Q2 2025 Raymond James Financial Inc Earnings Call
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James Mitchell, Paul Reilly, Paul Reilly, Paul Reilly, Paul Reilly, Paul Reilly, Paul Reilly James Mitchell, Paul Reilly, Paul Reilly, Paul
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Speaker Change: Cisco 2025, Second Quarter Earnings Call. This call is being reported and will be available for replay on the company's investor relations website. I'm Kristi Waugh, senior vice president of investor relations. Thank you for joining us.
Speaker Change: With me on the call today, our Chief Executive Officer, Paul Shoukrys, and Chief Financial Officer, which Oorlog. The presentation being reviewed today is available on our Investor Relations
Speaker Change: Following the prepared remarks, the operator will open the line for question
Industry or Market Conditions
Speaker Change: Anticipated timing and benefits of our acquisitions or are level of success in integrating acquired businesses Anticipated results of litigation in regulatory development and general economic conditions
Speaker Change: In addition, words such as belief, expects, anticipates, intends, plans, estimates, projects.
Speaker Change: Forecast, or future conditional verbs such as May, Will, Good, Should, and Wood, as well as any other statements that necessarily depend on future events are intended to identify forward with these statements.
Speaker Change: 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 10K and subsequent forms 10Q and forms 8K, which are available on our website.
Speaker Change: Now, I'm happy to turn the call over to CEO Paul Shoukry. Paul?
Paul Shoukry: Thank you, Kristi. Good evening, and thank you all for joining us on the call today.
Paul Shoukry: Last week, we had our global top financial advisor conference in Montreal. It was wonderful to spend time with our top advisors across our affiliation options from the US, Canada and the UK.
Paul Shoukry: They are extremely pleased with Raymond James, expressing a deep appreciation for a unique advisor in applying focus culture along with our robust platform.
Paul Shoukry: Just a week prior, we hosted all of our investment banking, managing directors in Tampa, and they also conveyed enthusiasm for a unique combination of values and capabilities that enabled them to best serve clients.
Paul Shoukry: Since the CEO's succession announcement last year, I have been spending a large portion of my time traveling to meet with as many advisors, bankers, associates, and clients as possible.
Paul Shoukry: I know I've shared this before, but what I continue to hear with passion from advisors, bankers and associates is the best professional decision that they ever made was joining Raymond James. And the biggest regret they have is they did enjoy several years earlier. [inaudible]
Paul Shoukry: That statement is really a testament to our special culture and all the fantastic associates who provide excellent service each day.
Every now and then we get external validation of this. [inaudible]
Paul Shoukry: For example, this quarter, our advisors earned the number one ranking in the 2025 JD Power Survey for Advise, Investor Satisfaction, and Industry Trust.
Paul Shoukry: to all of our advisors and the associates who support those advisors. Congratulations!
and thank you for earning this well-deserved recognition.
Paul Shoukry: My number one goal at CEO will be to reinforce and strengthen our unique culture that was established by Bob and Tom James and fortified by Paul Reilly.
Paul Shoukry: and I am so fortunate to have a top-notch leadership team who share the same commitment.
Paul Shoukry: Our values-based client-first approach has consistently led to strong results, and that was the case again in the fiscal second quarter.
Paul Shoukry: We generated quarterly net revenues of $3.4 billion in pre-taxed income of $671 billion, up 9% and 10% over the year ago quarter respectively.
Paul Shoukry: For the first six months of fiscal 2025, we generated record net revenues of $6.9 billion in record pre-text income of $1.4 billion.
Paul Shoukry: Up 13% and 15% over the first half of fiscal 2024. [inaudible]
Paul Shoukry: These solid results were attributable to our diverse and complementary businesses.
Paul Shoukry: Across all of our businesses we have achieved consistent success retaining and recruiting financial professionals who provide high quality financial advice to their clients.
Paul Shoukry: In a private client group, we ended the quarter with $1.54 trillion of client assets under administration, representing year-over-year growth of 6%.
Paul Shoukry: Including assets recruited into our RIA and custody services division, we recruited total coin assets over the past 12 months of nearly $59 billion across all of our platforms.
Paul Shoukry: Quarterly domestic net new assets equals $8.8 billion, representing a 2.6% annualized growth rate on the beginning of the period domestic PCG assets.
Paul Shoukry: We saw net new assets approved throughout the quarter and also had extremely strong months of new commits in March and April , which should help our net new assets in the second half of the fiscal year.
Paul Shoukry: So, we are very optimistic about our momentum in growing pipelines across all of our affiliation options.
Speaker Change: and many more. I hope you enjoyed this video. If you did, please like, share, and subscribe.
Speaker Change: Our best of both world value proposition, where we offer a unique combination of an advisor and client-focused culture coupled with leading technology and solutions, continues to resonate with advisors across all of our affiliation options.
Speaker Change: In the capital market segment, the investment banking pipeline is very strong, but the timing of closing has been negatively impacted with market uncertainty and heightened volatility associated with tariff negotiations.
Kristina Waugh, Jonathan Oorlog, Paul Reilly
Speaker Change: While investment banking closings are expected to remain challenged across the industry until we get more certainty, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industry's recover when the market becomes more conducive.
Speaker Change: In the asset management segment, net inflows into managed fee-based programs in the private client group were very strong during the quarter, annualizing at 8%.
Speaker Change: In the bank segment, loans ended the quarter at a record $48.3 billion, primarily reflecting strong growth in security's based lending balances.
Speaker Change: Most importantly, the credit quality of the love portfolio remains solid.
