Raymond James Financial(RJF) - 2023 Q4 - Annual Report

PART I. Item 1. Business Raymond James Financial, Inc. (RJF) is a diversified financial services company operating primarily in the U.S., Canada, and the U.K., offering private client, capital markets, asset management, and banking services - RJF is a leading diversified financial services company providing private client group, capital markets, asset management, banking and other services, operating predominantly in the U.S., Canada, and the U.K.[11] - RJF operates through five segments: Private Client Group (PCG), Capital Markets, Asset Management, Bank, and Other[15] - As of September 30, 2023, RJF had approximately 18,000 associates (including 3,693 employee financial advisors) and 5,019 independent advisors, reflecting a growth of approximately 1,000 associates from the prior year[51] - The financial services industry is intensely competitive, with RJF competing on the basis of quality of associates, services, product selection, performance, location, and reputation, facing competition from larger firms, web-based services, and fintechs[65] - RJF is subject to extensive regulation by U.S. federal and state laws, as well as international laws, including supervision by the Federal Reserve, FDIC, SEC, FINRA, and foreign regulatory bodies like the FCA and CIRO[68][69][70][93][100][101][102] Item 1A. Risk factors RJF's operations and financial results are exposed to various risks, including reputational damage, cyber-attacks, funding issues, credit defaults, market volatility, and regulatory changes - Damage to RJF's reputation, stemming from issues like conflicts of interest, regulatory non-compliance, ethical concerns, cybersecurity breaches, or associate misconduct, could significantly harm business prospects and client relationships[122] - Cyber-attacks or security breaches of technology systems, including those of third-party vendors, pose significant liability and reputational harm, with increasing sophistication of attacks and new SEC disclosure requirements effective December 18, 2023[123][124][125][126][127][128][129] - An inability to maintain adequate funding and liquidity, or access to capital, could negatively affect RJF's financial condition, potentially requiring scaling back operations, selling assets, or limiting shareholder distributions[130][131] - RJF is exposed to credit risk from third parties failing to meet obligations, including clients with margin loans and borrowers of SBL, C&I, CRE, REIT, residential mortgage, and tax-exempt loans, with concentrations in specific activities or geographies exacerbating this risk[142][143][144][145] - Market risk, particularly interest rate risk, can adversely affect asset and liability values, trading inventories, and net interest spread, with rising rates increasing interest income and servicing fees but also increasing funding costs[146][147][148][149] - The financial services industry is intensely competitive, with new entrants like fintechs and evolving technology requiring continuous adaptation and potentially leading to pricing pressures and increased costs[168][169][170][171] - Regulatory actions, including new and proposed regulations (e.g., CRA amendments, Volcker Rule, standard of care for broker-dealers), can increase compliance costs, limit business opportunities, and result in significant fines or sanctions[190][191][192][193][194][195][196][197][198][199][200][201][202][203][204][205][206] Item 1B. Unresolved staff comments There are no unresolved staff comments to report Item 2. Properties RJF operates its principal business from an owned 1.25 million square foot office space in St. Petersburg, Florida, with additional owned facilities and leased spaces across the U.S., Canada, and Europe - RJF's principal operations are located in St. Petersburg, Florida (1.25 million sq ft owned), with other owned facilities in Southfield, Michigan (90,000 sq ft), and a data center in Denver, Colorado (40,000 sq ft)[213] - The company leases premises in major metropolitan areas across the U.S. (e.g., Memphis, New York City, Pittsburgh, Chicago, Houston, Boston), Canada (Toronto, Vancouver), the U.K. (London), and Germany, with lease expiration dates through fiscal year 2036[214] - RJF owns approximately 65 acres of land in Pasco County, Florida, for potential future development[214] Item 3. Legal proceedings RJF is routinely involved in various legal actions and regulatory reviews, with outcomes inherently unpredictable but not expected to materially affect consolidated financial condition - RJF is a defendant in various legal actions, including arbitrations and class actions, and is subject to regular reviews and investigations by regulatory authorities and self-regulatory organizations[215][216] - The level of litigation and investigatory activity in the financial services industry remains significant, with potential sanctions ranging from non-monetary censures to fines and business suspensions[216][217] - Management believes the outcome of current litigation and regulatory proceedings will not materially adversely affect the consolidated financial condition, but could be material to operating results and cash flows for a specific future period[218] Item 4. Mine safety disclosures This item is not applicable to Raymond James Financial, Inc PART II. Item 5. Market for registrant's common equity, related shareholder matters and issuer purchases of equity securities RJF's common stock trades on the NYSE, with a $1.5 billion repurchase program authorized in December 2022, and 8.35 million shares repurchased in FY2023 - RJF's common stock is traded on the NYSE under the symbol 'RJF'. As of November 17, 2023, there were 343 holders