Attached files
| file | filename |
|---|---|
| 8-K - 8-K - RAYMOND JAMES FINANCIAL INC | a8-k_3q16shareholdersletter.htm |
(1) Includes acquisition-related expenses incurred to date associated with our announced acquisitions.
(2) The Other segment includes the results of our principal capital and private equity activities as well as certain corporate overhead costs of RJF, including the interest costs on our public debt, and the acquisition and integration
costs associated with certain acquisitions (including expenses incurred to-date associated with our announced acquisitions).
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited – in 000s, Except per Share Amounts)
CONSOLIDATED RESULTS BY SEGMENT (unaudited – in 000s)
Revenues:
Private Client Group $ 903,223 $ 894,727 $ 2,660,687 $ 2,617,604
Capital Markets 256,734 237,680 727,508 711,775
Asset Management 100,954 98,899 298,034 292,551
Raymond James Bank 132,747 107,244 376,785 315,590
Other (2) 17,170 28,890 31,442 56,462
Intersegment eliminations (24,135) (18,727) (65,319) (52,801)
Total revenues $ 1,386,693 $ 1,348,713 $ 4,029,137 $ 3,941,181
Pre-tax income (loss) (excluding noncontrolling interests):
Private Client Group $ 81,911 $ 86,363 $ 234,283 $ 254,527
Capital Markets 32,769 18,287 86,024 66,788
Asset Management 32,507 31,554 96,996 102,445
Raymond James Bank 88,930 78,008 239,929 213,628
Other (2) (38,352) (6,082) (93,011) (46,030)
Pre-tax income (excluding noncontrolling interests) $ 197,765 $ 208,130 $ 564,221 $ 591,358
Three Months Ended Nine Months Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Revenues:
Securities commissions and fees $ 871,764 $ 874,606 $ 2,574,756 $ 2,568,829
Investment banking 72,714 76,988 198,971 228,766
Investment advisory and related administrative fees 96,156 96,235 288,574 286,012
Interest 163,810 137,147 467,848 403,669
Account and service fees 129,334 113,866 373,685 336,990
Net trading profit 29,795 16,216 66,379 42,157
Other 23,120 33,655 58,924 74,758
Total revenues 1,386,693 1,348,713 4,029,137 3,941,181
Interest expense (28,211) (27,724) (84,644) (81,954)
Net revenues 1,358,482 1,320,989 3,944,493 3,859,227
Non-interest expenses:
Compensation, commissions and benefits 908,899 901,342 2,663,254 2,621,830
Communications and information processing 71,717 69,267 212,337 196,014
Occupancy and equipment costs 40,825 40,269 123,505 121,100
Clearance and floor brokerage 10,214 9,648 30,727 32,734
Business development 36,488 40,127 112,529 119,607
Investment sub-advisory fees 15,030 15,293 43,866 44,535
Bank loan loss provision 3,452 (3,009) 26,991 10,293
Acquisition-related expenses 13,445 - 21,332 -
Other 66,962 46,757 166,123 137,537
Total non-interest expenses 1,167,032 1,119,694 3,400,664 3,283,650
Income including noncontrolling interests and before provision for income taxes 191,450 201,295 543,829 575,577
Provision for income taxes 72,261 74,935 206,541 218,404
Net income including noncontrolling interests 119,189 126,360 337,288 357,173
Net loss attributable to noncontrolling interests (6,315) (6,835) (20,392) (15,781)
Net income attributable to Raymond James Financial, Inc. $ 125,504 $ 133,195 $ 357,680 $ 372,954
Net income per common share – diluted $ 0.87 $ 0.91 $ 2.47 $ 2.55
Weighted-average common and common equivalent
shares outstanding – diluted 143,952 146,493 144,618 145,870
(1) (1)
International Headquarters:
The Raymond James Financial Center
880 Carillon Parkway // St. Petersburg, FL 33716
800.248.8863 // raymondjames.com
©2016 Raymond James Financial
Raymond James® is a registered trademark of Raymond James Financial, Inc.