Speaker Change: Turning to Capitol Deployment, I want to reiterate that our long-standing priorities have remained unchanged.
Speaker Change: And that starts with investing in growth, first organically, and complemented with strategic acquisitions.
Speaker Change: On last quarter's call, we explained that we're evaluating a few M&A opportunities.
Speaker Change: We also explain that those opportunities are often part of competitive processes and that we would not stretch on valuations [inaudible]
Speaker Change: Especially if we do not have conviction that we could generate strong risk adjusted returns for our shareholders at those prices.
Speaker Change: At this point, we are no longer pursuing those aforementioned opportunities [inaudible]
Speaker Change: Given our strong capital and liquidity positions and what we believe are attractive long-term returns from buying back our own stock at the current level, we have resumed share repurchases.
Speaker Change: During the quarter, we repurchased $250 million of common stock at an average share price of $146.
Speaker Change: Additionally, so far in April , we repurchased another $190 million or shares at an average price of $125 per share.
Speaker Change: Our current plan is to continue repurchasing shares on a more consistent basis.
Speaker Change: Lightly at an amount greater than the $250 million we repurchased the fiscal second quarter.
Speaker Change: Now, I'll provide a few comments on our outlook before turning it over to books to go over our quarterly financial results in more detail.
Speaker Change: Goes without saying, when I'll say it anyway, the heightened market volatility and potential economic impacts associated with tariffs have created a highly uncertain market environment.
Speaker Change: While client sediment on the markets and economy has declined significantly over the past quarter, the silver lining is clients are still confident with their financial plans. And satisfaction with their advisors has actually increased to 97% at Raymond James.
Speaker Change: These trends highlight the fact that clients really value having a financial advisor to help them navigate these uncertain times, a similar dynamic that we experienced during the COVID pandemic.
Speaker Change: During these times, our vision will remain unchanged to be the absolute best firm for financial professionals and their clients.
Speaker Change: In addition to our unique culture and robust platform, our strong balance sheet becomes increasingly important to prospective advisors for seeking strength and stability for their businesses and their clients during these periods of stress.
Speaker Change: As I explained earlier, our advisor recruiting pipelines are strong and building rapidly across our affiliation options.
Speaker Change: We are also making significant investments to further strengthen our capabilities.
Speaker Change: For example, during the quarter, we established and filled a new role for the Chief AI Officer.
Speaker Change: Our leadership team has conviction that AI will be a game changer for our industry.
Speaker Change: But we also know that it's still too early to know exactly how that will play out over the coming years.
Speaker Change: So we established this dedicated function to monitor developments and use cases for AI with the goal of deploying it to help our financial professionals serve the clients more effectively and efficiently.
Speaker Change: We already used AI in many areas, primarily in the back office. In just last week, we rolled out an in-house proprietary AI search tool, which has been very well received.
Speaker Change: As an industry, we are still in the early stages of utilizing AI, but we are excited and well prepared to expand AI utilization for financial professionals and their clients in the future.
Speaker Change: During the quarter, we also announced a new leadership structure for our private capital business to help high net worth focus advisors better serve their clients with a wide variety of bespoke private investment alternatives.
Speaker Change: These are just a couple of examples of an issue that we are pursuing to continue investing in our platform for advisors in their clients.
I look forward to our analyst investor day in June .
Speaker Change: where we will discuss these initiatives in other and more detail.
Speaker Change: and Summary, while there is significant macro uncertainty or value strategy and approach will remain largely unchanged.
Speaker Change: and our strong balance sheet should position us relatively well in any market environment.
Speaker Change: Now, we'll turn the call over to Butch Oorlog to review our financial results in more detail. Butch?
Thank you, Paul. I'll be due on slide 6.
Speaker Change: The firm reported net revenues of $3.4 billion for the fiscal second quarter, pre-tax income of $671 million, resulting in a pre-tax margin of 19.7%.
Speaker Change: Let income available to common shareholders was $493 million, and earnings per diluted share of $2.36.
Speaker Change: Excluding expenses related to acquisitions, adjusted net income available to common shareholders equal $507 million, an adjusted pre-tax margin of 20.3% and adjusted earnings per diluted share of $2.42.
Speaker Change: We generated annualized return on common equity a 16.4% and annualized adjusted return on tangible common equity of 19.7%
Speaker Change: Strong results for the quarter, particularly given are conservative capital-based
Turning to slide set [inaudible]
Speaker Change: Private Client Group generated pre-tax income of $431 million on quarterly net revenues of $2.49 billion.
Speaker Change: Results were driven by 6% higher PCG assets under administration compared to the previous year the result of market appreciation and the consistent addition of net new assets.
Speaker Change: Fiscal Year to date, PCG Generated Record Revenues, and Pretax Income
Speaker Change: Our Capital Market segment generated quarterly net revenues of $396 million and pre-tax income of $36 million.
Speaker Change: Net revenues grew 23% year-over-year, driven primarily by higher investment banking and fixed income brokerage revenues. However, sequential results declined 18%, largely due to the lower investment banking revenues.
Speaker Change: The asset management segment generated pre-tax income of $121 million on net revenues of $289 million.
Speaker Change: Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation of a 12-month period and strong net inflows into PCG-B-based accounts.
and many more. Thank you. Thank you.
Speaker Change: Sequentially, although market values declined, we had strong net inflows of approximately 3.7 billion dollars into managed programs on our platform.
Speaker Change: The asset management segment generated record revenues and pre-tax income fiscal year to date.
Speaker Change: The bank segment generated net revenues of $434 million, and pre-tax income of $117 million.