of record and 208,606,759 shares outstanding[5][222] - In December 2022, the Board of Directors authorized common stock repurchases of up to $1.5 billion, replacing the previous authorization[226] Common Stock Repurchases (Fiscal Year Ended September 30, 2023) | Period | Total Shares Purchased | Average Price Per Share | Shares Purchased Under Publicly Announced Plans | Approximate Dollar Value Remaining Under Plans (in millions) | | :--------------------------------- | :--------------------- | :---------------------- | :-------------------------------------------- | :---------------------------------------------------------- | | October 1, 2022 – October 31, 2022 | 358,103 | $105.94 | 354,313 | $800 | | November 1, 2022 – November 30, 2022 | 78,798 | $120.60 | — | $800 | | December 1, 2022 – December 31, 2022 | 937,747 | $106.64 | 937,737 | $1,400 | | First quarter | 1,374,648 | $107.26 | 1,292,050 | | | January 1, 2023 – January 31, 2023 | 53,430 | $114.90 | — | $1,400 | | February 1, 2023 – February 28, 2023 | 13,586 | $113.49 | — | $1,400 | | March 1, 2023 – March 31, 2023 | 3,745,485 | $93.45 | 3,745,388 | $1,050 | | Second quarter | 3,812,501 | $93.82 | 3,745,388 | | | April 1, 2023 – April 30, 2023 | 111,500 | $89.67 | 111,500 | $1,040 | | May 1, 2023 – May 31, 2023 | 2,069,035 | $87.79 | 2,069,035 | $858 | | June 1, 2023 – June 30, 2023 | 1,135,079 | $95.55 | 1,133,895 | $750 | | Third quarter | 3,315,614 | $90.51 | 3,314,430 | | | July 1, 2023 – July 31, 2023 | — | $— | — | $750 | | August 1, 2023 – August 31, 2023 | — | $— | — | $750 | | September 1, 2023 – September 30, 2023 | 928 | $90.15 | — | $750 | | Fourth quarter | 928 | $90.15 | — | | | Fiscal year total | 8,503,691 | $95.43 | 8,351,868 | | - During the twelve months ended September 30, 2023, RJF repurchased 8.35 million shares of common stock for $788 million at an average price of $94 per share, with $750 million remaining under the authorization[240] Item 6. Reserved This item is reserved and contains no information Item 7. Management's discussion and analysis of financial condition and results of operations This section discusses RJF's financial condition and results, highlighting macroeconomic impacts, interest rate changes, and strong capital positions, with a cautious future outlook Key Financial Highlights (Fiscal Year Ended September 30, 2023 vs. 2022) | Metric | FY2023 | FY2022 | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | | Net Revenues | $11.62 billion | $11.00 billion | 6% | | Pre-tax Income | $2.28 billion | $2.02 billion | 13% | | Net Income Available to Common Shareholders | $1.73 billion | $1.50 billion | 15% | | Earnings Per Diluted Share | $7.97 | $6.98 | 14% | | Return on Common Equity (ROCE) | 17.7% | 17.0% | 0.7 pp | | Return on Tangible Common Equity (ROTCE) | 21.7% | 19.8% | 1.9 pp | | Adjusted Net Income Available to Common Shareholders | $1.81 billion | $1.62 billion | 12% | | Adjusted Earnings Per Diluted Share | $8.30 | $7.49 | 11% | | Adjusted ROCE | 18.4% | 18.2% | 0.2 pp | | Adjusted ROTCE | 22.5% | 21.1% | 1.4 pp | | Compensation Ratio | 62.8% | 66.6% | (3.8) pp | | Adjusted Compensation Ratio | 62.1% | 66.1% | (4.0) pp | - The increase in net revenues was primarily driven by significantly higher short-term interest rates benefiting net interest income and RJBDP fees, along with incremental revenues from prior-year acquisitions (Charles Stanley, TriState Capital, SumRidge Partners)[235] - Non-compensation expenses increased by $388 million (23%), mainly due to elevated provisions for legal and regulatory matters ($175 million, including SEC off-platform communications sweep), acquisition-related expenses, and increases in communications, information processing, and business development expenses[238] - The bank loan provision for credit losses increased to $132 million in FY2023 from $100 million in FY2022, reflecting a weakened macroeconomic outlook for certain loan portfolios (especially commercial real estate prices), charge-offs, and loan downgrades[238] - As of September 30, 2023, RJF's Tier 1 leverage ratio was 11.9% and Total capital ratio was 22.8%, both more than double the regulatory requirements for being considered well-capitalized[241] - RJF had substantial liquidity with $2.08 billion of corporate cash and access to nearly $9.3 billion of FHLB borrowing capacity in the Bank segment as of September 30, 2023[241] - The firm expects economic uncertainty in the near term, anticipating negative impacts on Q1 2024 asset management fees (due to lower fee-based account balances), a 5% decline in combined net interest income and RJBDP fees (due to higher funding costs), and continued headwinds for investment banking and fixed income brokerage revenues[241] Introduction RJF's financial performance is closely tied to general economic conditions, U.S. equity and fixed income markets, interest rates, market volatility, and lending markets - RJF operates as a financial holding company and bank holding company, with results highly correlated to general economic conditions, U.S. equity and fixed income markets, interest rate changes, market volatility, and corporate/mortgage lending markets[234] Executive overview RJF's FY2023 saw increased net revenues and net income driven by higher interest rates and acquisitions, despite rising non-compensation expenses and credit loss provisions Key Financial Highlights (Fiscal Year Ended September 30, 2023 vs. 2022) | Metric | FY2023 | FY2022 | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | | Net Revenues | $11.62 billion | $11.00 billion | 6% | | Pre-tax Income | $2.28 billion | $2.02 billion | 13% | | Net Income Available to Common Shareholders | $1.73 billion | $1.50 billion | 15% | | Earnings