15-Fin-Rep-0017 KM 9/16
Stock Traded: NEW YORK STOCK EXCHANGE
Stock Symbol: RJF
corporate profile
Raymond James Financial, Inc., (NYSE: RJF) is a leading
diversified financial services company providing
private client, capital markets, asset management,
banking and other services to individuals, corporations
and municipalities. Its three principal wholly owned
broker/dealers, Raymond James & Associates, Raymond
James Financial Services and Raymond James Ltd.,
have approximately 6,800 financial advisors serving
in excess of 2.8 million client accounts in more than
2,800 locations throughout the United States, Canada
and overseas. Total client assets are approximately
$535 billion. Public since 1983, the firm has been listed
on the New York Stock Exchange since 1986 under the
symbol RJF. Additional information is available at
raymondjames.com.
2016
T H I R D Q U A R T E R
CHANGE
GROWTH
OPPORTUNITY
HEADWINDS
REGULATION
EXPLORATION
UNPREDICTABILITY
INVESTING WISELY
LIVING WELL
MOBILITY
2
1 6
Dear Fellow Shareholders,
As we write this letter, the S&P 500 index has
recovered from its precipitous drop following the
unexpected “Brexit” vote in June and is now hovering
near all-time highs. While corporate earnings in the June
quarter beat analysts’ estimates, adjusted earnings per
share for the S&P 500 still posted annual declines for the
fourth consecutive quarter. Meanwhile, global economic
and political concerns as well as unprecedented support
from central banks around the world have pushed high-
quality government bond yields to record lows.
Unfortunately, that financial stimulation has failed to
engender much corporate growth. Given these
crosscurrents, coupled with the seven-year bull market
in the United States, the increasingly widespread
apprehension among investors is justifiable.
Despite this suboptimal backdrop, Raymond James
generated record quarterly net revenues of $1.36 billion,
increasing 3% over the prior year’s fiscal third quarter
and 4% over the preceding quarter. All four of our core
operating segments produced revenue growth during the
quarter, and three of those segments – the Private Client
Group, Asset Management and Raymond James Bank –
achieved record quarterly revenues that were driven by
organic growth. Quarterly net income of $125.5 million,
or $0.87 per diluted share, declined 6% compared to the
prior year’s fiscal third quarter and was essentially flat
compared to the preceding quarter. Earnings were
hampered during the quarter by $13.4 million of
acquisition-related expenses as well as elevated legal
and regulatory expenses largely related to historical
anti-money laundering (AML) deficiencies, which will be
discussed later in this letter. The annualized return on
equity for the quarter was 10.7%, falling below our long-
term target of 12%-15% but still reflecting an acceptable
result given the lackluster market environment, the
aforementioned expenses and our relatively conservative
capital position.
For the first three quarters of fiscal 2016, net revenues
were $3.94 billion, up 2% over the same period in fiscal
2015 and representing a record start to our fiscal year.
Net income of $357.7 million, or $2.47 per diluted share,
declined 4%, which was primarily attributable to $21.3
million of acquisition-related expenses during the first
nine months of the fiscal year. We also achieved many
other records on June 30, including total balance sheet
assets of $28.8 billion, shareholders’ equity of $4.7 billion,
client assets under administration of $534.5 billion, total
number of Private Client Group financial advisors of 6,834,
financial assets under management of $71.7 billion and net
loans at Raymond James Bank of $14.8 billion. These
milestones are a testament to our firm’s steadfast
commitment on serving clients and should bode well for
future results.
During the quarter, the Private Client Group (PCG)
segment attained record quarterly net revenues of $900.5
million, increasing 1% compared to the prior year’s fiscal
third quarter and 2% compared to the preceding quarter.
Quarterly pre-tax income of $81.9 million was down 5% on
a year-over-year basis and 2% sequentially. Revenues in the
segment benefited from beginning the quarter with higher
assets in fee-based accounts as well as higher account and
service fees, which were both bolstered by excellent
financial advisor retention and recruiting. However, the
decline in PCG’s pre-tax income in the quarter was
attributable to subdued transactional commissions and
elevated legal and regulatory expenses. The strong net
recruiting results enabled PCG to achieve a record 6,834
financial advisors, impressive increases of 327 over June
2015 and 69 over March 2016. Client assets under
administration in the segment of $506 billion also reached
a new record, growing 6% compared to last year’s June and
4% compared to the preceding March. These records are
expected to be surpassed in the fourth quarter, as we are
on target to close the acquisition of the US Private Client
Services unit of Deutsche Bank Wealth Management in
September. We are also excited about the pending 3Macs
acquisition, which we are confident will be a high-quality
addition to our Private Client Group in Canada.