Speaker Change: On a sequential basis, bank segment net interest income grew 1%.
Speaker Change: Driven by continued one growth and a seven basis point expansion of net interest margin to 2.67% resulting from a favorable shift in asset mix along with a higher portion of lower cost deposits.
Turning to Consolidated Revenues on Slide 8. [inaudible]
Speaker Change: 2nd quarter, Nat Revenue's crew 9% over the prior year and declined 4% sequentially
Speaker Change: Asset Management and Related Administrative Fees, a $1.73 billion grew 14% over the prior year and decreased 1% compared to the preceding quarter [inaudible]
Speaker Change: The sequential decline was primarily due to fewer billing days in the quarter.
Speaker Change: TCG fee-based assets equal $873 billion at quarter end, up 9% year-over-year, and slightly lower compared to the preceding quarter.
Speaker Change: As we look ahead, we expect third quarter asset management and related administrative fees to be relatively flat with the second quarter and we expect third quarter asset management and related administrative fees
Speaker Change: Although PCG assets and fee-based accounts are slightly lower sequentially at quarter-end, the third quarter will benefit from one additional billing day in the quarter.
Speaker Change: and many more. Thank you for watching. I hope you enjoyed this video. If you did, please click the Like button and subscribe to my channel. I would really appreciate it. I'll see you in the next video.
Speaker Change: brokerage revenues of $580 million through 10% year-over-year, primarily due to higher fixed income brokerage revenues.
Speaker Change: Despite these strong results in our second quarter, the fixed income market at the start of the third quarter is challenging, as market and interest rate uncertainty calls a significant headwind for the business near term.
Speaker Change: Our revenues in this business could be unfavorably impacted while this uncertainty persists.
Speaker Change: Investment banking revenues, a $216 million increase 21% year-over-year, but declined 34% sequentially.
Speaker Change: The sequential decline reflected lower investment banking activity broadly. As you may remember, the prior quarter reflected near-record M&A results.
Moving to Slide 9
Speaker Change: Client, the client's domestic cash sweep and enhanced savings program balances, and is a quarter at $57.8 billion.
Speaker Change: Down 3% compared to the preceding quarter, and representing 4.2% of domestic PCG client assets.
Speaker Change: Domestic Cash Sweep and Enhanced Savings Program balances have decreased so far this fiscal quarter, not surprising given the timing of tax payments.
Speaker Change: with the current program balance, aligning roughly with April's quarterly fee billings of approximately $1.5 billion.
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Speaker Change: Turning to slide 10, combined net interest income and RJBDPVs from third party banks was $651 million at three percent sequential decline, primarily the result of two fewer billing days in the quarter.
Speaker Change: Net Interest Margin in the bank segment grew 7 basis points to 2.67% for the quarter. The result of the factors I described earlier.
Speaker Change: The average yield on RJBDP balances with third-party banks decreased 12 basis points to 3% primarily due to the full-quartered impact of rate cuts that occurred late in the preceding quarter.
and many more. Thank you. Thank you.
Speaker Change: Based on current interest rates and quarter-end balances net a third quarter fee billings.
Speaker Change: We would expect the aggregate of NII and RJBDP third party fees to be relatively unchanged in the fiscal third quarter as we expect the effect of slightly lower balances in the bank deposit program to be offset by one additional billing day.
Speaker Change: Keep in mind, there are many variables that will impact actual results, including any interest rate actions during the upcoming quarter. In fact, there is impacting our balance sheet, including changes in our loan and deposit balances.
Speaker Change: and many others. Thank you. Thank you. Thank you. Thank you.
Turning to Consolidate Expenses on Slide 11. [inaudible]
Speaker Change: Compensation Expense was $2.2 billion in the total compensation ratio for the quarter with 64.8%, excluding an acquisition-related compensation expenses, the adjusted compensation ratio was $64.5%.
Speaker Change: Non-compensation expenses of $528 million increased 2 percent sequentially, mostly due to our relatively modest bank loan provision for credit losses compared to the prior quarter where the provision was near zero.
and higher communications and information processing expenses.
Speaker Change: Through the first half of the fiscal year, we are on track for full year non-compensation expenses of approximately $2.1 billion, excluding the bank loan provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments related presented in our non-GAAP financial measures.
Speaker Change: Importantly, we remain committed to investing to support growth across the business while maintaining discipline over controllable expenses.
Speaker Change: On Slide 12, we provide key credit metrics for a bank segment.
Speaker Change: We grew loans during the quarter by two percent, primarily in support of our clients, with this loan growth continuing to be led by our security space loans and to a lesser extent
The credit quality of the loan portfolio remains strong.
Speaker Change: Criticized loans, as a percentage of total loans held for investment, decreased to 1.14% at quarter end, and not performing assets remain low at 34 basis points of bank segment assets.
Speaker Change: The bank loan allowance for credit losses as a percentage of total loans for investment ended in the quarter at 93 basis points.
Down two baseless points from the prior quarter. [inaudible]
Speaker Change: The allowance percentage has trended lower largely due to the loan mix ship towards the more security space loans and residential mortgages which carry lower allowance levels.
Speaker Change: These two lone categories represent well over half of our total loan book, reflecting 36% and 20% respectively.
Speaker Change: With regard to the relatively smaller corporate loan book, the bank loan allowance for credit losses on corporate loans as a percent of corporate loan's health for investment was 1.94 percent.
Speaker Change: We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios, including any potential impact of tariff negotiations on certain corporate borrowers, any effect of which will affect our third quarter of provision.
and many more. Thank you. Thank you.
