Raymond James Financial(RJF) - 2024 Q2 - Quarterly Results

Executive Summary & Overall Financial Performance Fiscal Second Quarter 2024 Highlights Raymond James Financial reported record net revenues and increased net income for the fiscal second quarter, driven primarily by growth in asset management and related administrative fees | Metric | Q2 FY2024 (Millions) | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Net Revenues | $3,120 | +9% | +3% | | Net Income Available to Common Shareholders | $474 | +12% | -5% | | Diluted EPS | $2.22 | +15% | -4% | | Adjusted Net Income Available to Common Shareholders | $494 | +11% | -4% | | Adjusted Diluted EPS | $2.31 | +14% | -4% | - Record quarterly net revenues were primarily driven by higher asset management and related administrative fees, which grew to $1.52 billion[2] - Net income available to common shareholders increased due to higher net revenues and a $32 million legal and regulatory net reserve release[2] First Half Fiscal Year 2024 Highlights The first six months of fiscal year 2024 saw record net revenues and earnings per diluted share, with strong contributions from Private Client Group and Asset Management segments | Metric | H1 FY2024 (Millions) | Change YoY | | :----------------------------------- | :------------------- | :--------- | | Net Revenues | $6,130 | +8% | | Diluted EPS | $4.54 | +7% | | Adjusted Diluted EPS | $4.71 | +9% | | Annualized Return on Common Equity | 18.3% | -1.0% | | Annualized Adjusted Return on Tangible Common Equity | 22.8% | -1.4% | - The Private Client Group segment generated record net revenues and pre-tax income, and the Asset Management segment produced record net revenues during the first six months[3] - Client assets under administration grew 18% year-over-year, reflecting market growth and solid financial advisor retention and recruiting[3] Key Consolidated Financial and Operational Metrics The company achieved record client assets under administration and in fee-based accounts, alongside significant growth in total clients' domestic cash sweep and Enhanced Savings Program balances | Metric | Value (March 31, 2024) | Change YoY | | :----------------------------------- | :--------------------- | :--------- | | Client Assets Under Administration | $1.45 trillion | +18% | | Private Client Group Assets in Fee-Based Accounts | $798.8 billion | +20% | | Total Clients' Domestic Cash Sweep and ESP Balances | $58.2 billion | +11% | Summary Results of Operations Consolidated summary results show strong quarterly and year-to-date growth in net revenues, pre-tax income, and net income, with adjusted metrics also reflecting positive trends Summary Results of Operations (Three Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Net revenues | 3,118 | 2,873 | 3,013 | 9% | 3% | | Pre-tax income | 609 | 557 | 630 | 9% | (3)% | | Net income available to common shareholders | 474 | 425 | 497 | 12% | (5)% | | Diluted EPS | 2.22 | 1.93 | 2.32 | 15% | (4)% | | Adjusted diluted EPS | 2.31 | 2.03 | 2.40 | 14% | (4)% | Summary Results of Operations (Six Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Net revenues | 6,131 | 5,659 | 8% | | Pre-tax income | 1,239 | 1,209 | 2% | | Net income available to common shareholders | 971 | 932 | 4% | | Diluted EPS | 4.54 | 4.23 | 7% | | Adjusted diluted EPS | 4.71 | 4.31 | 9% | Key Financial Ratios and Margins The company maintained strong profitability and efficiency ratios, with a slight increase in return on common equity and stable pre-tax margins, while the total compensation ratio saw a modest increase Key Financial Ratios (Three Months Ended March 31, 2024) | Metric | March 31, 2024 | March 31, 2023 | Dec 31, 2023 | | :----------------------------------- | :------------- | :------------- | :----------- | | Return on common equity | 17.5% | 17.3% | 19.1% | | Adjusted return on common equity | 18.3% | 18.2% | 19.7% | | Adjusted return on tangible common equity | 21.8% | 22.3% | 23.8% | | Pre-tax