Quarterly net revenues in the Capital Markets segment
of $251.6 million increased 8% over last year’s June quarter
and 6% over the preceding quarter. Pre-tax income in the
quarter of $32.8 million was up a substantial 79% over last
year’s fiscal third quarter and 17% over the preceding
quarter. The segment’s results in the quarter were lifted by
record trading profits as well as an improvement in both
institutional equity and fixed income commissions
compared to the year-ago quarter. Trading profits and
institutional commissions were aided by increased market
volatility in June following the “Brexit” vote. After suffering
from a dearth of equity underwriting activity over the past
12 months, we are cautiously optimistic about our
investment banking pipelines, which should be helped by
more stable commodity prices as well as our acquisition
during the quarter of Mummert & Company, which
enhances our M&A platform in Europe.
The Asset Management segment generated record
quarterly net revenues of $100.9 million, improving 2% over
last year’s June quarter and 4% over the preceding March
quarter. Quarterly pre-tax income in the segment was $32.5
million, up 3% on a year-over-year basis and 4%
sequentially. Financial assets under management finished
the quarter at $71.7 billion, a new record, lifted by
increased managed account utilization in our Private
Client Group segment in addition to market appreciation.
Raymond James Bank’s quarterly net revenues of $126.6
million reached a new record, growing an impressive 22%
over last year’s fiscal third quarter and 1% over the
preceding quarter. Pre-tax income of $88.9 million for the
quarter also represented a new record, rising 14%
compared to the June 2015 quarter and 4% compared to the
preceding March quarter. The bank’s record results were
primarily attributable to attractive growth of its
outstanding loan balances as well as the relatively
consistent credit quality of the loan portfolio. Net loans in
Raymond James Bank grew a noteworthy 23% over June
2015 to a record $14.8 billion, and the bank’s net interest
margin was relatively resilient at 3.10% for the quarter.
Total revenues in the “Other” segment, which consists
primarily of private equity valuation gains, were $17.2
million, of which $7.4 million was attributable to
noncontrolling interests. Pre-tax income in the segment
was also impacted by the aforementioned $13.4 million of
acquisition-related expenses during the quarter.
There were several other notable accomplishments
during the quarter. In June, Raymond James was named to
the Fortune 500 list. During the quarter, we also extended
the naming rights for Raymond James Stadium by 12 years
through the 2027 season. Many of our associates and
affiliated financial advisors also earned noteworthy
accolades during the quarter, including: five advisors being
named to the Barron’s list of 2016 Top Women Financial
Advisors, six program managers within our Financial
Institutions Division were named to Bank Investment
Consultant’s list of Top 20 Program Managers, and advisor
Darin Robert Shebesta and Raymond James Network for
Women Advisors’ Michelle Lynch were named to
InvestmentNews’ Top 40 under 40. Within Investment
Banking, Raymond James was recognized with two
honors by The M&A Advisor: Technology Deal of the Year
for the over $250 million category as well as Corporate &
Strategic Acquisition of the Year for the $100 million to
$500 million category. Also, for the second year in a row,
our restructuring team won Turnaround Deal of the Year
from the Global M&A Network.
As discussed earlier in this letter, our fiscal year-to-date
results have been adversely impacted by elevated legal and
regulatory expenses associated with historical AML
deficiencies. Specifically, during the quarter, FINRA
announced a $17 million fine and the state of Vermont
announced a $6 million settlement ($4.5 million of which
will be set aside for possible future claims by investors)
that both essentially related to our past failure to establish
and implement adequate AML procedures to properly
detect and prevent suspicious activity. We take these
responsibilities very seriously, and we have made
significant progress in addressing the shortcomings in our
AML policies and procedures, including hiring a new Chief
AML Officer, hiring an additional 50 associates on the AML
team and implementing a new technology platform called
Mantas, which is also utilized by several of the largest
banks. Given the increasingly intense regulatory
environment, all firms in our industry, including Raymond
James, will be required to substantially increase their
ongoing investments in regulatory compliance and risk
management. Fortunately, we have the scale and resources
to utilize state-of-the-art industry best practices and tools.