Speaker Change: Flight 13 shows the pre-tax margin trend over the past five quarters
Speaker Change: Demonstrating the resilience of our diverse business mix to consistently deliver strong margins.
Speaker Change: On slide 14, at quarter end, our total assets were $83.1 billion, a 1% sequential increase resulting primarily from low growth.
liquidity and capital, each remained very strong
Speaker Change: RJF Corporate Cash at the Parent, End of the Quarter, at approximately $2.5 billion, well above our $1.2 billion target.
Speaker Change: With the Tier 1 Leverage Ratio of 13.3% and Total Capital Ratio of 24.8%, we remain well above regulatory requirements.
Speaker Change: As Paul mentioned, our capital levels provide significant flexibility to continue being opportunistic and investing growth.
Speaker Change: The effective tax rate for the quarter was 26.2%, and increased over the preceding quarter as the benefit from the excess share-based compensation that vested in the preceding quarter did not recurred this quarter.
Speaker Change: Slide 15 provides a summary of our capital actions over the past five quarters.
As Paul mentioned, we have been actively repurchasing shares [inaudible]
Speaker Change: Over the past five quarters, we have returned to shareholders over $1.5 billion through common dividends and sharey purchases, and we have been actively repurchasing shares in April .
Speaker Change: We remain committed over the long-term to operate our businesses at capital levels in line with our stated targets.
Speaker Change: With our strong capital levels, we are well positioned to continue investing in organic growth.
Speaker Change: Prudently pursue acquisitions that meet our criteria of being a good cultural and strategic fit and we are well positioned to meet the needs of our clients and advisers and uncertain and challenging market conditions.
Speaker Change: and many more. Thank you for watching. See you next time.
Speaker Change: That concludes our prepared remarks. Operator, will you please open the line for questions.
Speaker Change: and many more. This is a production of the Center for Contemporary Art. No part of this recording may be reproduced without the support of the National Gallery of Congress. For more information about the Center for Contemporary Art, please visit the website at www.nfpr.org.
Speaker Change: and many more. Thank you for watching. See you next time.
Speaker Change: Absolutely, ladies and gentlemen, this formula begins to question and answer a session. If you are dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star run again.
Speaker Change: As a friendly reminder to everyone, please limit yourselves to one question and one follow-up only.
Michael Cho: Thank you. Our first question comes from the line of Michael Cho with JP Morgan. Please go ahead.
Speaker Change: and many more. Thank you. Thank you. Thank you. Thank you.
Michael Cho: Hey, good evening, guys. Thanks for taking my question here. I just wanted to start on the wealth business particularly and in a poll you kind of called out.
Michael Cho: nuances in NNA, during a quarter, and that improves sequentially throughout. [inaudible]
Michael Cho: I hope that you could just watch out some of those comments in terms of…
Michael Cho: You know, the magnitude of improvement into April and maybe, you know, any particular segments or channels that that you might call out and
Michael Cho: and if possible, you could talk through the size or the banks on pipeline today maybe versus last year at this time just to help us get a sense of direction here. Thanks.
Michael Cho: Yeah, thanks for that question, Michael. You know, the pipeline, I mean, NNA is tough to measure a month to month or even quarter to quarter the sale cycle.
Michael Cho: You know, takes a long time from the initial conversations to the time that, you know, advisors affiliate with the firm. So what I would just tell you high level is that throughout the corner, the actual NNA improved.
Speaker Change: and many more. I hope you enjoyed this video. If you did, please click the like button, subscribe to the channel, and follow us on social media.
Speaker Change: and as well as the new commits, particularly in the months of March, which was a very strong month followed by another good month in April .
Speaker Change: These are new commits that will be affiliating with us at a future date, so that's not reflected.
and the N&A number. And so, and this is really...
Speaker Change: from a variety of firms and across our affiliation options. So what I would tell you is that we're really optimistic about the pipelines and that our value proposition of the best of both worlds where we provide culture that's advisor and client focused with capabilities, technologies and solutions. [inaudible]
Speaker Change: and now increasingly important is the strong balance sheet that we have.
Speaker Change: Visitors are looking for a source of strength and stability for their businesses and a lot of these roll ups or even other strategics.
Speaker Change: Don't have tangible capital, for example, and so they're looking for sources of strength and stability so they can grow their businesses and provide good service but they're
Great. Thanks for that Paul. Um.
Speaker Change: If I could just switch gears quickly, but you talked about some moving pieces and the balance sheet.
Speaker Change: and to nuances across the second. So, hopefully, you could just talk through what you're seeing in terms of loan demand. I mean, you know, you called up bank loans grew, you know, slightly this quarter, quarter quarter, you know, if anything, not both considerations in terms of what you're seeing in terms of loan demand, you know, exiting the quarter and maybe into the physical third quarter as well. Thanks.
Thank you.
Sure.
Speaker Change: With regard to the loan demand during the quarter, I would say exiting the quarter, loan demand has been tepid on the corporate side, as you would expect, given the volatility and so, we remain poised and ready to opportunistically make investments.
Jonathan Oorrlog, Kristina Waugh, Peter Lacey, signoff
when the returns return to the...
A reasonable risk-adjusted target level for us [inaudible]
Speaker Change: But that said, we continue to see significant demand for our SBL loans during the quarter we had SBL loan growth.
of over $600 million.
Speaker Change: and total loan growth of over 2% in balances. So strong loan growth on the balance sheet overall during the quarter and exiting the quarter. We've still seen a strong demand in SPL loan growth.
Speaker Change: during April , so far in April , which is you've seasonally, a typically strong month, a time for us in order for us with respect to SBL, loan growth given, given clients' needs for liquidity around tax payments.
