each were partially offset by a favorable legal and regulatory net reserve release of $32 million in the quarter, which Paul mentioned earlier.

Paul: For the fiscal year, we still expect non compensation expenses, excluding provision for credit losses, unexpected legal and regulatory items or non-GAAP adjustments to be around $1 9 billion.

Paul Shoukry: This implies incremental non-compensation growth throughout the year as we continue to invest in growth and ensure high service levels for advisors and their clients throughout our business. Keep in mind, many of our non-compensation expenses, such as investment sub-advisory fees, represent healthy growth that follows corresponding revenue growth. Slide 14 shows the pre-tax margin trend over the past five quarters. This quarter, we generated a pre-tax margin of 19.5% and an adjusted pre-tax margin of 20.4%.

Paul: This implies incremental non compensation growth throughout the year as we continue to invest in growth and ensure high service levels for advisors and their clients throughout our businesses.

Paul: Keep in mind, many of our non compensation expenses, such as investment sub advisory fees represent healthy growth that follows the corresponding revenue growth.

Slide 14 shows the pretax margin trend over the past five quarters.

Paul: This quarter, we generated a pretax margin of 19, 5% and adjusted pre tax margin of 24%.

Paul Shoukry: A strong result, especially given the challenging market conditions impacting capital markets. As a reminder, our current targets provided at our Analyst and Investor Day last May are for pre-tax margin of 20% plus and a compensation ratio of less than 65%. We still think these targets are appropriate, and we will provide an update as needed at our upcoming Analyst and Investor Day scheduled for May 23rd. On slide 15.

Paul: A strong result, especially given the challenging market conditions impacting capital markets.

Paul: As a reminder, our current targets provided at our analyst and Investor Day last may our for pre tax margin of 20% plus and a compensation ratio of less than 65%. We still think these targets are appropriate and we will provide an update as needed at our upcoming analyst Investor day sketch.

Paul: <unk> for May 20 <unk>.

Paul: On slide 15.

Paul Shoukry: At quarter end, total balance sheet assets were $81.2 billion, a 1% sequential increase. Liquidity and capital remain very strong. RJF corporate cash at the parent ended the quarter at $2 billion, well above our $1.2 billion target, and we remain well capitalized with a Tier 1 leverage ratio of 12.3% and a total capital ratio of 23.3%. Our capital levels continue to provide significant flexibility to continue being opportunistic and investing in growth. The effective tax rate for the quarter was 21.8%, reflecting the favorable impact of non-taxable corporate-owned life insurance gains during the quarter.

Paul: At quarter end total balance sheet assets were $81 $2 billion.

Paul: A 1% sequential increase.

Paul: Liquidity and capital remain very strong.

Paul: J F corporate cash at the parent ended the quarter at $2 billion, well above our $1 $2 billion target.

Paul: And we remain well capitalized with tier one leverage ratio of 12, 3% and a total capital ratio of 23, 3%.

Paul: Our capital levels continue to provide significant flexibility to continue being opportunistic and invest in growth.

Paul: The effective tax rate for the quarter was 21, 8%, reflecting the favorable impact of non taxable corporate owned life insurance gains in the quarter.

Paul Shoukry: Looking ahead, we believe 24% is an appropriate estimate for the effective tax rate. Slide 16 provides a summary of our capital actions over the past five quarters. During the quarter, the firm repurchased 1.7 million shares of common stock for $207 million at an average price of $122 per share, including $43 million of shares repurchased in April. We completed the expected $250 million of these share repurchases since January 1 and fulfilled the repurchase commitment associated with the dilution from the Tri-State Capital Acquisition.

Paul: Looking ahead, we believe 24% is an appropriate estimate for the effective tax rate.

Paul: Slide 16 provides a summary of our capital actions over the past five quarters.

Paul: During the quarter the firm repurchased one 7 million shares of common stock for $207 million at an average price of $122 per share.

Paul: Including $43 million of shares repurchased in April we completed the expected $250 million of these shares repurchases since January one and.

Paul: And fulfilled a repurchase commitment associated with the dilution from the Tristate capital acquisition.

Paul Shoukry: As of April 19th, 2024, Approximately $1.14 billion remained under the board's approved common stock repurchase authorization. Going forward, we expect to continue to offset share-based compensation dilution and to be opportunistic with incremental repurchases. We are committed to maintaining capital levels in line with our stated target, and we'll discuss more on our overall capital management strategy at our upcoming Analyst Investor Day. Lastly, on slide 17, we provide key credit metrics for our bank segment, which includes Raymond James Bank and Tristate Capital Bank.

As of April 19, 2024.

Paul: Approximately $1.14 billion remained under the board's approved common stock repurchase authorization.

Paul: Going forward, we expect to continue to offset share based compensation dilution and to be opportunistic with incremental repurchases.

Paul: We are committed to maintaining capital levels in line with our stated targets and we'll discuss more on our overall capital management strategy at our upcoming analyst Investor Day.

Paul: Lastly on slide 17, we provide key credit metrics for our bank segment, which includes Raymond James Bank in Tristate Capital Bank.

Paul Shoukry: The credit quality of the loan portfolio is solid. Criticized loans as a percentage of total loans held for investment ended the quarter at 1.21%, up from 1.06% from the preceding quarter. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 1.06%. The bank loan allowance for credit losses on corporate loans as a percentage of the corporate loans held for investment was 2.05% at quarter end.

The credit quality of the loan portfolio is solid.

Paul: Criticized loans as a percentage of total loans held for investment ended the quarter at one point to 1%.

Paul: Up from 1.06% from the preceding quarter.

The bank loan allowance for credit losses, as a percentage of total loans held for investment ended the quarter at 1.06%.

Paul: The bank loan allowance for credit losses on corporate loans as a percentage of the corporate loans held for investment was 2.05% at quarter end.

Paul Shoukry: We believe this represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolio. Before I turn the call back over to Paul, I just want to say that I am absolutely honored to be named president and future CEO of this great firm. I'm excited to partner with my colleagues and friends, Scott Curtis, Tosh Elwin, and Jim Bunn, in their expanded roles to continue leading Raymond James with the same values that have guided Bob James, Tom James, and Paul Reilly since our founding. I am optimistic about our future. As all of our businesses have critical mass, significant headroom for continued growth, and a highly competent management team that embody our firm's advisor and client first values.

Paul: We believe this represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolio's Biff.

Speaker Change: Before I turn the call back over to Paul I, just want to say that I am absolutely honored to be named President and future CEO of this great firm.

Paul: I'm excited to partner with my colleagues and friends, Scott Curtis Tosh, Elwin, and Jim Bun and their expanded roles to continue leading Raymond James with the same values that guided Bob James Tom James and Paul Reilly since our founding.

Paul: I am optimistic about our future as all of our businesses have critical mass significant headroom for continued growth and a highly competent management team that embody our firm's adviser and client first values.

Paul Reilly: Now I'll turn the call back over to Paul Reilly to discuss our outlook. Paul? Thank you.

Paul: Now I'll turn the call back over to Paul Reilly to discuss our outlook Paul Thank.

Paul Reilly: Thank you Paul.

Paul Reilly: As I said at the start of the call, I'm pleased with our results for the fiscal second quarter and through the first half of the fiscal year, generating record results and ending the quarter with record client assets. And while there is still economic uncertainty, I believe we are in a position of strength to drive growth over the long term across all of our businesses. In the private client group, the next quarter's results will be positively impacted by the 7% sequential increase in assets in fee-based accounts. Our advisor recruiting activity remains robust, and I'm encouraged by a record number of large teams in the pipeline.

Paul Reilly: As I said at the start of the call I am pleased with our results for the fiscal second quarter and through the first half of the fiscal year generating record results and any of the quarter with record client assets.

And while there is still economic uncertainty I believe we are in a position of strength to drive growth over the long term across all of our businesses.

Paul Reilly: In the private client group. The next quarter results will be positively impacted by the 7% sequential increase of assets in fee based accounts.

Paul Reilly: Our advisor recruiting activity remains robust and I'm encouraged by a record number of large teams in the pipeline.

Paul Reilly: We are focused on being a destination of choice for our current and prospective advisors, which we believe over the long term should continue to drive industry-leading growth. In the capital markets segment, we continue to have a healthy M&A pipeline and good engagement level. But, our expectations for a gradual recovery are heavily influenced by market conditions, and we could expect activity to pick up over the next six to nine months. In the fixed income business, the overall dynamic of the past year remained unchanged.

Paul Reilly: We are focused on being a destination of choice for our current and prospective advisors, which we believe over the long term should continue to drive industry leading growth.

