Press release·03/02/2025 10:59:32

Executive Overview

For the fiscal first quarter of 2025, Raymond James Financial, Inc. (RJF) generated net revenues of $3.54 billion, an increase of 17% compared to the prior-year quarter. Pre-tax income was $749 million, up 19%, and net income available to common shareholders was $599 million, up 21%. Earnings per diluted share were $2.86, an increase of 23%.

The increase in net revenues was primarily due to higher asset management and related administrative fees, as well as increased investment banking revenues. This was partially offset by a decrease in net interest income and RJBDP fees from third-party banks due to lower interest rates.

Compensation, commissions and benefits expense increased 18%, primarily due to higher compensable revenues and increased compensation costs to support growth. The compensation ratio was 64.2%, compared to 63.8% in the prior-year quarter. Non-compensation expenses increased 12%, driven by higher communications and information processing costs, investment sub-advisory fees, and legal and regulatory provisions.

RJF’s capital and liquidity positions remain strong, with a tier 1 leverage ratio of 13.0% and total capital ratio of 25.0% as of December 31, 2024. The firm had $2.3 billion of cash at the parent company level. In December 2024, the Board increased the quarterly dividend by 11% and authorized up to $1.5 billion in common stock repurchases.

Outlook

Looking ahead, RJF believes it is well-positioned for long-term growth given its strong capital, $1.56 trillion in total client assets under administration, and $47.2 billion in net bank loans. The firm expects investment banking revenues to continue benefiting from a more favorable market environment, and fixed income brokerage revenues to increase from higher activity by depository institution clients.

However, the firm’s fiscal second quarter results will be negatively impacted by two fewer billable days, which is expected to reduce asset management and net interest income. RJF also anticipates potential increases in bank loan provisions for credit losses in future periods due to economic deterioration or changes in the macroeconomic outlook, as well as continued investments to support growth across its businesses.

Segment Results

Private Client Group (PCG):

• Net revenues increased 14% to $2.55 billion, driven by higher asset management and brokerage revenues, partially offset by lower RJBDP fees.
• Pre-tax income increased 5% to $462 million.
• PCG client assets under administration (AUA) were $1.49 trillion as of December 31, 2024, down 1% from September 30, 2024 due to changes in foreign exchange rates and the departure of a large independent contractor branch.
• Assets in fee-based accounts were $876.6 billion, up slightly from the prior quarter.

Capital Markets:

• Net revenues increased 42% to $480 million, primarily due to a significant increase in investment banking revenues.
• Pre-tax income was $74 million, compared to $3 million in the prior-year quarter.
• Investment banking revenues increased 86%, driven by more favorable market conditions for merger & acquisition activity.
• Brokerage revenues decreased 10% due to lower fixed income brokerage revenues.

Asset Management:

• Net revenues increased 25% to $294 million, driven by higher asset management and related administrative fees.
• Pre-tax income increased 34% to $125 million.
• Financial assets under management were $243.9 billion as of December 31, 2024, down slightly from September 30, 2024.

Bank:

• Net revenues decreased 4% to $425 million, while pre-tax income increased 28% to $118 million.
• Net interest income decreased 3% due to the impact of lower short-term interest rates, partially offset by higher average interest-earning asset balances.
• The bank loan provision for credit losses decreased $12 million compared to the prior-year quarter.

Liquidity and Capital Resources

RJF maintains a strong liquidity and capital position to support its business operations. As of December 31, 2024, the firm had $2.3 billion of cash at the parent company level and a tier 1 leverage ratio of 13.0% and total capital ratio of 25.0%, well above regulatory requirements.

The firm has various financing arrangements in place, including a $750 million committed unsecured credit facility, as well as uncommitted secured and unsecured borrowing facilities. RJF also has access to FHLB borrowings and the Federal Reserve’s discount window through its bank subsidiaries.

RJF’s credit ratings from Fitch, Moody’s, and S&P remain investment grade, with a stable outlook. The firm believes its strong capital and liquidity position provides flexibility to manage its balance sheet and continue investing in growth opportunities.

Risk Management

RJF has a comprehensive Enterprise Risk Management (ERM) program to identify, assess, monitor, and control various risks, including market, credit, liquidity, operational, model, and compliance risks.

The firm’s market risk exposure primarily arises from its trading inventory in the Capital Markets segment and the available-for-sale securities portfolio in the Bank segment. RJF actively manages these risks through the use of hedging strategies, position limits, and Value-at-Risk (VaR) monitoring.

In its banking operations, RJF analyzes interest rate risk based on forecasted net interest income and the economic value of equity across a range of interest rate scenarios. The firm utilizes interest rate swaps as part of its asset and liability management process.

RJF also has processes in place to manage credit risk, including the estimation of an allowance for credit losses on its loan portfolio. The firm’s estimates incorporate reasonable and supportable economic forecasts, and it monitors the sensitivity of its allowance to changes in macroeconomic conditions.

Overall, RJF’s risk management framework, which includes strong governance, the three lines of defense model, and various risk monitoring and mitigation techniques, is designed to ensure the firm can effectively manage the risks inherent in its business activities.

Analysis

Raymond James Financial’s fiscal first quarter of 2025 results demonstrate the firm’s ability to generate strong financial performance across its diversified business segments. The 17% increase in net revenues and 19% growth in pre-tax income highlight the firm’s success in capitalizing on favorable market conditions, particularly in its investment banking and asset management operations.

The firm’s focus on recruiting and retaining financial advisors in its Private Client Group segment continues to pay dividends, with assets in fee-based accounts reaching a record $876.6 billion. This shift towards more recurring, asset-based revenues helps provide stability and predictability to the firm’s earnings.

While the decrease in net interest income and RJBDP fees due to lower interest rates is a headwind, RJF’s proactive management of its balance sheet and funding sources has allowed it to maintain a robust liquidity and capital position. The firm’s ability to access diverse funding sources, including the FHLB and Federal Reserve, as well as its strong credit ratings, provide it with the flexibility to navigate changing market conditions.

Looking ahead, RJF’s outlook appears positive, with expectations of continued growth in investment banking and fixed income brokerage revenues. However, the firm will need to manage potential increases in credit losses and ongoing investments to support its growth initiatives. Maintaining discipline on expenses will also be crucial, as the firm’s compensation ratio remains elevated compared to historical levels.

Overall, Raymond James Financial’s diversified business model, strong financial position, and disciplined risk management approach position the firm well to capitalize on opportunities and weather potential challenges in the current environment. The firm’s focus on serving its clients, recruiting and retaining top talent, and prudently managing its capital and liquidity should continue to drive long-term shareholder value.