margin | 19.5% | 19.4% | 20.9% | | Adjusted pre-tax margin | 20.4% | 20.4% | 21.7% | | Total compensation ratio | 65.5% | 63.3% | 63.8% | | Adjusted total compensation ratio | 65.2% | 62.8% | 63.4% | | Effective tax rate | 21.8% | 23.3% | 21.0% | Segment Performance Overview Private Client Group The Private Client Group achieved record quarterly net revenues, driven by higher asset management and administrative fees, reflecting significant growth in client assets and successful advisor recruiting Private Client Group Key Metrics (Q2 FY2024) | Metric | Value | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Quarterly Net Revenues | $2.34 billion | +9% | +5% | | Quarterly Pre-tax Income | $444 million | +1% | +1% | | Assets Under Administration | $1.39 trillion | +19% | +6% | | Assets in Fee-Based Accounts | $798.8 billion | +20% | +7% | | Domestic Net New Assets (Q2) | $9.6 billion | -55% | -55% | | Domestic Net New Assets (H1) | $31.2 billion | -30% | N/A | - Growth was predominantly driven by higher asset management and related administrative fees, reflecting growth of assets in fee-based accounts and higher brokerage revenues[7] - Record PCG net revenues reflected 19% annual growth of client assets, driven by rising equity markets and net new assets[8] Capital Markets Capital Markets experienced year-over-year revenue growth primarily due to higher investment banking revenues, though sequential revenues declined due to lower fixed income brokerage and M&A advisory revenues Capital Markets Key Metrics (Q2 FY2024) | Metric | Value | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Quarterly Net Revenues | $321 million | +6% | -5% | | Quarterly Pre-tax Loss | $17 million | N/A | N/A | | Quarterly Investment Banking Revenues | $171 million | +18% | +1% | - Investment banking revenues increased slightly from the preceding quarter driven primarily by higher debt underwriting revenues[9] - The M&A pipeline and new business activity remain healthy, but the timing of closings is difficult to predict[9] Asset Management The Asset Management segment reported record quarterly net revenues and pre-tax income, largely attributable to higher financial assets under management resulting from strong equity markets and net inflows Asset Management Key Metrics (Q2 FY2024) | Metric | Value | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Quarterly Net Revenues | $252 million | +17% | +7% | | Quarterly Pre-tax Income | $100 million | +22% | +8% | | Financial Assets Under Management | $227 billion | +17% | +5% | - Record quarterly net revenues were largely attributable to higher financial assets under management due to higher equity markets and net inflows into fee-based accounts in the Private Client Group[10] Bank The Bank segment experienced a decline in net revenues and pre-tax income, primarily due to a lower Net Interest Margin (NIM) caused by increased interest expense from higher-cost funding Bank Segment Key Metrics (Q2 FY2024) | Metric | Value | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Quarterly Net Revenues | $424 million | -21% | -4% | | Quarterly Pre-tax Income | $75 million | -18% | -18% | | Bank Segment Net Interest Margin (NIM) | 2.66% | -97 bps | -8 bps | | Net Loans | $44.1 billion | +1% | -0% | | Criticized Loans as % of Total Loans | 1.21% | +0.29% | +0.15% | - The NIM decreased due to increased interest expense from higher-cost funding, as Enhanced Savings Program (ESP) balances replaced a portion of lower-cost Raymond James Bank Deposit Program (RJBDP) client cash sweep balances[14] - The credit quality of the loan portfolio remains solid, despite a slight increase in criticized loans as a percent of total loans held for investment[15] Other Corporate Activities The 'Other' segment reported a significant increase in net revenues and a shift to pre-tax income, benefiting from a favorable effective tax rate and strategic share repurchases Other Segment Key Metrics (Q2 FY2024) | Metric | Value | Change YoY | Change QoQ | | :----------------------------------- | :------------------- | :--------- | :--------- | | Quarterly Net Revenues | $17 million | +70% | -35% | | Quarterly Pre-tax Income/(Loss) | $7 million | N/A | +133% | | Effective Tax Rate | 21.8% | -1.5% | +0.8% | | Total Capital Ratio | 23.3% | +1.9% | +0.3% | | Tier 1 Leverage Ratio | 12.3% | +0.8% | +0.2% | - The effective tax rate for the quarter was 21.8%, reflecting the favorable impact of nontaxable corporate owned life insurance gains[16] - The firm repurchased 1.70 million shares of common stock for $207 million in Q2, with $1.14 billion remaining under the repurchase authorization[17] Segment Financial Summary A consolidated view of segment performance shows Private Client Group and Asset Management as key revenue and income drivers, while the Bank segment faced headwinds Segment Net Revenues (Three Months Ended March 31, 2024) | Segment | Net Revenues ($M) | % Change YoY | % Change QoQ | | :------------------ | :---------------- | :----------- | :----------- | | Private Client Group | 2,341 | 9% | 5% | | Capital Markets | 321 | 6% | (5)% | | Asset Management | 252 | 17% | 7% | | Bank | 424 | (21)% | (4)% | | Other | 17 | 70% | (35)% | | Intersegment eliminations | (237) | (30)% | (6)% | | Total Net Revenues | 3,118 | 9% | 3% | Segment Pre-tax Income/(Loss) (Three Months Ended March 31, 2024) | Segment | Pre-tax Income/(Loss) ($M) | % Change YoY | % Change QoQ | | :------------------ | :------------------------- | :----------- | :----------- | | Private Client Group | 444 | 1% | 1% | | Capital Markets | (17) | 50% | NM | | Asset Management | 100 | 22% | 8% | | Bank | 75 | (18)% | (18)% | | Other | 7 | NM | 133% | | Total Pre-tax Income | 609 | 9% | (3)% | Consolidated Financial Statements Consolidated Statements of Income (Quarterly) The consolidated statement of income for the quarter shows robust revenue growth across most categories, particularly in asset management fees and interest income, though interest expense significantly increased Consolidated Statements of Income (Three Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Asset management and related administrative fees | 1,516 | 1,302 | 1,407 | 16% | 8% | | Total brokerage revenues | 528 | 496 | 522 | 6% | 1% | | Account and service fees | 335 | 258 | 319 | 30% | 5% | | Investment banking | 179 | 154 | 181 | 16% | (1)% | | Interest income | 1,049 | 915 | 1,053 | 15% | —% | | Total revenues | 3,638 | 3,157 | 3,520 | 15% | 3% | | Interest expense | (520) | (284) | (507) | 83% | 3% | | Net revenues | 3,118 | 2,873 | 3,013 | 9% | 3% | | Compensation, commissions and benefits | 2,043 | 1,820 | 1,921 | 12% | 6% | | Total non-interest expenses | 2,509 | 2,316 | 2,383 | 8% | 5% | | Pre-tax income | 609 | 557 | 630 | 9% | (3)% | | Net income available to common shareholders | 474 | 425 | 497 | 12% | (5)% | Consolidated Statements of Income (Six Months) For the first six months, the company demonstrated strong year-over-year growth in net revenues and net income, with significant increases in asset management fees, brokerage revenues, and interest income, despite a substantial rise in interest expense Consolidated Statements of Income (Six Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Asset management and related administrative fees | 2,923 | 2,544 | 15% | | Total brokerage revenues | 1,050 | 980 | 7% | | Account and service fees | 654 | 547 | 20% | | Investment banking | 360 | 295 | 22% | | Interest income | 2,102 | 1,742 | 21% | | Total revenues | 7,158 | 6,184 | 16% | | Interest expense | (1,027) | (525) | 96% | | Net revenues | 6,131 | 5,659 | 8% | | Compensation, commissions and benefits | 3,964 | 3,556 | 11% | | Total non-interest expenses | 4,892 | 4,450 | 10% | | Pre-tax income | 1,239 | 1,209 | 2% | | Net income available to common shareholders | 971 | 932 | 4% | Consolidated Key Metrics & Balance Sheet Balance Sheet and Capital Adequacy The company's