Per Diluted Share | $7.97 | $6.98 | 14% | | Return on Common Equity (ROCE) | 17.7% | 17.0% | 0.7 pp | | Return on Tangible Common Equity (ROTCE) | 21.7% | 19.8% | 1.9 pp | | Adjusted Net Income Available to Common Shareholders | $1.81 billion | $1.62 billion | 12% | | Adjusted Earnings Per Diluted Share | $8.30 | $7.49 | 11% | | Adjusted ROCE | 18.4% | 18.2% | 0.2 pp | | Adjusted ROTCE | 22.5% | 21.1% | 1.4 pp | | Compensation Ratio | 62.8% | 66.6% | (3.8) pp | | Adjusted Compensation Ratio | 62.1% | 66.1% | (4.0) pp | - Net revenues increased due to higher short-term interest rates impacting net interest income and RJBDP fees, and incremental revenues from prior-year acquisitions (Charles Stanley, TriState Capital, SumRidge Partners)[235] - Compensation, commissions, and benefits expense remained flat year-over-year, as decreased compensable revenues were offset by acquisition-related expenses and growth-driven compensation costs[236] - Non-compensation expenses rose by $388 million (23%), primarily due to elevated legal and regulatory provisions ($175 million, including SEC off-platform communications sweep), acquisition-related expenses, and increases in communications, information processing, and business development[238] - The bank loan provision for credit losses was $132 million in FY2023, up from $100 million in FY2022, reflecting a weakened macroeconomic outlook for certain loan portfolios (e.g., commercial real estate prices), charge-offs, and loan downgrades[238] - The effective income tax rate decreased to 23.7% in FY2023 from 25.4% in FY2022, mainly due to non-taxable valuation gains on company-owned life insurance policies, partially offset by non-deductible fines and penalties[239] - RJF repurchased 8.35 million common shares for $788 million in FY2023, with $750 million remaining under the $1.5 billion authorization, and plans to continue repurchases in FY2024 to offset dilution[240] - As of September 30, 2023, RJF's Tier 1 leverage ratio was 11.9% and Total capital ratio was 22.8%, both significantly above regulatory requirements, supported by $2.08 billion in corporate cash and $9.3 billion in FHLB borrowing capacity[241] - Outlook for Q1 2024 includes anticipated negative impacts on asset management fees (due to lower fee-based account balances), a 5% decline in combined net interest income and RJBDP fees (due to higher funding costs from ESP), and continued market uncertainty affecting investment banking and fixed income brokerage revenues[241] Reconciliation of non-GAAP financial measures to GAAP financial measures RJF uses non-GAAP financial measures to provide clearer insights into core operating results by excluding certain material items - RJF uses non-GAAP financial measures like ROTCE, adjusted net income, adjusted EPS, adjusted ROCE, adjusted ROTCE, and adjusted compensation ratio to provide useful information to management and investors by excluding certain material items not indicative of core operating results[243] Reconciliation of Net Income Available to Common Shareholders (in millions) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------------ | :------- | :------- | :------- | | Net income available to common shareholders | $1,733 | $1,505 | $1,403 | | Total non-GAAP adjustments, net of tax | $73 | $110 | $137 | | Adjusted net income available to common shareholders | $1,806 | $1,615 | $1,540 | Reconciliation of Diluted Earnings Per Common Share | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------------ | :------- | :------- | :------- | | Diluted earnings per common share | $7.97 | $6.98 | $6.63 | | Total non-GAAP adjustments, net of tax | $0.33 | $0.51 | $0.65 | | Adjusted diluted earnings per common share | $8.30 | $7.49 | $7.28 | Reconciliation of Return on Common Equity and Tangible Common Equity | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Return on common equity | 17.7% | 17.0% | 18.4% | | Adjusted return on common equity | 18.4% | 18.2% | 20.0% | | Return on tangible common equity | 21.7% | 19.8% | 20.4% | | Adjusted return on tangible common equity | 22.5% | 21.1% | 22.2% | Net interest analysis Rapid Federal Reserve rate hikes significantly increased RJF's combined net interest income and RJBDP fees in FY2023, despite rising deposit costs in the latter half - The Federal Reserve rapidly increased its benchmark short-term interest rates from 0.25%-0.50% in March 2022 to 5.25%-5.50% by September 30, 2023, significantly impacting RJF's interest-sensitive assets and liabilities[250] Federal Funds Target Rate Schedule (Fiscal Years 2022-2023) | RJF Fiscal Quarter Ended | Effective Date of Interest Rate Action | Increase in Interest Rates (in basis points) | Federal Funds Target Rate | | :----------------------- | :----------------------------------- | :----------------------------------------- | :------------------------ | | March 31, 2022 | March 17, 2022 | 25 | 0.25% - 0.50% | | June 30, 2022 | May 5, 2022 | 50 | 0.75% - 1.00% | | June 30, 2022 | June 16, 2022 | 75 | 1.50% - 1.75% | | September 30, 2022 | July 28, 2022 | 75 | 2.25% - 2.50% | | September 30, 2022 | September 22, 2022 | 75 | 3.00% - 3.25% | | December 31, 2022 | November 3, 2022 | 75 | 3.75% - 4.00% | | December 31, 2022 | December 15, 2022 | 50 | 4.25% - 4.50% | | March 31, 2023 | February 2, 2023 | 25 | 4.50% - 4.75% | | March 31, 2023 | March 23, 2023 | 25 | 4.75% - 5.00% | | June 30, 2023 | May 4, 2023 | 25 | 5.00% - 5.25% | | September 30, 2023 | July 27, 2023 | 25 | 5.25% - 5.50% | - Combined net interest income and RJBDP fees from third-party banks increased by $1.47 billion (104%) in fiscal 2023 compared to the prior year, driven by higher short-term interest rates[252] - Despite overall rate increases, net