Great, thanks so much.
Devin Ryan: Your next question comes from the line of Devin Ryan, let's see this ends JMP, please go ahead.
A great hit, Paul, a hit book, how are you?
Good, Devin, how you doing?
Devin Ryan: I'm doing well. I want to come back to the kind of recruiting backdrop and obviously there's maybe more M&A of the late and there has been in the market and so just want to love to get a sense of how much of the recruiting backlog right now is coming from maybe some of the M&A affected firms or just maybe also just kind of the level of advisors and motion kind of whether it's much more elevated today than it has been in a while because of the M&A. So that's kind of one piece of it.
Devin Ryan: for them. The other side, market volatility can obviously affect pipeline as well, so just whether you were only maybe a few weeks into kind of post-haariff world, but whether you're seeing kind of this volatility impact, that pipeline at all or maybe change sentiment around advisors, going this to move. Maybe he has nothing to do with the M&A firms, but just more broadly, advisors in motion. Thanks.
Yeah, you know, our recruiting momentum, uh...
Devin Ryan: Has been strong over the last several years, you know, with or without M&A and that's really just the consistency [inaudible]
Devin Ryan: of putting advisors, treating them like clients and respecting the relationship advisors have with their clients and that...
Devin Ryan: Best of both world value proposition that I discuss so as you know our recruiting success has been consistent over the past you know several years and and certainly has been building up in our pipelines we're looking good before even recent M&A has was announced
that would have been said.
Whenever there's a change of control
Devin Ryan: Potentially changed the leadership and culture and capabilities and service levels that always creates catalysts for...
Devin Ryan: Advisors to take a look at other options and so to the extent those advisors are looking for the type of culture and capabilities that Raymond James provides and that would absolutely increase the opportunities with those advisors that are interested. Thank you very much.
Devin Ryan: Okay, great. Thanks, Paul. And just a follow-up also on the loan book as well. So, butch, I heard the comment about provision in the third quarter or at least anything related to tariffs would be considered. Then I just wanted to see if that's kind of a generic comment or if there's anything kind of in the loan book that
Devin Ryan: Would maybe warrant closer attention because of Paris, because I'm not aware of anything that's maybe directly, but obviously there's always kind of second derivatives of volatility, but just figured I'd ask since you had mentioned that. Thanks.
Speaker Change: and many more. And thank you for watching. I hope you enjoyed this video. I'll see you in the next one.
Yes, sure. Thanks, Devin. up
Speaker Change: The nature of the comment was more to make sure it's understood that the volatility commenced on April 2nd, and so the effects of the volatility both on the economic forecast that underpins
Speaker Change: The provision as well as anything specific to our loan book would not reflected in our second quarter results. So that will be impact our third quarter. That's really more of a comment around credit versus I mean comment around accounting versus credit is just from an accounting perspective to the extent that we have. [inaudible]
Speaker Change: New Assumptions that are given to us that we put in the Cecil models that hasn't been reflected in these results yet just because the timing of the macroeconomic changes that we anticipate will come to the new models would be following the end of this quarter that we're talking about today.
Thank you.
Speaker Change: Right, exactly. Okay, that's what I assume, but you appreciate the clarification. Thanks, guys.
Speaker Change: Your next question comes from the line of Dan Fannon with Jeffries. Please go ahead.
Dan Fanon: Thanks. One more on N&A. Just for the quarter, I wanted to confirm just any change in attrition in the period to make the numbers lower. I was just timing of the onboarding and then to follow up on Devin's question, curious of how your view of advisor moving for the industry.
Dan Fanon: In a period of volatility like we've seen, so historically if you look back after periods of this type of movement does advisor movement for the industry slow knowing that your competitive positioning is better today but just curious about the overall industry trends Thanks.
and many more. Thank you. Thank you.
Dan Fanon: Devin, each period of volatility is different. So one of our best recruiting years in history was during the financial crisis when advisors were looking for a source of strength and stability and with all the industry disruption and M&A and firms exiting the business.
We were...
Dan Fanon: Huge beneficiaries of that because we have a strong balance sheet as we do today. We have a strong balance sheet and I think we are viewed by advisors in the industry as a source of strength and stability for their businesses and for their clients.
Dan Fanon: We think that there's still movement just based on the pipelines and discussions that we're having and the home office visits that we're having and I've been traveling across the country meeting with very high quality [inaudible]
Dan Fanon: prospects that are interested in moving. And so we're still optimistic about the pipelines and the recruiting activity going forward. And what I would tell you around the retention is this quarter didn't have.
Any significant or notable? [inaudible]
Dan Fanon: Advisor Attrition, like the prior quarters did with a Subaru SJ or two, so their attention looks good. And so, again, we're pretty optimistic about net new assets as we look in the second half of this goal, 25 and beyond.
Speaker Change: Great, that's helpful. And then just to follow up on the cash comments, just want to make sure I heard you correctly, the billionaire to have from billing and another billionaire to have, I think is what you said for...
Dan Fanon: Tax Payments, and if that's correct, how does that compare to, you know, historical levels and is there any other change just given maybe some selling of, you know, derisking a cash build in this type of market backdrop?
Dan Fanon: Since quarter end, roughly equivalent to that $1.5 billion fee billings that came out of the accounts in April . So, it's not in addition to or an increment of that. That basically is where our cash balance is set, just net of those.
Collection of those views.
Dan Fanon: And overall that's a pretty good result considering the tax payments that we experience in April as well. So, you know, to have the cash be down commensurate with the quarterly fee buildings in April is a pretty good result.