Paul Reilly: And the capital market segment, we continue to have a healthy M&A pipeline and good engagement levels, but our expectations for a gradual recovery are heavily influenced by market conditions, and we could expect activity to pick up over the next six to nine months.

Paul Reilly: And in the fixed income business. The overall dynamic of the past year remained unchanged depository clients are experiencing flat to declining deposit balances and have less cash available for investing in securities putting pressure on our brokerage activity.

Paul Reilly: Depository clients are experiencing flat to declining deposit balances and have less cash available for investing in securities, putting pressure on our brokerage activity. We hope that once rates and cash balances stabilize, we will start to see an improvement. Overall, despite some of the near-term challenges, we believe the investments we've made in the capital markets business have positioned us well for growth once the market and rate environment become conducive. In the asset management segment, financial assets under management are starting the fiscal third quarter up 5% over the preceding quarter, which should provide a tailwind of revenue.

Paul Reilly: We hope that once rate and cash balances stabilize we will start to see an improvement.

Paul Reilly: Overall, despite some of the near term challenges we believe the investments we've made in the capital markets business have positioned us well for growth once the market and rate environment become conducive.

Paul Reilly: And the asset management segment financial assets under management are starting the fiscal third quarter up 5% over the preceding quarter, which should provide a tailwind to revenues.

Paul Reilly: We remain confident that strong growth of assets and fee-based accounts in the private client group segment will drive long-term growth of financial assets under management. In addition, we expect Raymond James Investment Management to help drive further growth over time. In the bank segment, we remain focused on fortifying the balance sheet with diverse funding sources and prudently growing assets to support client demand. We have seen securities-based loan payoffs decelerate, and we expect demand for these loans to recover as clients get comfortable with the current level of rates. With little activity in the market, corporate loan growth has been muted.

We remain confident that strong growth of assets in fee based accounts in the private client group segment will drive long term growth of financial assets under management and.

Paul Reilly: In addition, we expect Raymond James investment management to help drive further growth overtime in the bank segment, we remain focused on fortifying the balance sheet with diverse funding sources and prudently growing assets to support client demand.

Paul Reilly: We have seen securities based loan payoffs decelerate and we expect demand for these loans to recover as clients get comfortable with the current level of rates.

Paul Reilly: With little activity in the market corporate loan growth has been muted however, with ample client cash balances and capital we are well positioned to learn once activity increases and our conservative risk guidelines.

Paul Reilly: However, with ample client cash balances in capital, we are well positioned to lend once activity increases in our conservative risk guidelines. In addition to driving organic growth across our businesses, we also remain focused on corporate development efforts for opportunities that may meet our disciplined M&A parameters. In closing, we are well positioned entering the fiscal third quarter with a strong competitive position across all of our businesses and a solid capital and liquidity base to invest in future growth.

In addition to driving organic growth across our businesses. We also remain focused on our corporate development efforts for opportunities that may meet our disciplined M&A parameters.

Paul Reilly: In closing we.

Paul Reilly: We are well positioned entering the fiscal third quarter with a strong competitive positioning on all of our business and solid capital and liquidity base to invest in future growth.

Paul Reilly: As always, I want to thank our advisors who drive this business and associates for their continued dedication to providing excellent service to their clients. Thank you for all you do. That concludes our prepared remarks. Operator, will you please open the line for questions?

Paul Reilly: As always I want to thank our advisers, who drive this business and associates for their continued dedication to providing excellent service to their clients. Thank you for all you do.

Speaker Change: That concludes our prepared remarks, operator will you. Please open the line for questions.

Operator: Absolutely. And everyone, if you would like to ask a question today, please press star one on your telephone keypad. If you're using a speakerphone, please make sure your mute button is turned off to allow your signal to reach your equipment.

Paul Reilly: Absolutely.

Paul Reilly: If you would like to ask a question today. Please press star one on your telephone keypad. If you will when they speaker phone. Please make sure. Your mute button is turned off to allow your signal to reach our equipment. Once again led all star will have a question.

Operator: Once again, that is star number one. If you have a question, we'll go first today to Alex Blostein, Goldman Sachs.

Speaker Change: Well go first today to Alex <unk> Goldman Sachs.

Alexander Blostein: Hey, good afternoon. Thanks for the question and congrats to both of you guys. Well deserved.

Speaker Change: Hey, good afternoon. Thanks for the question and congrats to both of you guys are well deserved.

Paul Shoukry: I wanted to start with a question around comp. Maybe I understand there are some seasonal factors that impacted the quarter, but maybe you could break down how much the seasonal lift was specifically this quarter. It feels a little bit heavier than normal. And then, Paul, I think I heard you say that you're kind of on target for a 65% comp rate for the year, but then you also said you're still shooting to be below 65% for the year. So maybe just kind of help you guys figure out where you guys are ultimately going to end up for the full year.

Speaker Change: I wanted to start with a question around comp maybe I understand there are some seasonal factors that impacted the quarter, but maybe help break down how much the seasonal lift was specifically this quarter it feels a little bit heavier than normal and then Paul I think I heard you say that you're kind of on target to 65% comp rate for the year, but then you are.

Speaker Change: Also said you're still shooting to be below 65% for the year. So maybe just kind of help reconcile where you guys are ultimately expect.

Speaker Change: To end up for the full year.

Speaker Change: Yes, Alex I appreciate that.

Paul Shoukry: Yeah, Alex, I appreciate that. What we said was that the target that we announced to the last analyst and yesterday was 65%. And so that's sort of where we've been trending in the first two quarters. But what it does for the rest of the year is going to be largely dependent on, you know, the capital market segment. That's a big driver because typically, that would have a lower capital ratio and a comp ratio associated with it than, you know, the other segments and help the firm's overall comp ratio.

Paul: Well, we said was that the target that we announced at the last analyst Investor Day was 65% and so that's sort of where.

Paul: We've been trending in the first two quarters.

Paul: But thats kind of what it does for the rest of the year is going to be largely dependent on the capital market segment, that's a big driver.

Paul: Typically that would have a lower capital ratio.

Comp ratio associated with it and the other segments that helped the firm's overall comp ratio and that wasn't the case this quarter.

Paul Shoukry: And that wasn't the case this quarter, as you can calculate. So we are pleased to be able to generate close to a 65.2% adjusted comp ratio despite the challenges in that capital market sector. In terms of the reset of payroll taxes and the increase in salaries that's typical for the calendar first quarter of each year, I would say that probably had an impact around 30 to $35 million in the quarter. So, you know, a meaningful impact in the quarter. Of course, the salary increase. Unknown Attendee, Michael Cho, Raymond James Financial Inc.

Paul: You can calculate so.

Paul: We are pleased to be able to generate close to a 65, 2% adjusted comp ratio. Despite the challenges in that capital market segment.

Paul: In terms of the.

Paul: The reset of the payroll taxes the.

Paul: The increase in.

Paul: And salaries that typically that's typical to the calendar first quarter of each year I would say that probably had an impact around 30% to $35 million in the quarter. So no meaningful impact in the quarter of course salary increases.

Paul: We'll continue throughout the year, but.

Paul: Probably two thirds of that or so is related to the payroll tax reset which will decline throughout the course of the calendar year.

Unknown Attendee: I got you. Thanks for that.

Paul Reilly: My second question concerns recruiting activity, and if we look at the net new assets disclosed in the quarter, organic growth is trending at a lower end from what we've seen from you guys historically, and I guess double-clicking into that, it looks like the independent headcount continues to be pretty range-bound. So maybe kind of walk us through what's been sort of pressuring the net new asset growth so far this year, your expectations for the rest of the year, and then specifically what you're seeing in the independent channel that's been keeping the headcount relatively low. I think you're seeing the same thing.

Speaker Change: Hi, guys. Thanks for that my second question around recruiting activity and if we look at the net new assets disclosed in the quarter organic growth is trending at a lower end for what we've seen from you guys historically and I guess double click into that it looks like the independent head count continues to be pretty range bound so.

Speaker Change: Maybe kind of walk us through what's been sort of pressuring the net new asset growth. So far this year your expectations for the rest of the year and then specifically what are you seeing in the independent channel has been keeping the head count relatively flat.

Paul Reilly: I think you're seeing the same trends that we are. The teams we're hiring are larger. So we're bringing in, you know, more assets; we're on a great roll in terms of assets and trailing 12. We do have headcount that moves to our RAA channel, and that takes them out of headcount because they're not licensed. So even with that movement and keep the assets, but we're not keeping the headcount, and we'll try to give you more granularity on Investor Day and Analyst Day.

Speaker Change: I think youre seeing the same trends that.

Speaker Change: The teams were hiring are larger.

Speaker Change: So we're bringing in more assets.

Speaker Change: Great role in terms of assets and trailing 12.

