MS Morgan Stanley

Despite the market's turbulence earlier this year, Raymond James Financial Inc.'s revenue and profit rose in its second fiscal quarter on strength in its banking and lending activities.

The St. Petersburg, Fla.-based brokerage firm earned $125.8 million, or 87 cents per diluted share, for the quarter. That compares with $113.5 million in the year-earlier period, or 77 cents a diluted share. Excluding $6 million in costs associated with its acquisition of Deutsche Bank AG's private client unit, adjusted net income for the quarter was $129.7 million.

Analysts polled by Thomson Reuters had expected earnings of 75 cents a share.

Revenue totaled $1.34 billion, up 2% from the quarter a year earlier.

Raymond James—which fields more than 6,000 brokers through its traditional employee channel, Raymond James & Associates—said its revenue growth was mostly because of the rise in short-term interest rates last year, boosting revenue tied to its loan portfolio and client cash balances.

Chief Executive Paul Reilly said in a statement that he was "pleased with the [firm's] solid results" in the "extremely challenging market environment." Firm executives are scheduled to discuss the quarterly earnings with analysts on Thursday morning.

Raymond James's gain in banking revenue mirrors that of other brokerages. Morgan Stanley, Bank of America Corp.'s global wealth unit and Wells Fargo & Co. all reported higher first-quarter revenue in banking and lending tied to their brokerages, as they benefited from stronger lending activity and increased cash balances.

At Raymond James, interest revenue surged 20%, or $27.2 million, from last year, to $161.6 million. Fee-based revenue climbed 3% from last year, to $93.9 million, while commission revenue fell 1%, to $853.3 million.

Its noninterest expenses ticked up 1%, to $1.12 billion, partly because of costs tied to Raymond James's Deutsche Bank unit acquisition. That deal, announced in December, is expected to close in September.

Raymond James's various business units all reported gains for the quarter. Its private-client group, which includes Raymond James & Associates, saw revenue climb 1%, to $880.3 million, for the quarter.

Its capital-markets and asset-management groups said revenue rose 1% and 3%, respectively.

Its biggest growth was within its banking arm, which provides services to its brokerage clients. That unit saw a 22% increase in revenue from last year, to $125.3 million, thanks to the increase in short-term interest rates.

Raymond James's adviser head count was also up. Its total number of advisers grew by 78, to 6,765, as of March 31. Client assets rose 4%, to $513.7 billion.

Mr. Reilly attributed the gains in assets and head count to the company's adviser recruitment and retention strategy. He expects that to continue once its acquisition of the Deutsche Bank advisers wraps up later this year. Already, 90% of the Deutsche Bank advisers have agreed to join Raymond James, the firm said.

"This momentum should continue given the strong recruiting pipeline and the planned acquisition" from Deutsche Bank, Mr. Reilly said.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

April 20, 2016 18:45 ET (22:45 GMT)

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