Great, thank you.
Bill Katz: Question comes from the line of Bill Katz with TD Cowan, please go ahead [inaudible]
Okay, thank you very much. As you look ahead,
Bill Katz: Loans grew nicely, but the earning assets were sort of down sequentially. [inaudible]
as you think through maybe the funding mix. [inaudible]
and the London Med commentary mentioned.
Bill Katz: How do you see the intermediate-term view for earning asset growth? Is it flatish here and a remix within the loan category? Or could you actually see some kind of incremental expansion? Thank you.
Yeah, thanks Bill.
Bill Katz: We saw a majorities in the AFS portfolio of $350 million during the quarter two that was redeployed in part of funding the...
You know, we...
Bill Katz: With respect to that dynamic, we see more of that dynamic continuing.
Bill Katz: in RQ-3 and as well as RQ-4 to continue to reprise from the securities book into the into loans. Q-3, we approximate that to be about $275 million and in Q-4, about $325 million.
Speaker Change: I'm going to say I'm the lone side of the equation, you know, security-based loans, as Birch mentioned, have continued to grow in April , and so...
Speaker Change: We, and this is, that's through the volatility in the month of April as well. Again, some of that related to the tax payments and liquidity needs around that.
But we would expect those to continue to grow.
Speaker Change: and then the corporate loans, as we've always said, that's going to be...
Speaker Change: Market Dependent, and right now the demand for corporate loans still very tepid, certainly during this period of market volatility in April .
Speaker Change: and so we wouldn't expect those to row meaningfully until there's more clarity and certainty in the market and there's more loan demand and loan demand at prices that generate good risk adjusted returns.
Speaker Change: Okay, this is a follow-up. I'm sort of curious, a little bit of a nested question, so I apologize in advance. You mentioned that you were looking at a couple of transactions. I was wondering if you'd give us maybe the nature of the kind of transactions you were looking at. And as you look ahead, is a 10% tier one leverage ratio, still the appropriate bogey to which you are looking to manage the platform one. Thank you.
Speaker Change: Yeah, the 10% target is still a good target for us. We're obviously above that now, which is why we are going to be more consistent going forward.
Speaker Change: with buybacks, because even at four to five hundred million dollars of buybacks a quarter.
Speaker Change: going forward if that's the target now, which could change based on all set of circumstances, but that's kind of the target is to...
Speaker Change: looked at four to five hundred million per quarter. That really just keeps our capital ratios where they are, which gives us plenty of capacity for our top priority, which is growth, both organic growth and the pursue acquisition. So, and of course, we don't talk about acquisitions unless we're announcing them for ourselves. So,
I'm not going to get into the details around that [inaudible]
Okay, thank you [inaudible]
Thanks.
Speaker Change: Your next question comes from the line of Steven Chubak with little research. Please go ahead.
Stephen Chewback: Hi, thanks so much for taking my questions. Paul, I wasn't planning to ask you on buyback, but you just, I guess, opened the kimono, so to speak.
Stephen Chewback: It's certainly encouraging to see you guys so active in April .
Speaker Change: I think when you mentioned the 250 million buybacks for my initial concern was that you would continue to a creep more capital and that ratio would continue to build essentially it wouldn't be sufficient buyback to at least maintain the ratio and even drive it towards that target. [inaudible]
Speaker Change: You mentioned 4 to 500 million as a run rate so I'm just trying to understand, I mean my interpretation of your remarks is...
Speaker Change: Don't underwrite 250 or the floor, underwrite something closer to 400 or 500 million a quarter, which will ensure that your capital ratios are at least stable but not necessarily building from here. Is that correct?
Speaker Change: Yeah, that's a good interpretation of it. And of course, you know, if long growth accelerates, then that may cause us to slow down by backs or if there's acquisition opportunities like we saw last quarter when we stopped.
Speaker Change: when we slow down bybacks as we're evaluating live acquisition opportunities, so there's always different factors to consider.
Speaker Change: But absent those, the four to five hundred million that you're talking about to keep the capital ratios really from growing much further from here is a good assumption and something you could, you know, underwrite the models.
Speaker Change: Alright, that's great. And then for follow up, just on the outlook for...
Speaker Change: NII and NIM, you had noted that the spread revenues were expected to be flat sequentially.
Speaker Change: which is certainly encouraging. The one trend that we did notice would surprise positively was the deposit beta, which came in, we were around 90%. You just want to understand how you're managing deposit costs, what assumptions you're making as we get further costs.
Speaker Change: And if you can just unpack some of the component pieces that support that fly this spread revenue guide, which came in a little bit better than we had been anticipating given some of the quarterly trends.
Speaker Change: And that's based on spot balances so if we can grow loan balances more throughout the quarter there might be some upside to that vice versa if loan balances there's a
Speaker Change: You know, decline for during the quarter. So that's just our sort of conservative estimate for the
for BDP fees and an I.I. to remain relatively flat sequentially.
The Deposit Beta Assumption, I mean, really it's...
Speaker Change: It's two different, primarily two different buckets. There's a higher yielding buckets that enhance savings program, for example, which have nearly 100% deposit beta because they're tracking [inaudible]
The Cash Week Bucket, where... [inaudible]
Speaker Change: The rate of the cost of those deposits is much lower and therefore the deposit betas are much lower as well [inaudible]
Speaker Change: So, it's a little hard to calculate that deposit paid a quarter of a quarter just given the timing of the rate cuts last quarter, but that's what we're using to forecast for the upcoming quarter. [inaudible]
Very helpful color, Paul. Thanks for taking my questions.