Speaker Change: We do have head count that moves to our channel.

Speaker Change: And that takes them out of head count because theyre not license so.

Speaker Change: Even with that movement and keep the assets, but we're not keeping the head count and we will try to give you more granularity on <unk>.

Speaker Change: Yesterday.

Speaker Change: Analyst day.

Paul Reilly: Then you have ins and outs. So we do have some outs, and the ins take time to onboard. So the assets usually take, when you see a robust quarter like this $80 million in trailing 12, it could take nine months to a year to get all those assets in place. So our expectation is that recruiting will continue and continue strong. I think part of the transparency is we need to give you a little more transparency on the RIA and how we think about that. We've struggled with the measurement.

Speaker Change: And then you have ins and outs. So we do have some outs.

Speaker Change: And the and take time to onboard some of the assets usually take when you see a robust quarter like this 80 million.

Speaker Change: A million dollars of trailing 12.

Speaker Change: Months to a year to get all of those assets over so our expectation is that recruiting will continue and continued strong and.

Speaker Change: I think part of the transparency, we need to give you a little more transparency on that.

Speaker Change: To think about that we've struggled with the measurement.

Alexander Blostein: Great. All right. Thank you, guys.

Speaker Change: So you can see through them.

Speaker Change: Great Alright, Thank you guys.

Operator: Thanks, Alex. The next question is from Steven Chubak, Wolf Research.

Speaker Change: Thanks, Alex.

Speaker Change: Next question, even Toback Wolfe research.

Operator: Hey, good afternoon. This is Michael Anagnostakis on behalf of Steven.

Speaker Change: Hey, Good afternoon. This is Michael <unk> on for Stephen.

Michael Anthony Anagnostakis: I did want to ask one just on cash sweep. You know, I appreciate the commentary on how things have trended to start the start of the quarter and it was certainly nice to see that sweep cash was flat in one cue, but you know, now tax season is behind us. Are you seeing signs that the cash sweep is building, inflecting positively? And maybe just speak to your level of confidence that we could see absolute sweet cash balances build from here? Thanks.

Michael: I did want to ask one just on cash sweep.

Speaker Change: I appreciate the commentary.

Michael: How things have trended to start start the quarter and it was certainly nice to see that sweep cash was flat.

Michael: Alright, <unk>, but now tax season is behind US are you seeing signs that cash keeps building, reflecting positively and maybe just speak to your level of confidence that we could see absolute sweep cash balances build from here. Thanks.

Paul Shoukry: Yeah, I mean, we had tax season, and we also had a record quarterly fee billing that came out of the cash balances already. And so when I look at today's report, cash sweep balances so far in April are down $1.3 billion, which is less than the impact from the fee billings. Now we had some a decline in the enhanced savings program so far this April too, and again, that could have been impacted.

Speaker Change: Yes, I mean, we.

Michael: We had tax season, we also had a record quarterly fee building.

Michael: Came out of the cash balances already.

Michael: So when I look at today's report cash sweep balances.

Michael: So far in April are down $1, 3 billion, which is which is less than the impact from the fee billings that we had some decline in the enhanced savings program. So.

Michael: So far this April two.

Michael: And again that could have been impacted we have tracked significant payments to the IRS.

Paul Shoukry: We have tracked significant payments to the IRS with tax season here. So, if you look at the last couple of quarters, after the fee payments were made, cash kind of built throughout the quarter. And you saw that certainly in this past quarter, where cash sweep balances ended relatively flat quarter over quarter, which far exceeded our expectations that we shared on the last call. So we are hopeful that balances are stabilizing. And so we'll kind of continue.

Michael: With the tax season here so.

Michael: If you look at the last couple of quarters. After the fee payments were made cash kind of built throughout the quarter.

Michael: And you saw that certainly in this past quarter, where cash sweep balances ended relatively flat quarter over quarter, which far exceeded our expectations that we shared on the last call. So we are hopeful that the balances are stabilizing and so we will continue monitoring it from here.

Michael Anthony Anagnostakis: Got it. And maybe just pivoting to DOL, Paul, in the last earnings call, I recall that you were relatively comfortable with Ray J's positioning and that you expected the industry to challenge the new rule. With the final DOL rule now published, maybe you could update us on your views in terms of what the rule in its finalized state means for the industry, as well as any implications for Ray J that you would highlight. Thank you. Thank you. Thank you.

Got it.

Michael: Maybe just pivoting tab.

Michael: Well.

Michael: Paul on the last earnings call I recall, you were relatively comfortable with Ray Jay's positioning and that you expected the industry to challenge the new rule.

Paul: Rule with the final Dol rule now published maybe you can update us on your views in terms of what the rule and its finalized state means for the industry as well as any implications for Ray Jay that you would highlight.

Paul: Thanks.

Paul Reilly: Thank you. Well, yeah, so I appreciate the question, you know, digesting 500 pages of a regulatory rule is a little more, even more complicated than trying to get through our earnings release, so and analyze it. So it's early. The early read is actually from the rule itself, is we, you know, there's nothing that pops out that's overly problematic. Actually, it may be surprisingly so. I think the industry's concern will be two. One is that does the Department of Labor even have the authority to oversee these accounts?

Paul: Yes. So I appreciate the question digesting 500 pages of a regulatory rule is little more even more complicated and trying to get through our earnings release, So annualize that.

Speaker Change: So it's early.

Speaker Change: Early read is actually from the rule itself.

Speaker Change: We.

Speaker Change: There is nothing that pops out this overly problematic actually maybe surprisingly so I think the industry's concern will be too.

Speaker Change: One is that does the department of labor even have the authority to oversee these accounts and that doesn't have to do with this rule I don't think the rule itself.

Paul Reilly: And that doesn't have to do with this rule. I don't think the rule itself will have a great impact. But do we want another regulator to concede their statutory authority for the regulator to oversee those accounts? And the other thing is, if the rule is really talking about really complying with the best interest standard, why is there an extra rule? But the rule itself is, I think, much more manageable than the draft rule was. So, again, that's an early read. You know the devil's always in the detail, but I don't think the rule itself and what it requires us to do today doesn't look too problematic at all.

Speaker Change: Impact.

Speaker Change: But do we want another regulator to can see.

Speaker Change: Statutory authority for the regulator to oversee those accounts.

Speaker Change: And the other thing as well.

Speaker Change: Rule is talking about really complying with best interest standard <unk> zero.

Or an extra rules, so but the rule itself is.

Speaker Change: I think much more manageable than the draft.

Speaker Change: So again, that's an early read.

Speaker Change: The Devil is always in the detail but.

I don't think the rule itself and what it will require us to do today is.

It doesn't look too problematic at all.

Michael Anthony Anagnostakis: I totally appreciate that, and congratulations to you both. Thanks for taking my questions.

Speaker Change: Totally appreciate that and.

Speaker Change: Congratulations to you both thanks for taking my questions.

Thank you.

Operator: The next question comes from Michael Cho, J.P. Morgan.

Speaker Change: Next question comes from Michael Cho of Jpmorgan.

Michael Cho: Hi, good evening. Thanks for taking my question. My first one is on NNA again. I mean, you talked through a healthy pipeline looking ahead, but just in the quarter, you also talked through some seasonality and some lumpiness. I'm just curious, you know, if there's anything else you can call out or any more color around the nuances between, you know, maybe some of the affiliation models that you talked through and maybe anything to call out in terms of how maybe attrition is trending as well.

Michael Cho: Hi, good evening, Thanks for taking my question.

Michael Cho: First one I just wanted to follow up on M&A again, you talk to a healthy pipeline looking ahead.

Michael Cho: But just in the quarter again, you'll have to.

Michael Cho: Talk just some seasonality and some lumpiness I was just curious if theres anything else you can call out or any more color around nuances between now maybe some of the affiliate Asian model that you talked through in anything anything to call out in terms of how may be attrition is trending as well.

Michael Cho: Okay.

Paul Reilly: Yeah, if you look at the first six months, you know, or, you know, I think compared to the industry in the fives, we did pretty well. So this quarter was slower, in terms of the number. Typically, this is a little lower, but maybe a little lower than we would have thought in terms of the number itself.

Michael Cho: If you look if you look for the first six months.

Michael Cho: I think compared to the industry in the fives, we did pretty well so.

Michael Cho: This quarter was slower.

Michael Cho: In terms of the number.

Michael Cho: Typically this is a little lower but a lower maybe a little lower than we would've thought in terms of the number itself.