The outlook for the rest of the calendar year is uncertain.
Presidential elections always breed angst, and there is
certainly no reason to believe the upcoming election will be
any different. Furthermore, the real implications of the
“Brexit” vote to Europe and the rest of the world will take at
least one or two years to unravel. Finally, the direct and
indirect consequences of the unprecedented support from
central banks across the globe are incalculable. While we
would not be surprised by increased market volatility over
the next year or two, we remain absolutely confident the
United States is relatively well-positioned in these
uncertain times, as disposable income and household
wealth continue to recover gradually, the unemployment
JUNE 30,
2016
SEPTEMBER 30,
2015
Assets:
Cash and cash equivalents $1,978,057 $2,601,006
Assets segregated pursuant
to regulations and other
segregated assets
3,668,989 2,905,324
Securities purchased under
agreements to resell and other
collateralized financings
444,812 474,144
Financial instruments,
at fair value 2,279,224 2,051,577
Receivables 18,352,356 16,435,340
Property & equipment, net 294,994 255,875
Other assets 1,824,999 1,756,418
Total assets $28,843,431 $26,479,684
Liabilities and equity:
Loans payable $1,759,329 $1,878,247
Payables 20,369,901 17,962,826
Trading instruments sold but
not yet purchased, at fair value 285,299 287,993
Securities sold under
agreements to repurchase 266,158 332,536
Other liabilities 1,168,614 1,231,984
Total liabilities $23,849,301 $21,693,586
Total equity attributable to
Raymond James Financial, Inc. 4,747,459 4,522,031
Noncontrolling interests 246,671 264,067
Total equity $4,994,130 $4,786,098
Total liabilities and equity $28,843,431 $26,479,684
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION (Unaudited – in 000s)
RAYMOND JAMES FINANCIAL THIRD QUARTER REPORT 2016
Sincerely,
Thomas A. James Paul C. Reilly
Chairman CEO
August 31, 2016
rate remains low, and the cost of financing for both
businesses and consumers is attractive. If businesses
deploy more of their capital into long-term growth
investments instead of record levels of share repurchases,
domestic GDP growth would be further supported.
We sincerely appreciate your trust and ownership in
Raymond James. We remain committed to generating
superior long-term returns for our shareholders in any
market environment by always putting clients first.
(1) Includes acquisition-related expenses incurred to date associated with our announced acquisitions.
(2) The Other segment includes the results of our principal capital and private equity activities as well as certain corporate overhead costs of RJF, including the interest costs on our public debt, and the acquisition and integration
costs associated with certain acquisitions (including expenses incurred to-date associated with our announced acquisitions).
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited – in 000s, Except per Share Amounts)
CONSOLIDATED RESULTS BY SEGMENT (unaudited – in 000s)
Revenues:
Private Client Group $ 903,223 $ 894,727 $ 2,660,687 $ 2,617,604
Capital Markets 256,734 237,680 727,508 711,775
Asset Management 100,954 98,899 298,034 292,551
Raymond James Bank 132,747 107,244 376,785 315,590
Other (2) 17,170 28,890 31,442 56,462
Intersegment eliminations (24,135) (18,727) (65,319) (52,801)
Total revenues $ 1,386,693 $ 1,348,713 $ 4,029,137 $ 3,941,181
Pre-tax income (loss) (excluding noncontrolling interests):
Private Client Group $ 81,911 $ 86,363 $ 234,283 $ 254,527
Capital Markets 32,769 18,287 86,024 66,788
Asset Management 32,507 31,554 96,996 102,445
Raymond James Bank 88,930 78,008 239,929 213,628
Other (2) (38,352) (6,082) (93,011) (46,030)
Pre-tax income (excluding noncontrolling interests) $ 197,765 $ 208,130 $ 564,221 $ 591,358
Three Months Ended Nine Months Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Revenues:
Securities commissions and fees $ 871,764 $ 874,606 $ 2,574,756 $ 2,568,829
Investment banking 72,714 76,988 198,971 228,766