balance sheet shows growth in total assets and common equity, leading to increased book value per share, with capital ratios remaining strong and well above regulatory requirements Balance Sheet and Capital Ratios (As of March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Total assets | 81,232 | 79,180 | 80,130 | 3% | 1% | | Total common equity | 10,905 | 9,875 | 10,711 | 10% | 2% | | Book value per share | 52.60 | 46.67 | 51.32 | 13% | 2% | | Tangible book value per share | 44.11 | 38.14 | 42.81 | 16% | 3% | | Tier 1 leverage | 12.3% | 11.5% | 12.1% | N/A | N/A | | Total capital | 23.3% | 21.4% | 23.0% | N/A | N/A | Client and Advisor Metrics Client assets under administration and in fee-based accounts reached record levels, reflecting strong market performance and net new asset inflows, while the total number of financial advisors remained stable Client and Advisor Metrics (As of March 31, 2024) | Metric | March 31, 2024 | March 31, 2023 | Dec 31, 2023 | % Change YoY | % Change QoQ | | :----------------------------------- | :------------- | :------------- | :----------- | :----------- | :----------- | | Client assets under administration | $1,449.1B | $1,224.4B | $1,370.6B | 18% | 6% | | Private Client Group assets in fee-based accounts | $798.8B | $666.3B | $746.6B | 20% | 7% | | Financial assets under management | $226.8B | $194.4B | $215.0B | 17% | 5% | | Domestic Private Client Group net new assets (Q2) | $9,648M | $21,473M | $21,575M | -55% | -55% | | Total advisors | 8,761 | 8,726 | 8,710 | 0% | 1% | Cash and Deposit Balances Total clients' domestic cash sweep and Enhanced Savings Program (ESP) balances increased year-over-year, with a notable shift towards third-party banks for RJBDP balances and significant growth in ESP Clients' Domestic Cash Sweep and ESP Balances (As of March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | RJBDP - Bank segment | 23,405 | 37,682 | 23,912 | (38)% | (2)% | | RJBDP - Third-party banks | 18,234 | 9,408 | 17,820 | 94% | 2% | | Total clients' domestic cash sweep balances | 43,354 | 49,475 | 43,497 | (12)% | —% | | Enhanced Savings Program (ESP) | 14,863 | 2,746 | 14,476 | 441% | 3% | | Total clients' domestic cash sweep and ESP balances | 58,217 | 52,221 | 57,973 | 11% | —% | Detailed Net Interest Analysis Quarterly Net Interest Income and Rates Consolidated net interest income decreased year-over-year and sequentially, primarily due to a significant increase in interest expense on bank deposits, despite growth in interest-earning assets Consolidated Net Interest Income (Three Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Total interest-earning assets (Avg. Balance) | 73,105 | 71,342 | 73,014 | 2% | 0% | | Total interest-bearing liabilities (Avg. Balance) | 64,325 | 62,895 | 63,997 | 2% | 1% | | Total Interest Income | 1,049 | 915 | 1,053 | 15% | 0% | | Total Interest Expense | 520 | 284 | 507 | 83% | 3% | | Firmwide Net Interest Income | 529 | 631 | 546 | (16)% | (3)% | | Firmwide Net Interest Margin | 2.91% | 3.59% | 2.97% | -0.68% | -0.06% | - The average rate on total interest-bearing liabilities increased significantly from 1.80% to 3.26% year-over-year, impacting net interest income[30] - Bank segment's net interest margin decreased to 2.66% from 3.63% YoY and 2.74% QoQ[30] Six-Month Net Interest Income and Rates For the first six months, firmwide net interest income decreased year-over-year, primarily due to a substantial increase in interest expense on deposits, despite a rise in interest income from earning assets Consolidated Net Interest Income (Six Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Total interest-earning assets (Avg. Balance) | 73,068 | 72,153 | 1% | | Total interest-bearing liabilities (Avg. Balance) | 64,133 | 63,436 | 1% | | Total Interest Income | 2,102 | 1,742 | 21% | | Total Interest Expense | 1,027 | 525 | 96% | | Firmwide Net Interest Income | 1,075 | 1,217 | (12)% | | Firmwide Net Interest Margin | 2.94% | 