Paul Reilly: But, you know, the recruiting is going well, and the movement to RIA, you can see that net new asset growth was pretty robust. I mean, asset growth was pretty robust. So I think it actually was a We have quarters where things are down and quarters where things are up, and I just think it was down a little more than we anticipated from a measurement standpoint, but the recruiting. Not only in what we brought in this quarter, but what we have in the pipeline and think we have a relatively good chance of closing, and I can't remember ever being stronger, so.

Michael Cho: The recruiting is going well, but movement.

Michael Cho: You can see that.

Michael Cho: Asset growth was pretty robust.

Michael Cho: I mean that asset growth was pretty robust so I think it actually it was.

Michael Cho: No.

Michael Cho: Quarters, where things are down in quarters, where things are up and I just think it was down a little more of them.

Michael Cho: We anticipated from a measurement standpoint, but the recruiting.

Michael Cho: Not only on what we.

Michael Cho: Brought in this quarter, but what we have in the pipeline in fact, we have a relatively.

Michael Cho: Good chance of closing.

Michael Cho: Remember ever being stronger so yes.

Paul Reilly: So the numbers will be impacted by. In terms of advisor count, how many go to RIA? And then hopefully, the ones that do will choose to stay with us. So, and we've had a pretty good record on that so far.

Michael Cho: So the numbers will be impacted by.

Michael Cho: In terms of the advisor count how many go to.

Michael Cho: And hopefully the ones that do will choose to stay with us.

Michael Cho: And we've got a pretty good record on it so far.

Michael Cho: Okay, thank you. No, fair enough.

Speaker Change: Okay. Thank you enough fair enough.

Paul Reilly: And then just switching gears to the capital markets business. I mean, I realize some of that is driven by the deferred comp that you called out and maybe still recovering from, and the environment, I guess. So, with that backdrop, potentially improving from here, and Raymond James's history of investing in talent as well, I mean, how would you frame your willingness to go after incremental talent in the advisory business over the next, say, nine to twelve months?

Speaker Change: And then just switching gears to the capital markets business I mean I realize.

Speaker Change: Some of that is driven by that deferred comp that you called out and maybe still recovering M&A environment and I guess, so with that backdrop potentially.

Speaker Change: Improving from from here and premium gaming history of investing in talent as well I mean, how would you frame your.

Speaker Change: Willingness to go after incremental talent and.

Speaker Change: And the advisory business over the next call it nine to 12 months.

Speaker Change: So.

Paul Reilly: We've done a lot of adjusting in terms of the costs and lowering the costs in that business, but we've also done some hiring. So, you know, the businesses very leverage the upside of revenue that comes up. I mean, so you know, the margin two years ago was what 50% or something. I mean, now it's not.

Speaker Change: We've done a lot of.

Speaker Change: Adjusting in terms of the costs and lowering the costs in that business, but we've also done some hiring so.

Speaker Change: The businesses.

Speaker Change: Very.

Speaker Change: Leverage to the upside of revenue comes up I mean, so the margin two years ago was about 50% or something I mean, so now it's not.

Not.

Paul Reilly: So I mean, there's leverage for the revenue to grow to really help with that margin. So the question is just the market. And we're always open to bringing in talent. I think we showed in 2009.

Speaker Change: So I mean theres leverage for the revenue to grow to really help with that margin. So the question is just the market and we are open always to bring in talent I think we showed.

Paul Reilly: And the worst part is that we are hiring when other people aren't really paid off for our growth for the whole next decade. And so that is the blessing of a really strong capital position is that we have the opportunity, even in tough markets, to hire carry and really position talent to bring us forward. We've done some public finance hiring that we're already seeing payoff from this last quarter and this coming quarter. You know, if you looked at just the results of public finance, you wouldn't have done it, but we're, again, great believers in the business, the platform, and if there's great talent out there, we're willing to take the long-term investment and can liquidity and capital afford to do that.

Speaker Change: <unk> nine in the worst part of where you are hiring when other people aren't really paid off for our growth.

Speaker Change: Whole next decade and so.

That is the last segment of a really strong capital position.

Speaker Change: We have the opportunity even in tough markets.

Speaker Change: Higher carry and really position talent to bring US forward, we've done some fixed public finance hiring that we're already seeing.

Speaker Change: Hey off problem in Alaska.

Speaker Change: This quarter this coming quarter.

<unk>.

Speaker Change: If you looked at just the results are public but as you would have done it.

Speaker Change: Again, great believers in the business to the platform and if there is great talent out there who are willing to take the long term investment.

Speaker Change: Liquidity and capitalize afford to do that.

Speaker Change: Perfect. Thank you so much.

Speaker Change: Thank you.

Operator: The next question is from Brennan Hawken, UBS.

Speaker Change: The next question is Brennan Hawken UBS.

Brennan Hawken: Good afternoon. Thanks for taking my questions and congratulations to both of you.

Brennan Hawken: Good afternoon, Thanks for taking my questions and congrats to both of you.

Paul Reilly: Curious about the idea now that we're starting to see capital markets get going, and activity begin to pick up. You know, how should we think about incremental margins in that business for you given how, Unknown Attendee, Michael Cho, Raymond James Financial Inc.

Brennan Hawken:

Brennan Hawken: Curious about the idea now that we're starting to see capital markets get going activity begin to pick up.

Brennan Hawken:

How should we think about incremental margins.

Brennan Hawken: In that business for you given how.

Brennan Hawken: Weak the profitability has been I would assume that there would be pretty good but could you help us get a sense of what it all incremental dollar of revenue would mean from an incremental margin perspective.

Paul Shoukry: Yeah, I think the only thing we can really point to is, you know, the margins peaking out in the mid 20s. I think it's 25, 26% and 21, 22 in that time period. And so there's a lot of upside to the margins from where we are today. And just remember this, this quarter was impacted by 20 million dollars of deferred comp amortization from those record years as well, which, you know, we'll run off over the course of the next 12 to 18 months because those are typically three-year deferrals.

Speaker Change: Yes, I think.

Speaker Change: Maybe the only thing we can really point to is the.

Margins, peaking out in the mid <unk> I think it was $25 26%.

Speaker Change: 'twenty one 'twenty two in that time period.

Speaker Change: So, yes, theres a lot of upside to the margins from where we are today.

Speaker Change: And just remember this this quarter was impacted by $20 million of deferred comp amortization from those record years as well.

Speaker Change: We will run off over the course of the next 12 to 18 months because those are three year.

Speaker Change: Deferrals typically so.

Paul Shoukry: So there's a lot of upside. We have a very strong franchise now in investment banking, the pipelines, and the leading activity levels are good. Closings are difficult to predict just in this market environment, but we think there's a lot of upside to both the top and bottom line in our capital market segment. And if we didn't, we would be taking a lot.

Speaker Change: There's a lot of upside.

Speaker Change: We have a very strong franchise now in investment banking pipelines.

Speaker Change: Pipelines in the leading activity levels are good.

Speaker Change: Things are difficult to predict just in this market environment.

Speaker Change: We think there's a lot of upside to both the top and bottom line and our capital markets segment.

Speaker Change: And if we did we would be doing we've been taking a lot different actions.

Paul Reilly: And if we didn't, we would be doing, we'd be taking a lot different action. And we have taken so far. I think we've prudently cut expenses and made sure that we have the right people on the field, but we think we have a great team. As the market recovers, I believe they'll do very well.

Speaker Change: And we've taken so far I think we've prudently cut expenses and making sure that we have the right people on the field.

Speaker Change: We have a great team.

Speaker Change: As the market recovers believes they'll do very well.

Paul Reilly: Sure, fair enough. And then thinking about the improving environment, you know, if we continue to see signs of recovering strength in your core businesses, will that increase confidence and improve the likelihood of a better outlook for capital returns and buyback? You know, I think our capital philosophy

Speaker Change: Sure Fair enough.

Speaker Change: And then thinking about.

Speaker Change: The improving environment.

If we continue to see signs of recovering strength in your core businesses.

Speaker Change: Will that increased confidence and improve the likelihood for a better outlook for capital returns and buybacks.

Paul Reilly: You know, I think our capital philosophy hasn't changed and that we would love to add to the business, invest in the business first, and certainly. Our recruiting is, you know, an ongoing large investment, which is, you know, certainly I don't think anyone thinks it's a bad investment. We're looking for M&A opportunities and are active in the market, but we can't predict the timing.

Speaker Change: I think our capital philosophy.

Speaker Change: It changed and that we would love to add to the business invest in the business first and certainly.

Speaker Change: Our recruiting is.

Speaker Change: Ongoing large investment.

Speaker Change: Which is certainly I don't think anyone thinks is about investment we're looking for M&A opportunities and are active in the market.

Speaker Change: And predict the timing and we're not.