Investment advisory and related administrative fees 96,156 96,235 288,574 286,012
Interest 163,810 137,147 467,848 403,669
Account and service fees 129,334 113,866 373,685 336,990
Net trading profit 29,795 16,216 66,379 42,157
Other 23,120 33,655 58,924 74,758
Total revenues 1,386,693 1,348,713 4,029,137 3,941,181
Interest expense (28,211) (27,724) (84,644) (81,954)
Net revenues 1,358,482 1,320,989 3,944,493 3,859,227
Non-interest expenses:
Compensation, commissions and benefits 908,899 901,342 2,663,254 2,621,830
Communications and information processing 71,717 69,267 212,337 196,014
Occupancy and equipment costs 40,825 40,269 123,505 121,100
Clearance and floor brokerage 10,214 9,648 30,727 32,734
Business development 36,488 40,127 112,529 119,607
Investment sub-advisory fees 15,030 15,293 43,866 44,535
Bank loan loss provision 3,452 (3,009) 26,991 10,293
Acquisition-related expenses 13,445 - 21,332 -
Other 66,962 46,757 166,123 137,537
Total non-interest expenses 1,167,032 1,119,694 3,400,664 3,283,650
Income including noncontrolling interests and before provision for income taxes 191,450 201,295 543,829 575,577
Provision for income taxes 72,261 74,935 206,541 218,404
Net income including noncontrolling interests 119,189 126,360 337,288 357,173
Net loss attributable to noncontrolling interests (6,315) (6,835) (20,392) (15,781)
Net income attributable to Raymond James Financial, Inc. $ 125,504 $ 133,195 $ 357,680 $ 372,954
Net income per common share – diluted $ 0.87 $ 0.91 $ 2.47 $ 2.55
Weighted-average common and common equivalent
shares outstanding – diluted 143,952 146,493 144,618 145,870
(1) (1)
International Headquarters:
The Raymond James Financial Center
880 Carillon Parkway // St. Petersburg, FL 33716
800.248.8863 // raymondjames.com
©2016 Raymond James Financial
Raymond James® is a registered trademark of Raymond James Financial, Inc.
15-Fin-Rep-0017 KM 9/16
Stock Traded: NEW YORK STOCK EXCHANGE
Stock Symbol: RJF
corporate profile
Raymond James Financial, Inc., (NYSE: RJF) is a leading
diversified financial services company providing
private client, capital markets, asset management,
banking and other services to individuals, corporations
and municipalities. Its three principal wholly owned
broker/dealers, Raymond James & Associates, Raymond
James Financial Services and Raymond James Ltd.,
have approximately 6,800 financial advisors serving
in excess of 2.8 million client accounts in more than
2,800 locations throughout the United States, Canada
and overseas. Total client assets are approximately
$535 billion. Public since 1983, the firm has been listed
on the New York Stock Exchange since 1986 under the
symbol RJF. Additional information is available at
raymondjames.com.
2016
T H I R D Q U A R T E R
CHANGE
GROWTH
OPPORTUNITY
HEADWINDS
REGULATION
EXPLORATION
UNPREDICTABILITY
INVESTING WISELY
LIVING WELL
MOBILITY
2
1 6
International Headquarters:
The Raymond James Financial Center
880 Carillon Parkway // St. Petersburg, FL 33716
800.248.8863 // RaymondJames.com
©2016 Raymond James Financial
Raymond James® is a registered trademark of Raymond James Financial, Inc.
15-Fin-Rep-0015 KM 5/16
Stock Traded: NEW YORK STOCK EXCHANGE
Stock Symbol: RJF
corporate profile
Raymond James Financial, Inc. (NYSE: RJF) is a leading
diversified financial services company providing
private client, capital markets, asset management,
banking and other services to individuals, corporations
and municipalities. Its three principal wholly owned
broker/dealers, Raymond James & Associates, Raymond
James Financial Services and Raymond James Ltd.,
have approximately 6,700 financial advisors serving
in excess of 2.8 million client accounts in more than
2,700 locations throughout the United States, Canada
and overseas. Total client assets are approximately
$514 billion. Public since 1983, the firm has been listed
on the New York Stock Exchange since 1986 under the
symbol RJF. Additional information is available at
www.raymondjames.com.