3.38% | -0.44% | - The average rate on total interest-bearing liabilities nearly doubled from 1.64% to 3.20% year-over-year[31] - Bank segment's net interest margin decreased to 2.70% from 3.51% year-over-year[31] Detailed Segment Financials Private Client Group Detailed Results The Private Client Group demonstrated strong revenue growth across most categories, particularly in asset management fees and brokerage revenues, contributing to increased pre-tax income Quarterly Performance Quarterly net revenues for PCG increased 9% YoY and 5% QoQ, driven by significant growth in asset management fees (16% YoY) and brokerage revenues (12% YoY) Private Client Group Revenues (Three Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Asset management and related administrative fees | 1,283 | 1,102 | 1,191 | 16% | 8% | | Total brokerage revenues | 407 | 364 | 382 | 12% | 7% | | RJBDP fees: Bank segment | 206 | 311 | 223 | (34)% | (8)% | | RJBDP fees: Third-party banks | 160 | 100 | 152 | 60% | 5% | | Net revenues | 2,341 | 2,144 | 2,226 | 9% | 5% | | Total compensation, commissions and benefits | 1,664 | 1,463 | 1,569 | 14% | 6% | | Pre-tax income | 444 | 441 | 439 | 1% | 1% | Six-Month Performance For the six months, PCG net revenues grew 9% YoY, driven by strong increases in asset management fees (15% YoY) and brokerage revenues (11% YoY), with compensation expenses also increasing significantly Private Client Group Revenues (Six Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Asset management and related administrative fees | 2,474 | 2,155 | 15% | | Total brokerage revenues | 789 | 709 | 11% | | RJBDP fees: Bank segment | 429 | 579 | (26)% | | RJBDP fees: Third-party banks | 312 | 237 | 32% | | Net revenues | 4,567 | 4,207 | 9% | | Total compensation, commissions and benefits | 3,233 | 2,880 | 12% | | Pre-tax income | 883 | 875 | 1% | Capital Markets Detailed Results Capital Markets saw a mixed performance, with strong growth in investment banking, particularly debt underwriting, offsetting declines in fixed income brokerage and M&A advisory sequentially Quarterly Performance Quarterly net revenues for Capital Markets increased 6% YoY but declined 5% QoQ, with investment banking revenues growing 18% YoY, driven by a 41% increase in debt underwriting Capital Markets Revenues (Three Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Total brokerage revenues | 122 | 130 | 140 | (6)% | (13)% | | M&A and advisory | 107 | 87 | 118 | 23% | (9)% | | Debt underwriting | 41 | 29 | 26 | 41% | 58% | | Total investment banking | 171 | 145 | 170 | 18% | 1% | | Net revenues | 321 | 302 | 338 | 6% | (5)% | | Pre-tax income/(loss) | (17) | (34) | 3 | 50% | NM | Six-Month Performance For the six months, Capital Markets net revenues increased 10% YoY, with investment banking revenues growing 23% YoY, and the segment significantly reduced its pre-tax loss Capital Markets Revenues (Six Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Total brokerage revenues | 262 | 264 | (1)% | | M&A and advisory | 225 | 189 | 19% | | Debt underwriting | 67 | 45 | 49% | | Total investment banking | 341 | 278 | 23% | | Net revenues | 659 | 597 | 10% | | Pre-tax loss | (14) | (50) | 72% | Asset Management Detailed Results Asset Management continued its strong performance, with significant growth in asset management and related administrative fees, leading to increased net revenues and pre-tax income Quarterly Performance Quarterly net revenues for Asset Management grew 17% YoY and 7% QoQ, primarily driven by a 17% YoY increase in total asset management and related administrative fees Asset Management Revenues (Three Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Managed programs | 163 | 140 | 150 | 16% | 9% | | Total asset management and related administrative fees | 242 | 206 | 224 | 17% | 8% | | Net revenues | 252 | 216 | 235 | 17% | 7% | | Pre-tax income | 100 | 82 | 93 | 22% | 8% | Six-Month Performance For the six months, Asset Management net