Paul Reilly: And, you know, we're not. Certainly we've committed to buy dilution, back and and the opportunistic and but we don't want the capital levels we think that these levels are high and you know we want to manage them and so we will be meeting with the board and I think by the you know analysts and investor days may have you know better, Insight to how we may do that, but, to the, you know, the profitability, we're not trying to hoard capital doesn't benefit us.

Speaker Change: Certainly we are committed to buy dilution back in and be opportunistic, but we don't want the capital levels. We think at these levels are high.

Speaker Change: We want to manage them and so we will be meeting with the board and I think by the.

Speaker Change: The analyst and Investor days May have better.

Speaker Change: Insight to how we may do that.

But.

Speaker Change: Yes.

Speaker Change: So the profitability, we're not trying to hoard capital doesn't benefit us.

Paul Reilly: But we, you know, we'll probably always be higher than most firms, but this is a pretty robust level. We acknowledge that. I think our commitment for those on this call thinking we'd do a buyback that averaged $120 plus. You know, you wouldn't have thought we would have done that even a quarter or two ago. So we're, we're trying to, you know, manage the levels.

Speaker Change: We will always be higher probably than most firms but.

Speaker Change: This is a pretty robust level.

Speaker Change: Knowledge that.

Speaker Change: Okay. Thank our commitment for those on this call thinking we'd do a buyback but averaged $120 plus.

Speaker Change: You wouldn't have thought we would have done that even a quarter or two ago.

Speaker Change: We are trying to manage the levels.

I appreciate that color.

Operator: The next question is Dan Fannon, Jeffrey.

Daniel Thomas Fannon: The next question is Dan Fannon Jefferies.

Daniel Thomas Fannon: Thanks. Good evening. Just to follow up on that last question, can you talk about, you know, M&A and really what you think makes the most sense in terms of strategic fit from a product, geography, or scale perspective?

Dan Fannon: Yeah.

Daniel Thomas Fannon: Thanks, Good evening just to follow up on that last question can you talk about M&A and really what you think makes the most sense in terms of strategic fit from a product geography or scale perspective.

Paul Reilly: Yeah, we could go and go along. I mean, that's a hard question to answer quickly.

Yes, we could go in through along I mean, that's.

Speaker Change: Hard question to answer.

Quickly I mean, there is our primary geographies or.

Paul Reilly: I mean, our primary geographies are, you know, North America and then Europe, where we look for the best opportunities in each business. The opportunities are different in our private client group. It's really North America and the UK.

North America and in Europe.

Speaker Change: That we look for the best opportunities in each business the opportunities are different in our private client group, It's really North America and the UK.

Paul Reilly: Our M&A group is much broader. You know, we're on the continent, not really in Asia, but not against M&A capability, more than we have today, asset management, this particular product. You know, we can go on and on and on. So it's, we think in all the areas of the firm, there are areas that we can grow that strategically help us through acquisition. But you know, that would be a lot longer and in a lot more detail than that general question.

Speaker Change: Our M&A group.

Speaker Change: Much broader.

Speaker Change: Net.

Speaker Change: Really in Asia, but not against M&A capability.

Speaker Change: More than we have today asset management.

Speaker Change: Particular products.

Speaker Change: We can go on and on and on so.

Speaker Change: We think in all the areas of the firm there are areas, where we can grow that.

Speaker Change: Strategically help us through acquisition.

Speaker Change: But that would be.

Speaker Change: A lot longer than a lot more detail than that general questions. So each business does.

Paul Reilly: So each business has different needs; M&A, we think there are areas that we could expand. The private client group, we think our geographies, we've done well in the Northeast, but could do more. And we're really focused on growing in the West. Unknown Speaker But more robustly, you know. So the answer is a lot of areas if we can find the right opportunities and, you know, make them a reasonable return for shareholders that we would have.

Speaker Change: Needs M&A, we think there are areas, where we could expand the private client group, we think our geographies we've done well in the northeast, but could do more and we're really focused on growing in the west.

Speaker Change: More robustly.

Speaker Change: So the answers.

Speaker Change: A lot of areas, if we can find the right opportunities.

Speaker Change: Make a reasonable return for shareholders.

Speaker Change: Yes.

Daniel Thomas Fannon: Okay. And then as you think about NII going forward, and you mentioned the kind of cash trends and some stabilization there, on the loan growth side, any signs of a pickup in potential demand there?

Speaker Change: Understood and then as you think about NII going forward and you mentioned, the kind of cash trends and some stabilization there.

Speaker Change: On the loan growth side any signs of pickup in potential demand there or as you think about the rest of this year what are the kind of.

Paul Shoukry: Yeah, as you know, loan growth has been tepid, not only for us, but for the entire banking industry, since rates started rising over the last 12 to 16 months. And a lot of that is due to just the higher rate environment and a lot of corporations and investors coming into this environment flush with cash. We are optimistic about loan growth going forward, but we don't know exactly when that inflection point will hit.

Speaker Change: Most sensitive factors as we think about.

Speaker Change: That line item in terms of up or down.

Speaker Change: Yes.

Speaker Change: Loan growth has been tepid not only for us but for the entire banking industry since rates started rising over the last 12 to 16 months.

Speaker Change: A lot of that is due to just the higher rate environment.

Speaker Change: And a lot of corporations.

Speaker Change: Investors coming into this environment flushed with cash.

Speaker Change: We are optimistic about loan growth going forward, we don't know exactly when that inflection point will hit but we do think that there is.

Paul Shoukry: But we do think that there's a demand building up, both for companies who will eventually get back engaged in M&A and other investing activities, as well as private client group investors. So one of the reasons that we are maintaining strong capital and funding positions and a lot of flexibility is to be in a position of strength when that loan growth does resume.

Speaker Change: Manned building up both for companies, who will eventually get back engaged in M&A and other investing activities as well as.

Speaker Change: Private client group investors, so one of the reasons.

Speaker Change: We are maintaining strong capital and funding positions in a lot of flexibility as to be in a position of strength when that loan growth does resume because it is just a matter of in our minds, just a matter of timing.

Unknown Attendee: [inaudible]

Operator: Up next is a question from Mark McLaughlin, Bank of America. Good afternoon. Thank you.

Speaker Change: For when that loan growth recovers and so we're well positioned for it we don't know when that will come back, but we're optimistic about the growth going forward.

Speaker Change: Thank you.

Our next question from Mark Mclaughlin Bank of America.

Mark Robert McLaughlin: Good afternoon. Thanks for taking my question and congratulations to you both.

Good afternoon. Thanks for taking my question and congratulations to you both.

Paul Reilly: I wanted to get your take with regard to advisor movements. What have you guys been seeing on your end in terms of advisors leaving wire houses and also competition between independent broker dealers? Is there anything to call out?

Mark Robert McLaughlin: Wanted to get your take with regard to advisor movements. What have you guys been seen on year ends in terms of advisers, leaving wire houses and also competition between independent broker dealers is there anything to call out.

Paul Reilly: [inaudible] has been, you know, has, you know, the focus has been big. I think private equity investment into the RAA space has caused more movement between and outside of the independent broker dealers and employee broker dealers. So that's kind of a new factor in force.

Mark Robert McLaughlin: Just that the competition is still robust.

So advisor movement, especially a large teams that's been.

Mark Robert McLaughlin: The focus has been big I think private equities investment into the <unk> space has caused more of a movement to into outside of the <unk>.

Mark Robert McLaughlin: Broker dealers and employee broker dealers, so that's kind of a new factor.

Paul Reilly: So part of the reasons why, you know, a decade ago, we started investing in our RA channel so we could be competitive. So yeah, I mean, I can't remember a time where there hadn't been a lot of competition, but we still see why our house movement is in our favor. I think that you're seeing more people not reporting advisor counts for that reason. But, you know, we see a lot of activity, but it's competitive. There are a lot of people.

Mark Robert McLaughlin: So part of the reasons why a decade ago, we started investing.

Mark Robert McLaughlin: Have our RA channels, so we can be competitive.

Speaker Change: So, yes, I mean.

Speaker Change: I can't remember, a time, where competition, where there hasnt been a lot of competition.

Speaker Change: But we still see wire house movement in our favor.

I think that Youre seeing.

Speaker Change: More people not reporting advisor count for that reason.

Speaker Change: But we see a lot of activity.

Speaker Change: But it is competitive there are a lot of people.

Mark Robert McLaughlin: Out there competing, and it's, you know, at the end of the day. It's not just money. I think what people think the highest bidders get it if you look at our, we just saw the latest industry source. We're still, you know, lower than most firms. I have a fair margin on our transition assistance, but it's clearly up from, you know, a couple of years ago. So reflecting the competition, so it's competitive, but we believe our platform is what lands people in our culture. And so, so far, it's continuing. It's not easy.