interest income and net interest margin decreased in the second half of fiscal 2023 compared to the first half, due to a more rapid increase in deposit costs, primarily from the Enhanced Savings Program[252] Firmwide Net Interest Income and Margin (FY2023 vs. FY2022) | Metric | FY2023 | FY2022 | Change | | :------------------------------------ | :------------- | :------------- | :------------- | | Total interest-earning assets (average) | $71,944 million | $68,045 million | +$3,899 million | | Total interest-bearing liabilities (average) | $63,604 million | $58,845 million | +$4,759 million | | Firmwide net interest income | $2,375 million | $1,203 million | +$1,172 million | | Firmwide net interest margin | 3.30% | 1.77% | +1.53 pp | | Bank segment net interest margin | 3.28% | 2.39% | +0.89 pp | Results of Operations This section details the financial performance of RJF's operating segments, including Private Client Group, Capital Markets, Asset Management, Bank, and Other Private Client Group PCG net revenues and pre-tax income significantly increased in FY2023, driven by higher interest rates impacting account and service fees, despite lower asset management and brokerage revenues PCG Segment Net Revenues (FY2023 vs. FY2022) | Revenue Category | FY2023 (in millions) | FY2022 (in millions) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :--------- | | Asset management and related administrative fees | $4,545 | $4,710 | (4)% | | Total brokerage revenues | $1,434 | $1,516 | (5)% | | Total account and service fees | $2,237 | $1,207 | 85% | | Investment banking | $35 | $38 | (8)% | | Interest income | $455 | $249 | 83% | | All other | $48 | $32 | 50% | | Total revenues | $8,754 | $7,752 | 13% | | Interest expense | ($100) | ($42) | 138% | | Net revenues | $8,654 | $7,710 | 12% | - PCG net revenues increased 12% to $8.65 billion, and pre-tax income increased 71% to $1.76 billion in FY2023 compared to FY2022[283] - Asset management and related administrative fees decreased 4% due to lower fee-based account balances at the start of quarterly billing periods, partially offset by Charles Stanley acquisition revenues[284] - Brokerage revenues decreased 5%, primarily from lower trailing revenues from mutual fund and annuity products (market-driven) and reduced sales of equity, mutual/other fund, variable annuity, and insurance products, partially offset by higher fixed annuity and fixed income sales[285] - Account and service fees surged 85% due to significantly higher short-term interest rates impacting RJBDP fees from both the Bank segment and third-party banks, despite a decline in average RJBDP balances[286] - Net interest income increased 83% due to higher short-term interest rates on cash, segregated cash, and client margin account balances, partially offset by lower average balances[287] PCG Client Asset Balances (as of September 30) | Metric (in billions) | 2023 | 2022 | 2021 | | :------------------------------------ | :----- | :----- | :----- | | Assets Under Administration (AUA) | $1,201.2 | $1,039.0 | $1,115.4 | | RIA and Custody Services (RCS) AUA | $133.3 | $108.5 | $92.7 | | Assets in fee-based accounts | $683.2 | $586.0 | $627.1 | | RCS assets in fee-based accounts | $111.7 | $89.9 | $77.2 | | Percent of AUA in fee-based accounts | 56.9% | 56.4% | 56.2% | - PCG AUA and fee-based assets increased 16% and 17% respectively, driven by net equity market appreciation and strong net inflows from recruiting[272] PCG Financial Advisors (as of September 30) | Category | 2023 | 2022 | 2021 | | :----------------------- | :----- | :----- | :----- | | Employees | 3,693 | 3,638 | 3,461 | | Independent contractors | 5,019 | 5,043 | 5,021 | | Total advisors | 8,712 | 8,681 | 8,482 | - The total number of financial advisors increased to 8,712, driven by new recruits and trainees exceeding departures[277] Clients' Domestic Cash Sweep and ESP Balances (as of September 30, in millions) | Category | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | RJBDP: Bank segment | $25,355 | $38,705 | $31,410 | | RJBDP: Third-party banks | $15,858 | $21,964 | $24,496 | | Subtotal RJBDP | $41,213 | $60,669 | $55,906 | | Client Interest Program (CIP) | $1,620 | $6,445 | $10,762 | | Total clients' domestic cash sweep balances | $42,833 | $67,114 | $66,668 | | Enhanced Savings Program (ESP) | $13,592 | — | — | | Total clients' domestic cash sweep and ESP balances | $56,425 | $67,114 | $66,668 | - Total clients' domestic cash sweep and ESP balances decreased 16% due to client cash sorting to higher-yielding alternatives, partially offset by the launch of the ESP in March 2023, which attracted $13.59 billion[282] Capital Markets Capital Markets experienced a significant decline in net revenues and a pre-tax loss in FY2023, primarily due to macroeconomic uncertainties impacting investment banking and brokerage activities Capital Markets Segment Net Revenues (FY2023 vs. FY2022) | Revenue Category | FY2023 (in millions) | FY2022 (in millions) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :--------- | | Total brokerage revenues | $475 | $590 | (19)% | | Total investment banking | $613 | $1,062 | (42)% | | Interest income | $88 | $36 | 144% | | Affordable housing investments business revenues | $109 | $127 | (14)% | | All other | $14 | $21 | (33)% | | Total revenues | $1,299 | $1,836 | (29)% | | Interest expense | ($85) | ($27) | 215% | | Net revenues | $1,214 | $1,809 | (33)% | | Pre-tax income/(loss) | ($91) | $415 | NM | | Compensation, commissions and benefits | $902 | $1,065 | (15)% | | Total non-compensation expenses | $403 | $329 | 22% | - Capital Markets net revenues decreased 33% to $1.21 billion, resulting in a pre-tax loss of $91 million in FY2023, compared