Thank you.
Speaker Change: Your next question comes from the line of Alex Blostein with Goldman Sachs, please go ahead [inaudible]
Hey guys, thank you for the question.
Speaker Change: A little bit of a big picture question in NNA, so less sort of related to the quarterly or the monthly trends that we've seen. But as you sort of zoom out, Rager used to do kind of 5% plus NNA. And I get it, it's really not a perfect metric and there's a lot that kind of goes into it. But it just feels like you've been at kind of a 3% run rate over the last few quarters.
Speaker Change: So as you look forward, what's been I guess the problem in the last year or so, what do you think could change to get you guys back to this 5% plus or is the 5% plus still a realistic target?
and many more. Thank you. Thank you.
Speaker Change: Yeah, well, just last quarter, we were above 3% to me, we were 4% last quarter, and if you excluded that kind of OSJ departure, we're kind of in the midfives [inaudible]
Blast Quarter. So, I would just...
Speaker Change: You know, this is really just between this quarter and then a year ago quarter, where it was sub, you know, three or four percent range. But listen, we, we are optimistic again. It's hard to look at a quarter to quarter. Big picture.
Speaker Change: We're optimistic about our recruiting pipelines and we're optimistic that we…
Speaker Change: can continue to be best in class and an agro, or it's just as we have been year after year after year, and so there's nothing in our calculus or in our expectations that's changing around that. We're very optimistic about the recruiting pipelines.
Speaker Change: The months of March and April were very strong for us in terms of new commits, and that's just continuing to accelerate in terms of the interest in Raymond James . . . . . . . . . .
Speaker Change: We are certainly a destination of choice for high quality financial advisors across the industry, across all of our channels. And so we're really excited about the recruiting momentum and the retention of our existing advisors and the NNA trajectory going forward.
Speaker Change: Great, that's helpful. For my follow-up, I wanted to dig a little more into the common you made around the private investment old platform. Maybe spend a minute on kind of what does that look like today at Ray Jay and I'm curious both in terms of...
Speaker Change: sort of manufacturing capabilities and if there's anything you're looking to add there from an asset management side and more importantly on the distribution side as you sort of look at the footprint you have in the wealth channel and how you can monetize that with alternative managers.
and many more. Thank you. Thank you.
Speaker Change: We have a lot of upside in that business. We've made a lot of progress over the last five years in building out the platform, the capabilities, the resources, the expertise.
Speaker Change: The internal research around it. And so, and we have a lot of high network focus advisors with clients that are interested.
Speaker Change: and the products. And it's a wide range. It's kind of...
Speaker Change: It captures a wide range of products, everything from the alternative private equity mutual fund type products all the way to, we have a private, a pick desk that we call it, private investments for clients with
Speaker Change: 50 million dollars and above of, you know, investable assets and everything in between. This is an open architecture platform for us, just like most of the rest of our wealth platform is really an open architecture platform so we bring in the best providers across all of the product types. [inaudible]
Speaker Change: To the extent that we provide our own products, for example, we hired a new head of private placements to kind of work with our capital market clients, to the extent that they want to raise capital from our private client group business. That's an example of collaboration and synergy between the businesses that could be win-win for clients in the private client group and capital markets business alike.
Speaker Change: But certainly there's a growing appetite amongst clients for, in our advisors for these type of products.
That's great. Thanks so much.
and many more. Thank you. Thank you.
Speaker Change: Your next question comes from the line of Jim Mitchell with C-Port Global Security. Please go ahead.
Thank you.
Hey, good evening.
Speaker Change: Paul, just maybe a follow-up on Capitol Return. Appreciate the quarterly comments, but when we think about keeping ratios flat, capital levels flat, you're at 13.3% tier 1 leverage, you've had a target out there of 10% doesn't sound like a deal is in the near term. So is it?
Speaker Change: We just don't expect to get to 10 without deals or can you kind of push that ratio down from here because when you look at just the math of 13.3 versus 10, that's a couple of a billion of excess capital versus your target.
and many more. Thank you. Thank you.
Speaker Change: Certainly, we would like to deploy that through growth investments both organically and through acquisitions, but the first thing we have to do is...
and Paul Reilly.
Speaker Change: and so that would be the plan going forward is to continue looking for growth opportunities. We have not given up on M&A and in fact
Speaker Change: M&A opportunities sometimes present themselves in periods of volatility and uncertainty like we're in today and so we're still very actively pursuing acquisition opportunities across our businesses as well.
Speaker Change: Well, so is it the 10% more of a target with, you know, assuming growth but you're not going to get to that target with buybacks, you just need to have some investments to get there.
Speaker Change: Yeah, I mean, that's really the way we're getting it get down to 10 is hopefully through growth investments. That would be the ideal way to get down to 10, this investing in top-line growth.
Okay, great, and then maybe just...
thinking through on the NNI side with. [inaudible]
Speaker Change: 3-4 cuts in the forward curve, it's bouncing around. But can you just update your NII sensitivity? You highlighted some asset turnover.
Speaker Change: in the low yielding AFS book and being reinvested in higher yielding assets, does that help offset?
Speaker Change: Baby Pressures from a few rate cuts, how do we think about that bigger picture?
Speaker Change: I think the bigger picture is that rate cuts can actually result in...
Speaker Change: Increased loan balances for security-based loans and corporate loans alike. And so...
Speaker Change: You know, we don't think that rate cuts would necessarily be bad for NII over the long term. We actually think it would potentially be beneficial to NII as it helps loan balances grow.
at Lower Rates. [inaudible]
So thank you.