Speaker Change: Out there competing and it's.

Speaker Change: At the end of the day, it's not just money I think what people think the highest bidders get it if you look at our we just saw the latest industry stores were still.

Speaker Change: No.

Speaker Change: Lower than most firms.

Speaker Change: A fair margin and our transition assistance, but it's clearly up from.

Speaker Change: A couple of years ago, so reflecting the competition so.

Speaker Change: As competitive, but we believe our platform is what lands people on our culture and so so far it's continuing.

Speaker Change: But it's not easy it's hard work.

Paul Reilly: Thanks, I appreciate that color. And then I'm sure we'll get an update on this at Investor Day. But with respect to RCS, what are you guys seeing in terms of advisors moving, especially the size of those advisors? I realize, for the most part, it's usually advisors once they reach kind of a critical mass. Are you seeing the size of the advisors wanting to move over to RIA kind of move down in scale?

Speaker Change: Thanks, I appreciate that color and then I'm sure we'll get an update on this at the Investor day, but with respect to Rcs. What have you guys seen in terms of advisors moving especially the size of those advisers I realize for the most part it's usually advisers once they reached kind of sort of a critical mass of you seen this the size of the.

Speaker Change: <unk> wanting to move over to <unk> kind of moved down in scale.

Operator: You know, in the market, there's certainly a lot of movements of smaller teams that want to become RIAs and big teams that have the infrastructure to be RIAs. So the movements are really kind of across the board, larger teams. One of the positives and challenges of RIAs is that you can affiliate with a firm but have multiple custodians. So, you know, I think that if you look at that, large RIAs at some of the big custodial firms, they can still move assets, you know, so you don't have to have the firm affiliate with you to be an asset gainer too.

Speaker Change: And the market there is certainly a lot of movement of movements.

Speaker Change: Smaller teams that want to become our A's and big teams that have the infrastructure to <unk>. So the movements really kind of across the board larger teams.

Speaker Change: What are the.

Speaker Change: Positives and challenges of <unk>.

Speaker Change: You can affiliate.

Firm.

Speaker Change: Multi custodians.

Speaker Change: So I think that if you look at that.

Speaker Change: Large <unk> that some of the big custodial firms they still move assets sometimes.

Speaker Change: So you don't have to have.

Speaker Change: The firm affiliated with you to be an asset gain or two so.

Operator: So the dynamic of that, it's a much more dynamic industry in that way. It's kind of all or none on the registered rep side. And it's, it's a fight for wallet, you know, on the RIA side.

Speaker Change: The dynamic of that it's a much more dynamic industry in that way, it's kind of all or none.

Speaker Change: Registered rep side.

Speaker Change: It's a fight for wallet.

Speaker Change: On the <unk>.

Syed.

Great. Thank you.

Kyle Voigt: We'll now take a question from Kyle Voigt, from KBW.

Speaker Change: We will now take a question from Kyle Voigt <unk> definitely.

Paul Reilly: Hi, good evening. I just have a couple of follow-up questions. Maybe first, just to follow up on Dan's M&A question. I guess just to be clear on the capital point: do you feel like you have enough capital flexibility today with the current leverage ratios? to act on the M&A opportunities that you're seeing in the market, or is the near-term guidance on buybacks to offset dilution and implied continued near-term capital build due to maybe wanting a bit more flexibility due to the size of the acquisition opportunities that you're seeing?

Kyle Voigt: Hi, Good evening I just have a couple of follow ups, maybe first just a follow up on Dan's M&A question.

Kyle Voigt: Just to be clear on the capital point can you feel like you have enough capital flexibility today with the current leverage ratios.

Kyle Voigt: To act on the M&A opportunities that youre seeing in the market.

Kyle Voigt: Or is the near term guidance on buybacks to offset dilution.

Kyle Voigt: And an implied continued near term capital Bell two to maybe wanting a bit more flexibility to get the size of the acquisition opportunities that youre seeing.

Kyle Voigt: Inc.

Paul Reilly: You know, I think we're in the ballpark of flexibility. The question just is that question: do you see something where it could be bigger?

Kyle Voigt: Okay.

Kyle Voigt: I think we are in the ballpark of flexibility. The question just is that question.

Speaker Change: See something where it can be bigger.

Paul Reilly: But you can't just wait and wait and wait with total capital. We know we've drifted up one, if I remember right, Paul, 14% or something. And people are saying, "What are you doing?"

Speaker Change: But you can't just wait and wait and wait with total capital.

We've drifted up ones.

Remember right, Paul 14% or something.

Speaker Change: And people are saying what are you doing but we at <unk>. We have three deals that we executed in one year that brought it down.

Paul Reilly: But, you know, we had three deals that we executed in one year that brought it down. So it hit 10 then, and it's been building back up, so if it was as smooth and we could forecast it, it'd be really easy. Unknown Attendee Right, but M&A kind of hits.

Speaker Change: So at 10, then thats been building back up so.

Speaker Change: If it was smooth and we could forecast that would be really easy.

Speaker Change: Alright, but M&A kind of hits.

Speaker Change: Deals, sometimes come almost out of the blue or someone just decides they're going to sell.

Paul Reilly: And, you know, so that's why if we average up sometimes it's, you know, we feel like the market will be, will have opportunities that we can foreshadow. But that doesn't mean we're right. There's one thing to enter into a discussion. That's another thing; first seller to agree it's time and, you know, pick us and close. So it's that that's the challenge. But many of the deals that we have closed are because we could execute.

Speaker Change: And so that's why if we average up sometimes.

Speaker Change: Feel like the market will be we will have opportunities that we can foreshadow, but that doesn't mean, we're right. There is one thing to enter into a discussion thats another thing.

Speaker Change: A seller to agree it's time.

Speaker Change: Picked us and to close so.

Speaker Change: That's the challenge.

Speaker Change: But many of the deals that we are closed is because we could execute and we could we were not only were they attracted to us but there was a certainty of closing both financially and that we have enough cash on hand that it wasn't healthy.

Paul Reilly: And we could, we were not only attracted to them, but there was a certainty of closing both financially and that, you know, we had enough cash on hand that it wasn't a leap, you know, that we in the financing, because we're not leveraged, isn't a leap that we can close very, very quickly. So I wish I could give you a science to it. There's a little more art to it.

Speaker Change: <unk>.

Speaker Change: Then the financing because we are not leveraged isn't I'll leave that we can close very very quickly so.

Speaker Change: I wish I could give you a science to it there's a little more art to it.

Paul Reilly: And that's, We would love to be as clear as we can on this, but you know, we have the magic formula. We would, we would let you know, or at least package it and sell it to our competitors.

Speaker Change: We would love to be as clear as we can on this but.

Speaker Change: We have the magic formula.

Speaker Change: Now or at least packages and solid competitors.

Kyle Voigt: That's very helpful. Thank you.

Speaker Change: That's very helpful. Thank you.

Paul Shoukry: And then just for a follow-up on the loan balances, I think you gave some commentary on SBLs a few quarters ago that you were actually seeing some decent demand, and some of the acceleration in that book of the growth of that book that you were seeing in the calendar third quarter was due to some pay down slowing. So I guess it's a bit surprising to see that growth has stalled out here in the past quarter.

And then just for a follow up on the loan balances.

You gave some commentary on Spl's, a few quarters ago that youre actually seeing some decent demand in some of the acceleration in that bulk of the growth of that bucket that you were seeing in the calendar third quarter was due to some pay downs slowing.

Speaker Change: I guess a bit surprising to see that growth has stalled out here.

Paul Shoukry: Just wondering if you could provide any additional color on what's happening in the SBL book specifically, which is flatlined here. And then do you think the market really just needs to wait for rates to move lower before demand broadens again?

Speaker Change: In the past quarter I'm, just wondering if you could provide any additional color on what's happening in the SPL bulk specifically, which is flat line here and then.

Speaker Change: Do you think the market really just needs to wait for rates to move well before demand broadens again.

Paul Shoukry: It was flattish for us, as you point out, sequentially, as it was, I think, for the rest of the industry, at least those who have reported thus far. So, I'm not sure you necessarily need to wait for rates to decrease. It's just maybe a stabilization of rates, even as borrowers get used to sort of the new norm. So, I think that's really what we're seeing as we've transitioned from historically low rates to our current levels at an unprecedented pace. It's just something that a lot of people are still getting used to, and companies are still getting used to.

Yes.

Speaker Change: It was flattish for us as you pointed out sequentially as it was I think.

Speaker Change: The rest of the industry at least those who have reported thus far so.

Speaker Change: I'm not sure you necessarily need to wait for rates to decrease as just maybe a stabilization of rates even as.

