Raymond James Financial Inc. (RJF, Financial) filed Quarterly Report for the period ended 2009-03-31.
RAYMOND JAMES FINANCIAL INC. is a holding company whose subsidiaries are engaged principally in the securities brokerage business including the underwriting distribution trading and brokerage of equity and debt securities and the sale of tax advantaged investments mutual funds and other investment products and provides investment management services for retail and institutional clients. Raymond James Financial Inc. has a market cap of $2.16 billion; its shares were traded at around $17.67 with a P/E ratio of 9 and P/S ratio of 0.7. The dividend yield of Raymond James Financial Inc. stocks is 2.5%. Raymond James Financial Inc. had an annual average earning growth of 7.5% over the past 10 years.
Net interest income increased $25 million, or 34%, over the same quarter in the prior year but declined $10 million, or 9%, over the immediately preceding quarter. RJBank s net interest income increased $36 million, or 75%, over the prior year but declined $10 million, or 11%, from the immediately preceding quarter. Net interest income in the PCG segment declined $7.3 million, or 36%, from the prior year quarter and increased a modest $1 million, or 9%, over the immediately preceding quarter. RJBank has benefitted from the continued growth of its loan portfolio and also from increased spreads since the prior year. As expected, spreads have begun to decline, dropping by 23 basis points to 3.66% since the immediately preceding quarter. This rate is still above what is expected as a long term sustainable spread. The specific factors which impacted the interest rate spreads at RJBank were: (1) as deposit rates were declining over the quarter, a larger spread was realized on the large portion of the 5/1 adjustable rate mortgage portfolio that is still in its fixed rate period; and (2) LIBOR was historically high in the early part of the fiscal year, and some commercial loans did not reset until sometime during the March quarter.
Average client margin balances declined $387 million (25%) and assets segregated pursuant to regulations decreased $116 million over the same quarter of the prior year. Customer cash balances held in the Client Interest Program increased $135 million. Net interest income in the PCG segment was negatively impacted by lower margin balances and by lower spreads than in the prior year. This segment is negatively impacted by interest rate cuts as the rate is lowered immediately on the interest earning assets while the lowering of the interest rate paid to clients occurs over a period of weeks to remain competitive with money market fund yields. In the current rate environment, interest rate spread on Client Interest Program deposits invested in the segregated reserve account are approximately one-third of the historic spread of 60 to 65 basis points.
Private Client Group revenues were 31% below the prior year quarter, reflecting the impact of the extremely negative market conditions on this segment. Securities commissions and fees declined 27% despite a 10% increase in the number of Financial Advisors. All of the Company s broker-dealers experienced positive results in recruiting successful Financial Advisors as the brokerage industry continues to be in a state of unrest. Unfortunately, the financial markets themselves have been in a steep decline and clients are not investing as actively. As would be expected, revenues from fee based accounts have also declined as it is based on account valuations which have declined dramatically during the year. The S&P 500 has declined 66% since the end of March 2008. As a result, average annual production per Financial Advisor declined from $333,000 to $302,000 in RJFS and from $522,000 to $456,000 in RJA since the same quarter in the prior year.
Private Client Group results also include the interest revenue earned on client margin balances and cash segregated for regulatory purposes net of the interest expense paid on client cash balances. The net interest from these balances declined $7 million, or 36%, from the prior year as interest rates fell to record low levels, thus compressing spreads. In addition, client margin balances have declined $320 million since the prior year.
Capital Markets pre-tax results increased 261% from the prior year as trading results shifted from a $7 million loss to a $12 million gain and fixed income commissions increased 39% to offset the decline in equity commissions caused by the market conditions. Of the segment s trading profits, $12.2 million were generated by fixed income, as the bond market was volatile and active. The fixed income markets volatility has generated activity as clients are attracted to the possibility of better yields and others are selling holdings to obtain liquidity. The segment results also included flat mergers and acquisition fees compared to the prior year s quarter. The negative market conditions that continued to impact the Private Client Group also impacted Capital Markets as there were only ten domestic and one Canadian underwriting in the quarter. An improvement in the overall equity markets will likely be necessary to realize a significant increase in underwritings and the related commissions and fees.
Read the The complete ReportRJF is in the portfolios of Bruce Sherman of Private Capital Management, David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.
RAYMOND JAMES FINANCIAL INC. is a holding company whose subsidiaries are engaged principally in the securities brokerage business including the underwriting distribution trading and brokerage of equity and debt securities and the sale of tax advantaged investments mutual funds and other investment products and provides investment management services for retail and institutional clients. Raymond James Financial Inc. has a market cap of $2.16 billion; its shares were traded at around $17.67 with a P/E ratio of 9 and P/S ratio of 0.7. The dividend yield of Raymond James Financial Inc. stocks is 2.5%. Raymond James Financial Inc. had an annual average earning growth of 7.5% over the past 10 years.