Speaker Change: There's static analyses you can do and we can share that with you, it's just a deposit beta assumption based on the static balances but I think what's more interesting and realistic is what would happen dynamically to balances.
Speaker Change: if rates were to be lower over a longer period of time. Thank you very much.
Okay, fair enough. Thanks.
Thank you [inaudible]
Speaker Change: Your next question comes from the line of Kyle Voigt KVW, please go ahead [inaudible]
Thank you.
[inaudible]
Speaker Change: Good evening everyone. Maybe just one for me, just on the on non-comp expenses. I heard into the prepare remarks.
Speaker Change: A Uron Tracks for the 2.1 billion to the full year. I think first half annualized is coming in a bit under that. So just wondering if you could speak to some of the push and pull factors in the back half of the year.
Speaker Change: and if Mark had stayed near current levels down quarter to date pretty meaningfully, that lead to non-coms coming in lower than the 2.1 guy just giving some of the offsets on advisory fees.
Yeah, thanks Kyle.
Thank you.
Speaker Change: With respect to our non-config expenses, it's not unusual for us to have a ramp up as we move deeper into our fiscal year. And so we believe that ramp up will occur in certain of the line items, especially in our communications and IT expense lines. And therefore we believe that that would be too early to make a call to a just-
Just that on top, expectation of that guidance.
Speaker Change: You know, we remain committed to invest a long term, especially in our leading technology.
Speaker Change: So, you know, any impacts from the current volatility would not likely impact our long-term thinking with respect to that. And then also keep in mind that a significant portion of those non-expenses are variable and move with revenues, things like FDIC insurance and flood advisory fees. So, that aspect is something that will keep an eye on.
Speaker Change: but definitely not the time to us in our thinking to provide any revised expectation on that level.
Speaker Change: Thanks. If I could just ask one model and follow up as well, just on administrative comp within PCG, it was down quarter on quarter and year on year looked a bit off-trend, just wondering if there's anything to call out for that administrative compensation line within the PCG segment in the
and many more. Thank you. Thank you.
Yeah, Kyle, the...
One thing to think about that is, it's hard to... It's hard.
Speaker Change: With respect to COMP, there are different elements that would affect subcomponents within the COMP from quarter to quarter. So, although the percentage change was as you noted for the quarter, we would advise you to think about it long-term and if you look year to date, at the six-month year to date...
Speaker Change: relative to the prior year to date. It's up 5%, which is consistent for that six month period, which is consistent with with what we'd expect given the given growth in the business and the growth in the element of those types of expense components. Thank you very much.
Okay, thank you.
Speaker Change: Your last question for today comes from the line of Michael Cyprys with Morgan Stanley , please go ahead.
Michael Cypress: Great, thank you for taking the question. I just wanted to ask about the new chief AI officer role. I was hoping to talk about the responsibilities for this new function. What resources will be of their disposal? What sort of conditions do you have here and how will you go about measuring success?
Thank you.
Michael Cypress: Well, I'm really glad you asked that question and there's something that we plan on talking more about at the Analyst Investor Day in June , but...
Speaker Change: The new chief AI officer, Stuart Feld, who was an internal promotion, so one of our senior leaders in technology.
is really, and he will have a dedicated team.
Speaker Change: We're really focused on evaluating a kind of call it a lookout function, which is somewhat unique in that usually we outsource lookout functions to consulting firms, but we think the leadership team has conviction that
Speaker Change: A.I. will be such a game changer for our industry and it'll occur relatively rapidly. [inaudible]
Speaker Change: that we need to have that function internally also because the way we use AI will be very different than how many of our competitors we anticipate will use AI, whereas we're really wanting to use AI to help our financial professionals and our financial advisors.
Better Serve Their Clients Where [inaudible]
Speaker Change: Many of our competitors have used technology and are planning on using AI to essentially try to get around their financial advisors to go direct to their clients. And that is not our goal, our goal is...
Speaker Change: to use AI to better empower our advisors and financial professionals so they can...
to provide even better service. [inaudible]
Speaker Change: to their clients. And so this function will be monitoring changes in model developments, third party providers and vendors who are coming up with new AI solutions. What competitors are doing in essentially use cases for Raymond James given our unique approach.
Speaker Change: of really betting on the financial professional to provide great advice to their clients.
Speaker Change: and so they've already made pretty good progress and there'll be a lot more to talk about over the coming years and certainly we'll talk about a more analyst investor today in terms of how they're structuring their work and thinking around AI.
Speaker Change: Great, and just a quick follow-up on that. Just curious around the use cases that you've identified. Just curious how many you've identified, how many you have in production and any sort of lessons learned from your initial foray into it so far.
Speaker Change: Yeah, I think I would defer the specifics to the experts at our analyst investor day in terms of the number of actual use cases and what we've learned from it. So, better discussion for analyst investor day.
Fair enough, look forward to it, thank you!
www.mytrendyphone.co.uk
Speaker Change: There are no further questions at this time. I would like to turn the call back over to Paul Shoukry in the next video.
Speaker Change: The client's survey showing 97% satisfaction with their advisors through this turbulent period in the-
the J.D. Power Award No. 1 for
Speaker Change: Client Satisfaction for any advice firm and most importantly number one in being the most trusted firm and so just want to thank all of our advisors and associates and thank all of our clients as well for trusting Raymond James. Thank you very much and have a great evening.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Please wait, the conference will begin shortly .
Michael Oorlog, Paul Reilly, Paul Reilly, Paul Reilly, Paul Reilly, Paul Reilly, Paul