Speaker Change: Borrowers get used to sort of the new norm.

Speaker Change: So I think I think that's really what we're seeing as we've transitioned from historically low rates.

Speaker Change: Two.

Speaker Change: Current levels at an unprecedented pace just.

Speaker Change: A lot of people are still getting used to.

Speaker Change: Companies are still getting used to.

Paul Shoukry: [inaudible]

Paul Shoukry: you know, at this level of rates.

Speaker Change: This level of rates.

Kyle Voigt: Great, thank you very much, and congratulations again to both of you.

Speaker Change: Great. Thank you very much and congrats again.

Speaker Change: Thanks Scott.

Your next question comes from Michael <unk> with Morgan Stanley.

Operator: Your next question comes from Michael Cyprys, Morgan Stanley.

Michael Cho: Hi, Thanks for taking the question just wanted to ask on organic asset growth I think in the past you've suggested that most of the growth and in a grid that youre seeing is from recruiting and just curious how you think about that opportunity set over time.

Michael J. Cyprys: Hi, thanks for taking the question. I just wanted to ask about organic asset growth. I think in the past, you've suggested that most of the growth, N&A growth that you're seeing is from recruiting. Just curious how you think about an opportunity set over time, from maybe providing advisors with more services to enhance their efficiency and unlock growth from the installed advisor.

Michael Cho: From maybe providing advisers with more services to enhance their efficiency and unlock growth from the installed adviser base to grow same store sales.

Michael Cho: I think our focus internally is first to our existing advisors, both technology and.

Michael Cho: Our capability is to make sure their spending is.

Paul Reilly: I think our focus internally is first on our existing advisors, both technology and, you know, capabilities to make sure they're spending as much time as they can. [inaudible] The tools we put out, the technology we put out, the back office, modernization, all of that is to help your productivity. That does drive a lot of our growth and what we do, and keeps advisors here. This is a market, and frankly, the market's been this way for a while, where almost any advisor could leave.

Michael Cho: As much time as they can.

Michael Cho: With their clients and acquiring new clients.

Michael Cho: It makes the advisors happy that means our clients are happy is the cheapest growth for us So our focus.

Michael Cho: And develop the platform for other advisors don't want to come to so.

Michael Cho: The tools, we put out the technology, we put out the back office modernization all of that is to help advisor productivity and.

Michael Cho: That does drive a lot of our growth in what we do and keeps advisors here.

Michael Cho: This is a market and frankly the market has been this way for a while where almost any advisor could leave.

Paul Reilly: You know, get a lot of money for their book and start somewhere else, but they stay here because of that. So that's a big focus of ours. That's where we pay a lot of attention. Number one is retention. And I think part of our growth rates have been driven by our retention rates, too, and our recruiting, so. I'm not sure if there's more to the question, but that's, you know, it's kind of focus number one is to make the existing advisors happy and productive.

Michael Cho: Okay, a lot of money for their book.

Michael Cho: And start somewhere else, but they stay here because of that so that's a big focus of ours, that's where we pay a lot of attention number one is on retention and.

Michael Cho: And I think part of our growth rates have been.

Michael Cho: Driven by our retention rates too in our recruiting so.

I'm not sure if theres more of the question, but thats kind of focused number one is to make the existing advisers have been productive.

Michael Cho: Great and then just on the loan book, just curious where you think you're Underpenetrated as you look at the portfolio today and if you look out over the next couple of years, how would you sort of like the composition and size of the book to evolve and are there any additional capabilities you feel you may need to build out.

Michael J. Cyprys: And then just on the loan book, just curious where you think you're underpenetrated as you look at the portfolio today, and if you look out over the next couple of years, how would you like the composition and size of the book to evolve? And are there any additional capabilities you feel you may need to build out? Yeah, there are two pieces to that.

Speaker Change: Yes, there is two pieces to that there is.

Paul Reilly: Are we underpenetrated compared to wire houses in terms of loans? [inaudible] You know, if our loans are, if you like our mortgage loans, use them; if you don't, something's better for your clients, use it. So our job is to provide competitive products, and their advisor's job is to figure out what's appropriate for their client, to you. So we do not set quotas. We do not put in place incentives.

Speaker Change: Are we underpenetrated compared to warehouses in terms of loans.

Speaker Change: You would say, yes, but our other thing as well.

Speaker Change: Take a position with advisors.

Speaker Change: <unk> is to do the right thing for your clients.

Speaker Change: If our loans are.

Like our mortgage loans use them if you don't.

Speaker Change: Something's better else for your clients use it so our job is to provide competitive products.

Speaker Change: And their advisors job is to figure out what's appropriate for their clients.

To use so we do not put quotas we.

We do not put incentives some people have product incentives further top trips or their managers have.

Paul Reilly: You know, some people have product incentives for their top trips or their managers have quotas to try to hit. We have none of that.

Speaker Change: <unk> tried to hit we have none of that we just want advisers to do what's best for the business and then we try to develop compelling products.

Paul Reilly: We just want advisors to do what's best for the business. And then we try to develop compelling products and education that they can use to help their clients. Our numbers, industry-wise, are lower, but we understand why, because we're not pushing it. We do it through education, not through trying to use incentives to get them to do it.

Speaker Change: And services that.

And educate that they can use.

Speaker Change: Used to help their clients so.

Speaker Change: Our numbers industry wide are lower but we understand why because we're not pushing it.

Speaker Change: We do it through education, not through trying to use incentives to get them to do it so.

Paul Reilly: So now you can talk about, from a capital allocation standpoint, that might be different from our side, what loans we'd like to grow. The good news for us is that we'd like the private client group loans, the SBLs, the mortgages, the other things that... They not only have our best risk-adjusted return, they're secured, and they're good for clients, and they're flexible for clients. So we're matched up that way.

Speaker Change: So now you can talk about from a capital allocation standpoint that might be different from our side.

Speaker Change: Loans, we'd like to grow the good news is for us as we'd like the private client group the spl's mortgages the other things that they have.

Speaker Change: Not only spl's have our best risk adjusted return there are secured.

Speaker Change: And they're good for clients and their flexible for clients. So we're matched up that way. So our challenges are more where do we want to go on whether it's the commercial banking site inspection or how much do we on investment securities and other that are more of a financial decision and long term investment so there.

Paul Reilly: So our challenges are more where do we want to go, whether it's the commercial banking section or how much do we want to invest in securities and other things that are more of a financial decision and long-term investment. So they're, You know, penetration is a good question. We are lower, but we don't try to force it. You know, we want our advisors to do it if it's the right thing for their clients.

Speaker Change: So penetration is a good question, we are lower but we don't try to force it.

Speaker Change: We want our advisers to do it if it's the right thing for their clients.

Operator: Next up is Bill Katz and T.D. Cowan.

Speaker Change: Great. Thank you.

Speaker Change: Next Bill Katz PD Cowen.

William Katz: Okay, thank you very much and congratulations, everybody. I have a question for you just on NIM, the net interest margin. Just sort of wondering if you could talk a little bit about maybe where the exit level might be for the new quarter. And just if, given sort of the reinvestment rates of what might be rolling on, rolling off, and in a world of a tepid type of loan backdrop for now, how do you sort of see that playing out if the sorting starts to ease a little bit as well? Thank you.

William Katz: Okay. Thank you very much and congratulations everybody.

William Katz: <unk> for you just on the NIM. The net interest margin just sort of wondering if you could talk a little bit about maybe where the exit level might be for the new quarter.

William Katz: And just if just given sort of the reinvestment rates are what might be rolling on rolling off and in a world of a tepid.

William Katz: <unk> of loan backdrop for now.

William Katz: See that playing out.

Speaker Change: The sorting stores ease a little bit as well thank you.

Paul Shoukry: Yeah, I would say a lot of the shift in cash balances from on the balance sheet to third-party banks that really occurred in the last couple of quarters. So, the NEM going forward is going to be more driven by, you know, one, the absolute level of rates and what happens with short-term rates going forward. And also, too, the asset mix, to the extent we're a little heavy right now on the bank balance sheet and cash balances, going back to the comments I made earlier about wanting to be in a position of strength when loan demand recovers.

Speaker Change: Yeah.

Yes, I would say a lot of the shift in cash balances from on balance sheet to third party banks that really occurred in the last couple of quarters. So yes.

Speaker Change: The NIM going forward is going to be more driven by one the absolute level of rates and what happens with short term rates going forward.

Speaker Change: And also to the asset mix to.

Speaker Change: To the extent, we're a little heavy right now on the bank balance sheet and cash balances going back to the comments I made earlier about wanting to be in a position of strength when loan demand.