to a pre-tax income of $415 million in FY2022[297] - Investment banking revenues declined 42% due to macroeconomic uncertainties and higher interest rates dampening capital markets activity, though activity improved in the fiscal fourth quarter[298] - Brokerage revenues decreased 19%, primarily from lower fixed income brokerage activity due to challenging market conditions for depository institution clients, partially offset by incremental revenues from the SumRidge Partners acquisition[299] - Compensation-related expenses decreased 15% due to lower revenues, partially offset by growth investments (including SumRidge Partners), higher salaries (inflationary/market pressures), and increased share-based compensation amortization[300] - Non-compensation expenses increased 22%, mainly due to SumRidge Partners-related expenses, higher legal and regulatory provisions, and increased travel, event, and professional fees[301] Asset Management Asset Management net revenues and pre-tax income decreased in FY2023 due to lower fee-based assets, despite an increase in total financial assets under management from market appreciation and net inflows Asset Management Segment Net Revenues (FY2023 vs. FY2022) | Revenue Category | FY2023 (in millions) | FY2022 (in millions) | Change (%) | | :------------------------------------------ | :------------------- | :------------------- | :--------- | | Total asset management and related administrative fees | $846 | $882 | (4)% | | Account and service fees | $21 | $22 | (5)% | | All other | $18 | $10 | 80% | | Net revenues | $885 | $914 | (3)% | | Pre-tax income | $351 | $386 | (9)% | | Compensation, commissions and benefits | $198 | $194 | 2% | | Total non-compensation expenses | $336 | $334 | 1% | - Asset Management net revenues decreased 3% to $885 million, and pre-tax income decreased 9% to $351 million in FY2023 compared to FY2022[321] - Asset management and related administrative fees decreased 4% due to lower assets in non-discretionary asset-based programs and AMS financial assets under management (market-driven depreciation), partially offset by incremental revenues from the Chartwell acquisition[322] Financial Assets Under Management (AUM) (as of September 30, in billions) | Category | 2023 | 2022 | 2021 | | :------------------------------------ | :----- | :----- | :----- | | AMS | $139.2 | $119.8 | $134.4 | | Raymond James Investment Management | $68.7 | $64.2 | $67.8 | | Subtotal financial assets under management | $207.9 | $184.0 | $202.2 | | Less: Assets managed for affiliated entities | ($11.5) | ($10.2) | ($10.3) | | Total financial assets under management | $196.4 | $173.8 | $191.9 | - Total financial assets under management increased to $196.4 billion as of September 30, 2023, from $173.8 billion in 2022, driven by $15.7 billion in net market appreciation and $8.2 billion in net inflows (AMS and Raymond James Investment Management)[313] Raymond James Investment Management AUM by Objective (as of September 30, 2023, in billions) | Objective | AUM | Average Fee Rate | | :---------- | :---- | :--------------- | | Equity | $23.0 | 0.56% | | Fixed income | $37.8 | 0.20% | | Balanced | $7.9 | 0.33% | | Total | $68.7 | 0.34% | Bank The Bank segment saw an 86% increase in net revenues driven by higher interest rates, but pre-tax income slightly decreased due to a significant rise in interest expense and credit loss provisions Bank Segment Net Revenues (FY2023 vs. FY2022) | Revenue Category | FY2023 (in millions) | FY2022 (in millions) | Change (%) | | :------------------------------------------ | :------------------- | :------------------- | :--------- | | Interest income | $3,098 | $1,209 | 156% | | Interest expense | ($1,141) | ($156) | 631% | | Net interest income | $1,957 | $1,053 | 86% | | All other | $56 | $31 | 81% | | Net revenues | $2,013 | $1,084 | 86% | | Pre-tax income | $371 | $382 | (3)% | | Compensation and benefits | $177 | $84 | 111% | | Bank loan provision/(benefit) for credit losses | $132 | $100 | 32% | | RJBDP fees to PCG | $1,093 | $357 | 206% | | All other non-compensation expenses | $240 | $161 | 49% | - Bank segment net revenues increased 86% to $2.01 billion, while pre-tax income decreased 3% to $371 million in FY2023 compared to FY2022[327] - Net interest income increased 86% due to significantly higher short-term interest rates and increased average interest-earning assets, along with incremental income from the TriState Capital Bank acquisition, partially offset by higher interest expense from diversified funding sources like the Enhanced Savings Program and certificates of deposit[328] - The net interest margin increased to 3.28% in FY2023 from 2.39% in FY2022[328] - The bank loan provision for credit losses increased to $132 million in FY2023 from $100 million in FY2022, reflecting a weakened macroeconomic outlook for certain loan portfolios (e.g., commercial real estate prices), charge-offs, and loan downgrades[330] - Compensation expenses increased 111% due to incremental expenses from the TriState Capital Bank acquisition, increased headcount, and annual salary increases[331] - Non-compensation expenses (excluding bank loan provision) increased 157%, primarily due to a 206% increase in RJBDP and other fees paid to PCG, driven by higher short-term interest rates[332] Other The Other segment's pre-tax loss decreased in FY2023, driven by higher interest income on corporate cash, despite increased non-interest expenses from regulatory provisions Other Segment Net Revenues (FY2023 vs. FY2022) | Revenue Category | FY2023 (in millions) | FY2022 (in millions) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :--------- | | Interest income | $147 | $25 | 488% | | Net gains on