Strong Banking and Lending Boost Raymond James's Profit
April 20 2016 - 7:00PM
Dow Jones News
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)
Copyright (c) 2016 Dow Jones & Company, Inc.
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