Paul Shoukry: And so that brings down the NEM, all else being equal, but it's at least a push, if not a modest positive, to NII, net interest income, and earnings. But in the meantime, it does, you know, drag down the NEM a bit as we hold, you know, more cash balances than we think we would need on a run rate basis. So as far as the jumping off point, I think it is, you know, a relatively stable number from where we were this quarter.

Speaker Change: Covers and so that brings down the NIM all else being equal, but it's it's.

Speaker Change: At least a push if not a modest positive to NII net interest income and earnings but in the meantime, it does yes.

Speaker Change: Dragged down the NIM a bit as we hold more cash balances than we think we would need on a run rate basis. So that's.

Speaker Change: As far as the jumping off point I think it is a relatively stable number from where we were this quarter, we're not shifting.

Paul Shoukry: like we were doing over the last couple of quarters. So I think that's all fairly well reflected this quarter.

Speaker Change: Yes, proactively shifted cash balances off balance sheet to third party banks like we're doing over the last couple of quarters. So I think that's all fairly well reflected this quarter.

William Katz: Great, that's helpful. And just try and triangulate a combination of the senior executive leadership changes, your comments, Paul Shoukry, about sort of the platform being in a very good spot with scale. Where are you investing right now as you think through maybe the comp or non-comp side? And how might the strategic vision be evolving as you sort of migrate to the next generation of leaders? Thank you.

Speaker Change: Great. That's helpful and just just try and triangulate combination of the senior executive leadership changes your comments, Paul Shoukri about sort of the platform being at a very good spot with scale.

Speaker Change: Where are you investing right now as you think through maybe the comp or non comp side and how might the strategic vision be evolving as you sort of migrate to the next generation of leaders. Thank you.

Paul Shoukry: I mean, we have been consistently investing in all of our businesses. First and foremost, the largest business by far is our private client group business, and we don't anticipate that changing.

Speaker Change: Yeah.

Paul Shoukry: Yes, I mean, we have been consistently investing in all of our businesses.

Paul Shoukry: First and foremost the largest business by far is our private client group business.

Paul Shoukry: And we don't anticipate that changing so thats, where the vast majority of our investment dollars go but we also invest heavily in growth and the capital markets asset management and the bank businesses and they are all great businesses. If you will.

Paul Shoukry: So that's where the vast majority of our investment dollars go. But we also invest heavily in growth and the capital markets, asset management, and the bank businesses. And they're all great businesses. If you look at the last three years, and even the first half of this fiscal year, being able to generate record revenues and earnings in very different market environments has, you know, been a testament and a reflection of having a diversified business model. So we're going to continue to invest in very high service levels, and continue to invest in technology to, you know, Michael Advance, Randall Walker, Andrew Sharp, Peter Advance, Michael Advance, Andrew Sharp.

Paul Shoukry: Look at the last three years and even the first half of this fiscal year being able to generate record revenues and earnings in a very different market environments.

<unk>.

Paul Shoukry: As a testament and a reflection of having.

Paul Shoukry: A diversified business model.

Paul Shoukry: So we're going to continue to invest in very high service levels continue to invest in technology.

Paul Shoukry: Two.

Paul Shoukry: Enhanced the service levels and create more efficiencies for advisers. So they can spend more time with clients as Paul was touching on earlier.

Paul Shoukry: So kind of maybe a long winded way of saying, there's not going to be a dramatic change because everything is really working very well and has been since our founding $19 62.

Paul Shoukry: Thank you. Congratulations again.

Operator: And our final question today will come from Devin Ryan, from Citizens JMP.

Paul Shoukry: <unk> focused on essentially the same businesses that we're focused on today and so that's sort of the kind of plan going forward.

Devin Ryan: Hey, thanks so much for squeezing me in. And obviously, I want to echo the congratulations as well to Paul Shoukry and the others on the leadership team not on the call and to Paul Reilly as well. The stock, I think, was trading at about $10 when you joined in 2009. I remember those days pretty well, and it was unquestionably a successful run and a well-earned transition. So congratulations.

Speaker Change: Thank you congrats again.

Speaker Change: And our final question today will come from Devin Ryan JMP.

Devin Ryan: Hey, yes. Thanks, so much for squeezing me in and obviously you'd want to echo the congratulations as well to partially agree and the others on the leadership team that on the call and the.

Devin Ryan: Paul Reilly as well the stock I think it was trading at about $10.

Devin Ryan: <unk> joined in 2009, I remember those days.

Devin Ryan: Pretty well and so unquestionably a successful run well our transition so congratulations.

Devin Ryan: I just want to real quick a couple here on just fixed income brokerage. You know, you had a very significant step up in the first quarter off of the back half of 2023. And then that took a step back again in the second quarter. And just curious, you know, was that just a shift in activity and depositories just with the changes in rate expectations, or something else going on there? And just how to think about that business relative to maybe the second quarter jumping off point.

Devin Ryan: I just wanted to real quick a couple here on just fixed income brokerage.

Devin Ryan: You had a very significant step up in the first quarter.

Devin Ryan: The back half of 2023 and that took a step back again in the second quarter and just curious is that just a shift in activity in depository is just with the changes in rate expectations or is there something else going on there and just how to think about that business relative to maybe the second quarter, our jumping off point.

Paul Shoukry: Yeah, when a couple quarters ago, rates came down quite a bit and yields came down quite a bit and gave depositories a repositioning opportunity. And on the call last quarter, I think we talked about that repositioning opportunity being somewhat episodic in nature. And, you know, throughout the course of this quarter, rates actually went up again.

Devin Ryan: Yes, a couple of quarters ago.

Devin Ryan: The rates came down quite the yields came down quite a bit and gave depository is a repositioning opportunity and.

Devin Ryan: On the call last quarter, I think we talked about that repositioning opportunities being somewhat episodic in nature.

Devin Ryan: Throughout the course of this quarter.

Devin Ryan: Rates actually went up again.

Paul Shoukry: And so you know, the underlying factors that Paul discussed on the call and in his prepared remarks were that, you know, depositories are still struggling to grow deposit balances or keep deposit balances flat. And so they're going to be prudent and slow to reinvest in securities in this environment. And that's the largest part of our fixed income business. So, we continue to expect some headwinds there until deposit balances start growing again and banks feel more confident investing in their securities portfolio.

Devin Ryan: And so the.

Underlying factors that Paul discussed on the call.

Prepared remarks was that the.

<unk> are still struggling to grow deposit balances deposit balances flat.

So they're going to be prudent and slow to reinvest in securities in this environment. So that's the largest part of our fixed income business.

Devin Ryan: We continue to expect some headwinds there until deposit balances start growing again.

Devin Ryan: And banks feel more confident in investing in their securities portfolio. Meanwhile, Some ridge has been nice and that it has diversified the fixed income revenue streams with Thats corporate trading technology enabled capability and so but that business thrives on volatility in this past quarter.

Paul Shoukry: Meanwhile, Summeridge has been nice in that it has diversified the fixed income revenue streams with its corporate trading technology-enabled capability, but that business thrives on volatility, and this past quarter, spread and rate volatility wasn't as significant, so they didn't have sort of the uplift that they had in preceding quarters.

Devin Ryan: Right.

Devin Ryan: The rate volatility wasn't as significant so they didn't have sort of the uplift that they had in preceding quarters.

Devin Ryan: Okay, terrific. You know, I'll just leave it there in the interest of time here and follow up offline. But thanks very much. I appreciate it.

Okay terrific I'll just leave it there in the interest of time here and follow up off line, but thanks very much I appreciate it.

Paul Reilly: At this time, I would like to hand the conference back to Paul Reilly for any additional or closing remarks.

Speaker Change: Thanks, Kevin.

Speaker Change: At this time I would like to hand, the conference back to Paul Reilly for any additional or closing remarks.

Operator: Great, we appreciate you all coming on and having a good quarter. We're already on to the next quarter, and I think we've got some good payoffs in. We look forward to it, and I'm not sure I look forward to hearing all these generational comments, how old I am, how ready Paul is, but he is ready, and so I think you're going to see a lot of good things from Raymond James. So, once again, ladies and gentlemen, that does conclude today's conference. Thank you.

Paul Reilly: Great. We appreciate you all coming on in.

Paul Reilly: Good quarter were already on to the next quarter and I think we've got some good tailwind. So we look forward to it.

Paul Reilly: I'm not sure I look forward to hearing all these generational comments.

Paul Reilly: I am now.

Paul Reilly: Already fall is but but he is ready so I think youre going to see a lot of good things for Raymond James So thanks for joining us today.

Operator: And once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation. You may now disconnect.

Speaker Change: And once again, ladies and gentlemen that does conclude today's conference. Thank you all for your participation you may now disconnect.

Speaker Change: [music].