revenues increased 15% YoY, with total asset management and related administrative fees up 16% YoY, and pre-tax income grew 19% YoY Asset Management Revenues (Six Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Managed programs | 313 | 274 | 14% | | Total asset management and related administrative fees | 466 | 403 | 16% | | Net revenues | 487 | 423 | 15% | | Pre-tax income | 193 | 162 | 19% | Bank Detailed Results The Bank segment's net interest income declined significantly due to a sharp increase in interest expense, leading to reduced net revenues and pre-tax income, despite growth in interest income Quarterly Performance Quarterly net revenues for the Bank segment declined 21% YoY and 4% QoQ, with net interest income decreasing 22% YoY due to a 108% YoY increase in interest expense Bank Segment Revenues (Three Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Interest income | 868 | 749 | 872 | 16% | —% | | Interest expense | (455) | (219) | (446) | 108% | 2% | | Net interest income | 413 | 530 | 426 | (22)% | (3)% | | Net revenues | 424 | 540 | 441 | (21)% | (4)% | | Bank loan provision for credit losses | 21 | 28 | 12 | (25)% | 75% | | RJBDP fees to Private Client Group | 206 | 311 | 223 | (34)% | (8)% | | Pre-tax income | 75 | 91 | 92 | (18)% | (18)% | Six-Month Performance For the six months, Bank segment net revenues decreased 17% YoY, with net interest income declining 18% YoY, driven by a 123% YoY increase in interest expense Bank Segment Revenues (Six Months Ended March 31, 2024) | Revenue Category | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Interest income | 1,740 | 1,425 | 22% | | Interest expense | (901) | (404) | 123% | | Net interest income | 839 | 1,021 | (18)% | | Net revenues | 865 | 1,048 | (17)% | | Bank loan provision for credit losses | 33 | 42 | (21)% | | RJBDP fees to Private Client Group | 429 | 579 | (26)% | | Pre-tax income | 167 | 227 | (26)% | Other Segment Detailed Results The 'Other' segment showed a significant turnaround, moving from a pre-tax loss to a pre-tax income position, driven by increased net revenues and a substantial reduction in non-interest expenses Quarterly Performance Quarterly net revenues for the 'Other' segment increased 70% YoY, while non-interest expenses decreased 70% YoY, leading to a pre-tax income of $7 million compared to a $23 million loss in the prior year Other Segment Revenues (Three Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Net revenues | 17 | 10 | 26 | 70% | (35)% | | Total non-interest expenses | 10 | 33 | 23 | (70)% | (57)% | | Pre-tax income/(loss) | 7 | (23) | 3 | NM | 133% | Six-Month Performance For the six months, 'Other' segment net revenues increased 126% YoY, and the segment achieved a pre-tax income of $10 million, a significant improvement from a $5 million loss in the prior year Other Segment Revenues (Six Months Ended March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Net revenues | 43 | 19 | 126% | | Total non-interest expenses | 33 | 24 | 38% | | Pre-tax income/(loss) | 10 | (5) | NM | Bank Segment Specific Metrics Bank Segment Key Metrics The Bank segment maintained stable total assets and net loans, but saw an increase in nonperforming and criticized loans, with net interest margin declining and net charge-offs increasing significantly Bank Segment Key Metrics (As of March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | % Change YoY | % Change QoQ | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------- | :----------- | | Total assets | 61,038 | 60,400 | 61,517 | 1% | (1)% | | Bank loans, net | 44,099 | 43,683 | 44,182 | 1% | —% | | Bank loan allowance for credit losses | 471 | 415 | 479 | 13% | (2)% | | Total nonperforming assets | 187 | 99 | 164 | 89% | 14% | | Nonperforming assets as a % of total assets | 0.31% | 0.16% | 0.27% | N/A | N/A | | Total criticized loans | 538 | 403 | 472 | 33% | 14% | | Criticized loans as a % of loans held for investment | 1.21% | 0.92% | 1.06% | N/A | N/A | | Total bank deposits | 54,843 | 54,229 | 55,393 | 1% | (1)% | | Net interest margin | 2.66% | 3.63% | 2.74% | N/A | N/A | | Net charge-offs (Q2) | 28 | 20 | 8 | 40% | 250% | Non-GAAP Financial Measures Reconciliation Adjusted Net Income and Pre-tax Income The company provides adjusted non-GAAP measures to exclude acquisition-related expenses, offering a clearer view of core operating results, with adjusted net income and pre-tax income showing higher values compared to GAAP figures Adjusted Net Income and Pre-tax Income Reconciliation (Three Months Ended March 31, 2024) | Metric | GAAP ($M) | Non-GAAP Adjustments ($M) | Adjusted ($M) | | :----------------------------------- | :-------- | :------------------------ | :---------- | | Net income available to common shareholders | 474 | 20 | 494 | | Pre-tax income | 609 | 26 | 635 | | Compensation, commissions and benefits expense | 2,043 | (11) | 2,032 | - Non-GAAP adjustments primarily include acquisition-related retention compensation, amortization of identifiable intangible assets, and other acquisition-related expenses[57] Adjusted Margins and Compensation Ratios Adjusted pre-tax margins and total compensation ratios provide insights into operational efficiency by excluding the impact of acquisition-related expenses Adjusted Margins and Compensation Ratios Reconciliation (Three Months Ended March 31, 2024) | Metric | GAAP | Non-GAAP Adjustments | Adjusted | | :----------------------------------- | :----- | :------------------- | :------- | | Pre-tax margin | 19.5% | 0.9% | 20.4% | | Total compensation ratio | 65.5% | (0.3)% | 65.2% | Adjusted Earnings Per Share Adjusted earnings per common share, both basic and diluted, are presented to reflect the company's performance excluding specific non-recurring or acquisition-related items Adjusted Earnings Per Common Share Reconciliation (Three Months Ended March 31, 2024) | Metric | GAAP | Non-GAAP Adjustments | Adjusted | | :----------------------------------- | :----- | :------------------- | :------- | | Basic EPS | $2.27 | $0.10 | $2.37 | | Diluted EPS | $2.22 | $0.09 | $2.31 | Tangible Common Equity and Adjusted Return on Equity The reconciliation of tangible common equity and adjusted return on equity provides a more comparable view of the company's financial strength and profitability by excluding goodwill and identifiable intangible assets Tangible Common Equity Reconciliation (As of March 31, 2024) | Metric | March 31, 2024 ($M) | March 31, 2023 ($M) | Dec 31, 2023 ($M) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Total common equity | 10,905 | 9,875 | 10,711 | | Goodwill and identifiable intangible assets, net | (1,894) | (1,932) | (1,908) | | Deferred tax liabilities related to goodwill and identifiable intangible assets, net | 134 | 128 | 132 | | Tangible common equity | 9,145 | 8,071 | 8,935 | | Tangible book value per share | $44.11 | $38.14 | $42.81 | Adjusted Return on Tangible Common Equity (Three Months Ended March 31, 2024) | Metric | GAAP | Adjusted | | :----------------------------------- | :----- | :------- | | Return on common equity | 17.5% | 18.3% | | Return on tangible common equity | 21.0% | 21.8% | Footnotes General Footnotes The footnotes provide essential definitions, methodologies, and additional context for the financial metrics and non-GAAP adjustments presented in the report - Footnote (1) clarifies that certain financial measures are non-GAAP and refers to reconciliation schedules[68] - Footnote (2) defines Domestic Private Client Group net new assets and its annualized growth calculation[68] - Footnote (10) explains the Raymond James Bank Deposit Program (RJBDP) and how fees are earned and accounted for[68] - Footnote (11) describes the Enhanced Savings Program (ESP) and its reflection in bank deposits[68] - Footnote (17) details the components of the 'Other' segment, including corporate cash, private equity investments, and unallocated corporate overhead costs[70]