private equity investments | $6 | $9 | (33)% | | All other | $3 | $9 | (67)% | | Total revenues | $156 | $43 | 263% | | Interest expense | ($97) | ($93) | 4% | | Net revenues | $59 | ($50) | NM | | Pre-tax loss | ($114) | ($191) | 40% | | Compensation and benefits | $95 | $90 | 6% | | Insurance settlement received | ($32) | — | NM | | Losses on extinguishment of debt | — | — | — | | All other non-compensation expenses | $110 | $51 | 116% | - The Other segment's pre-tax loss decreased by $77 million to $114 million in FY2023 compared to FY2022[336] - Net revenues increased by $109 million, primarily due to higher interest income earned on corporate cash balances as a result of increased short-term interest rates[336] - Non-interest expenses increased by $32 million (23%), mainly due to a provision related to the SEC industry sweep on off-platform communications, partially offset by a $32 million insurance settlement received and a $22 million decrease in acquisition-related expenses[337] Statement of financial condition analysis RJF's total assets and liabilities decreased in FY2023, driven by lower client cash sweep balances and brokerage client payables, partially offset by increased bank deposits and cash equivalents Consolidated Statements of Financial Condition (as of September 30, in millions) | Category | 2023 | 2022 | Change ($) | Change (%) | | :------------------------------------------ | :------- | :------- | :--------- | :--------- | | Total Assets | $78,360 | $80,951 | ($2,591) | (3)% | | Cash and cash equivalents | $9,313 | $6,178 | $3,135 | 51% | | Assets segregated for regulatory purposes and restricted cash | $3,235 | $8,481 | ($5,246) | (62)% | | Bank loans, net | $43,775 | $43,239 | $536 | 1% | | Total Liabilities | $68,173 | $71,519 | ($3,346) | (5)% | | Bank deposits | $54,199 | $51,357 | $2,842 | 6% | | Brokerage client payables | $5,447 | $11,446 | ($5,999) | (52)% | | Total Shareholders' Equity | $10,187 | $9,432 | $755 | 8% | - Total assets decreased by $2.59 billion (3%) to $78.36 billion, primarily due to a $5.25 billion decrease in assets segregated for regulatory purposes (driven by lower client cash sweep balances), partially offset by a $3.14 billion increase in cash and cash equivalents in the Bank segment[340] - Total liabilities decreased by $3.35 billion (5%) to $68.17 billion, mainly due to a $6.0 billion decline in brokerage client payables (related to lower CIP balances), partially offset by a $2.84 billion increase in bank deposits (driven by the Enhanced Savings Program launch)[341] Liquidity and capital resources RJF maintains robust liquidity and capital, exceeding regulatory requirements, supported by corporate cash, FHLB capacity, and the Enhanced Savings Program, while monitoring potential future capital rule changes - RJF's liquidity management aims to ensure adequate funding across various economic and market environments, including stress events, by maintaining higher capital and liquidity levels, especially in the Bank segment[342] - Contingency funding plans include reallocating client cash in RJBDP, increasing FHLB borrowings, accessing credit lines, and potentially capital markets or Federal Reserve borrowings[343] - The Enhanced Savings Program (ESP), launched in March 2023, provides an additional source of funding by allowing PCG clients to deposit cash in high-yield Raymond James Bank accounts[344] - As of September 30, 2023, RJF had $2.08 billion in corporate cash and access to a $750 million committed unsecured revolving credit facility (undrawn)[356][367] - Raymond James Bank and TriState Capital Bank maintained higher cash balances in FY2023, a combined increase of $3.3 billion, as part of liquidity management strategies during market volatility[359] - RJF, Raymond James Bank, and TriState Capital Bank exceeded all 'well-capitalized' regulatory requirements as of September 30, 2023, with strong capital ratios[350][903] RJF Regulatory Capital Ratios (as of September 30) | Ratio | 2023 Actual | 2023 Well-Capitalized Requirement | 2022 Actual | 2022 Well-Capitalized Requirement | | :---------------- | :---------- | :-------------------------------- | :---------- | :-------------------------------- | | Tier 1 leverage | 11.9% | 5.0% | 10.3% | 5.0% | | Tier 1 capital | 21.4% | 8.0% | 19.2% | 8.0% | | CET1 | 21.2% | 6.5% | 19.0% | 6.5% | | Total capital | 22.8% | 10.0% | 20.4% | 10.0% | - Proposed rules by U.S. banking regulators on July 27, 2023, could lead to higher capital requirements and eliminate the AOCI opt-out election, potentially reducing regulatory capital ratios, especially if RJF exceeds $100 billion in average total consolidated assets[352] - RJF had $1.00 billion in FHLB borrowings outstanding at September 30, 2023, and an additional $9.25 billion in immediate credit available from the FHLB based on pledged collateral[371][372] - Aggregate outstanding senior notes payable totaled $2.04 billion as of September 30, 2023, with estimated future contractual interest payments of approximately $1.9 billion through 2051[377] RJF Credit Ratings (as of November 21, 2023) | Rating Agency | Issuer and Senior Long Term Debt Rating | Issuer and Senior Long Term Debt Outlook | Preferred Stock Rating | | :-------------- | :-------------------------------------- | :--------------------------------------- | :--------------------- | | Fitch Ratings, Inc. | A- | Stable | BB+ | | Moody's | A3 | Stable | Baa3 (hyb) | | Standard & Poor's Ratings Services | A | Stable | Not rated | Regulatory RJF and its subsidiaries consistently exceed all 'well-capitalized' regulatory capital requirements, despite a U.K. subsidiary facing a temporary restriction on new branch onboarding - RJF and its regulated subsidiaries (Raymond James Bank, TriState Capital Bank, broker-dealers, trust subsidiaries) are subject to various regulatory capital requirements, all of which were exceeded as of September 30, 2023, maintaining a 'well-capitalized' status[386] - Raymond James Investment Services Limited, a U.K. subsidiary, agreed to a Voluntary Application for Imposition of Requirements (VREQ) with the FCA in August 2023, prohibiting new branch or financial advisor onboarding without prior FCA consent, which is not expected to materially impact consolidated results[387] Critical accounting estimates Financial statement preparation involves significant management judgment, particularly for loss provisions related to legal/regulatory matters and the allowance for credit losses, which is sensitive to economic forecasts - The preparation of consolidated financial statements requires significant management judgment in making estimates and assumptions, particularly for loss provisions related to legal/regulatory matters and the allowance for credit losses[388][389] - The allowance for credit losses (ACL) is a critical estimate, involving complex analysis of quantitative and qualitative factors, including historical losses, current conditions, and reasonable/supportable economic forecasts (e.g., GDP, equity markets, unemployment, real estate prices)[391][393] - A hypothetical downside economic scenario would increase the quantitative portion of the ACL on bank loans by approximately $235 million, while an upside scenario would reduce it by $50 million, demonstrating sensitivity to macroeconomic forecasts[394] Accounting standards update RJF adopted amended guidance related to troubled debt restructurings and financing receivables disclosures on October 1, 2023, with no material financial impact - RJF adopted amended guidance (ASU 2022-02) related to troubled debt restructurings and disclosures for financing receivables on October 1, 2023, which did not have a material impact on financial position or results of operations[396] Risk management RJF employs a comprehensive Enterprise Risk Management program, overseen by the Board, to manage market, credit, liquidity, operational, model, and compliance risks through policies, monitoring, and diversification - RJF employs a formal Enterprise Risk Management (ERM) program to assess and review aggregate risks, with oversight from the Board of Directors and senior management committees, and a three-line-of-defense model (businesses, Compliance/Risk Management, Internal Audit)[398][400] - Primary risks include market, credit, liquidity, operational, model, and compliance risks[399] - Market risk arises from changes in market prices affecting trading inventory, derivatives, and investments, with primary exposures to interest rates, equity prices, and foreign exchange rates[401] - RJF manages interest rate risk in trading activities through hedging strategies and limits (dollar-based, exposure-based, issuer concentration), and monitors Value-at-Risk (VaR) daily, which was higher in FY2023 due to increased market volatility and acquisitions[404][405][410] Banking Operations Estimated Net Interest Income Sensitivity (12-month period) | Instantaneous Change in Rate (basis points) | Projected Change in Net Interest Income (%) | | :---------------------------------------- | :---------------------------------------- | | +200 | 13% | | +100 | 6% | | 0 | —% | | -100 | (6)% | | -200 | (11)% | - Credit risk is managed through well-defined credit policies, underwriting criteria, ongoing risk monitoring, and diversification across loan types, geographies, and industries, with specific policies for SBL, C&I, CRE, REIT, residential mortgage, and tax-exempt loans[437][438][439][440][441][442][443][444] Net Loan (Charge-offs)/Recoveries by Portfolio Segment (in millions) | Loan Portfolio Segment | FY2023 Net Loan (Charge-off)/Recovery Amount | FY2023 % of Avg. Outstanding Loans | FY2022 Net Loan (Charge-off)/Recovery Amount | FY2022 % of Avg. Outstanding Loans | | :----------------------- | :------------------------------------------- | :--------------------------------- | :------------------------------------------- | :--------------------------------- | | C&I loans | ($44) | 0.40% | ($28) | 0.29% | | CRE loans | ($10) | 0.14% | $1 | 0.02% | | Residential mortgage loans | — | —% | $1 | 0.02% | | Total loans held for sale and investment | ($54) | 0.12% | ($26) | 0.08% | Nonperforming Assets and Key Credit Ratios (as of September 30, in millions) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Nonperforming loans | $128 | $74 | | Nonperforming assets | $128 | $74 | | Nonperforming loans as a % of total loans held for sale and investment | 0.29% | 0.17% | | Allowance for credit losses as a % of nonperforming loans | 370% | 535% | | Nonperforming assets as a % of Bank segment total assets | 0.21% | 0.13% | - Operational risk is managed through policies, procedures, and business continuity plans to address business disruptions, transaction errors, system deficiencies, and cybersecurity incidents[472] - Model risk, the possibility of unintended business outcomes from model design or use, is managed by an independent Model Risk Management department through governance, inventory, validation, and monitoring[476][477] - Compliance risk is managed through a framework that identifies, assesses, controls, measures, monitors, and reports on compliance with laws, standards, and internal requirements, supported by the Compliance department[478][479] Item 7A. Quantitative and qualitative disclosures about market risk This section refers to the detailed quantitative and qualitative disclosures about market risk provided within 'Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk management' of this Form 10-K - Quantitative and qualitative disclosures about market risk are provided in 'Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk management'[480] Item 8. Financial statements and supplementary data This section presents RJF's audited consolidated financial statements for fiscal years 2021-2023, including statements of financial condition, income, comprehensive income, changes in equity, and cash flows, with detailed notes - The consolidated financial statements for Raymond James Financial, Inc. and subsidiaries for the fiscal years ended September 30, 2023, 2022, and 2021, have been audited by KPMG LLP, who expressed an unqualified opinion[485] Consolidated Statements of Financial Condition (as of September 30, in millions) | Category | 2023 | 2022 | | :------------------------------------------ | :------- | :------- | | Cash and cash equivalents | $9,313 | $6,178 | | Assets segregated for regulatory purposes and restricted cash | $3,235 | $8,481 | | Total Assets | $78,360 | $80,951 | | Bank deposits | $54,199 | $51,357 | | Brokerage client payables | $5,447 | $11,446 | | Total Liabilities | $68,173 | $71,519 | | Total Shareholders' Equity | $10,187 | $9,432 | Consolidated Statements of Income and Comprehensive Income (Year ended September 30, in millions) | Category | 2023 | 2022 | 2021 | | :------------------------------------------ | :------- | :------- | :------- | | Total revenues | $12,992 | $11,308 | $9,910 | | Net revenues | $11,619 | $11,003 | $9,760 | | Total non-interest expenses | $9,339 | $8,981 | $7,969 | | Pre-tax income | $2,280 | $2,022 | $1,791 | | Net income available to common shareholders | $1,733 | $1,505 | $1,403 | | Earnings per common share – diluted | $7.97 | $6.98 | $6.63 | | Total comprehensive income | $1,750 | $568 | $1,351 | Consolidated Statements of Cash Flows (Year ended September 30, in millions) | Category | 2023 | 2023 | 2021 | | :------------------------------------------ | :------- | :------- | :------- | | Net cash provided by/(used in) operating activities | ($3,514) | $72 | $6,647 | | Net cash used in investing activities | ($274) | ($7,151) | ($5,140) | | Net cash provided by financing activities | $1,438 | $5,879 | $5,232 | | Net increase/(decrease) in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | ($2,111) | ($1,790) | $6,815 | | Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of year | $12,548 | $14,659 | $16,449 | Item 9. Changes in and disagreements with accountants on accounting and financial disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure Item 9A. Controls and procedures RJF's management and external auditors concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2023, with no material changes - RJF's disclosure controls and procedures were evaluated as effective by management, including the CEO and CFO, as of September 30, 2023[946] - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023[947] - Management concluded that internal control over financial reporting was effective as of September 30, 2023, based on the COSO framework[949] - KPMG LLP issued an unqualified opinion on the effectiveness of RJF's internal control over financial reporting as of September 30, 2023[951] Item 9B. Other information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023[959] Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections This item is not applicable to Raymond James Financial, Inc PART III. Item 10. Directors, executive officers and corporate governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Annual Meeting of Shareholders proxy statement, with executive officers also listed in Part I, Item 1 - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[962] - A list of executive officers is included in Part I, Item 1 of this report[962] Item 11. Executive compensation Information regarding executive compensation is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders - Information on executive compensation is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[963] Item 12. Security ownership of certain beneficial owners and management and related shareholder matters Information on security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders - Information on security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[963] Item 13. Certain relationships and related transactions, and director independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[963] Item 14. Principal accountant fees and services Information on principal accountant fees and services is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders - Information on principal accountant fees and services is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[963] PART IV. Item 15. Exhibits and financial statement schedules This section lists financial statements and schedules, along with a comprehensive exhibit listing, many incorporated by reference from previous SEC filings - Financial statements are included under Item 8 of this Annual Report on Form 10-K, with schedules omitted if not required or redundant[965] - A comprehensive exhibit listing is provided, detailing various corporate documents, agreements, and plans, many of which are incorporated by reference from prior SEC filings[965][966][968] Item 16. Form 10-K summary This item indicates that no Form 10-K summary is provided Signatures The Annual Report on Form 10-K is duly signed by RJF's Chair and CEO, CFO, SVP and Chief Accounting Officer, and other directors on November 21, 2023 - The report is signed by Paul C. Reilly (Chair and CEO), Paul M. Shoukry (CFO), Jonathan W. Oorlog, Jr. (SVP and Chief Accounting Officer), and other directors on November 21, 2023[973][974][975]