Highlight of Business Operations:
Total Company net revenues decreased 15% to $590 million from $692 million in the comparable quarter of the prior year. The current year earnings include positive trading results and increased institutional commissions, partially offset by lower private client commissions and lower investment advisory fee revenue. Net income was 90% below the prior year quarter. Net interest earnings increased 34%, or $25 million over the prior year quarter, but declined 9% or $10 million from the immediately preceding quarter. The current year earnings were significantly impacted by a $75 million loan loss provision expense at RJBank compared to $11 million in the prior year quarter and $25 million in the immediately preceding quarter. The Company s effective tax rate for the quarter continues to be higher than it was in the rising equity markets of previous years as nondeductible items had a magnified impact due to the lower pre-tax earnings in the quarter. Diluted net income was $0.05 per share, versus $0.50 per share in the prior year quarter.Net interest income increased $25 million, or 34%, over the same quarter in the prior year but declined $10 million, or 9%, over the immediately preceding quarter. RJBank s net interest income increased $36 million, or 75%, over the prior year but declined $10 million, or 11%, from the immediately preceding quarter. Net interest income in the PCG segment declined $7.3 million, or 36%, from the prior year quarter and increased a modest $1 million, or 9%, over the immediately preceding quarter. RJBank has benefitted from the continued growth of its loan portfolio and also from increased spreads since the prior year. As expected, spreads have begun to decline, dropping by 23 basis points to 3.66% since the immediately preceding quarter. This rate is still above what is expected as a long term sustainable spread. The specific factors which impacted the interest rate spreads at RJBank were: (1) as deposit rates were declining over the quarter, a larger spread was realized on the large portion of the 5/1 adjustable rate mortgage portfolio that is still in its fixed rate period; and (2) LIBOR was historically high in the early part of the fiscal year, and some commercial loans did not reset until sometime during the March quarter.
Average client margin balances declined $387 million (25%) and assets segregated pursuant to regulations decreased $116 million over the same quarter of the prior year. Customer cash balances held in the Client Interest Program increased $135 million. Net interest income in the PCG segment was negatively impacted by lower margin balances and by lower spreads than in the prior year. This segment is negatively impacted by interest rate cuts as the rate is lowered immediately on the interest earning assets while the lowering of the interest rate paid to clients occurs over a period of weeks to remain competitive with money market fund yields. In the current rate environment, interest rate spread on Client Interest Program deposits invested in the segregated reserve account are approximately one-third of the historic spread of 60 to 65 basis points.
Private Client Group revenues were 31% below the prior year quarter, reflecting the impact of the extremely negative market conditions on this segment. Securities commissions and fees declined 27% despite a 10% increase in the number of Financial Advisors. All of the Company s broker-dealers experienced positive results in recruiting successful Financial Advisors as the brokerage industry continues to be in a state of unrest. Unfortunately, the financial markets themselves have been in a steep decline and clients are not investing as actively. As would be expected, revenues from fee based accounts have also declined as it is based on account valuations which have declined dramatically during the year. The S&P 500 has declined 66% since the end of March 2008. As a result, average annual production per Financial Advisor declined from $333,000 to $302,000 in RJFS and from $522,000 to $456,000 in RJA since the same quarter in the prior year.
Private Client Group results also include the interest revenue earned on client margin balances and cash segregated for regulatory purposes net of the interest expense paid on client cash balances. The net interest from these balances declined $7 million, or 36%, from the prior year as interest rates fell to record low levels, thus compressing spreads. In addition, client margin balances have declined $320 million since the prior year.
Capital Markets pre-tax results increased 261% from the prior year as trading results shifted from a $7 million loss to a $12 million gain and fixed income commissions increased 39% to offset the decline in equity commissions caused by the market conditions. Of the segment s trading profits, $12.2 million were generated by fixed income, as the bond market was volatile and active. The fixed income markets volatility has generated activity as clients are attracted to the possibility of better yields and others are selling holdings to obtain liquidity. The segment results also included flat mergers and acquisition fees compared to the prior year s quarter. The negative market conditions that continued to impact the Private Client Group also impacted Capital Markets as there were only ten domestic and one Canadian underwriting in the quarter. An improvement in the overall equity markets will likely be necessary to realize a significant increase in underwritings and the related commissions and fees.
Read the The complete ReportRJF is in the portfolios of Bruce Sherman of Private Capital Management, David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.
