Raymond James Financial(RJF) - 2022 Q2 - Quarterly Report

Acquisitions - The acquisition of Charles Stanley Group PLC was completed on January 21, 2022, for £277 million ($376 million), enhancing financial planning and investment advisory services in the U.K.[29] - The Charles Stanley acquisition added £121 million ($164 million) of goodwill and £63 million ($85 million) of identifiable intangible assets, primarily related to client relationships[30] - The acquisition of TriState Capital Holdings, Inc. was valued at approximately $1.1 billion, with a per share consideration of $31.09 based on RJF's closing price on October 19, 2021[31] - TriState Capital will continue to operate as a separately branded firm and independently-charted bank subsidiary upon closing of the acquisition[31] - The acquisition of SumRidge Partners, a fixed income market maker, is expected to close in the fiscal fourth quarter of 2022, adding trading technologies and risk management tools[33] - The company acquired Charles Stanley during the six months ended March 31, 2022, resulting in additional goodwill and identifiable intangible assets[129] - The company anticipates future growth through strategic acquisitions, including TriState Capital and SumRidge Partners[215] Financial Performance - Total revenues for the three months ended March 31, 2022, were $2,711 million, with net revenues of $2,673 million after interest expense[170] - Non-interest revenues amounted to $2,469 million, with asset management and related administrative fees contributing $1,464 million[170] - The company reported a net OCI of $(302) million for the three months ended March 31, 2022, compared to $(408) million in the previous period[167] - Total revenues for the six months ended March 31, 2022, were $5,529 million, an increase from $5,454 million for the same period in 2021, reflecting a growth of 1.4%[174] - Non-interest revenues for the six months ended March 31, 2022, reached $5,062 million, compared to $4,266 million in the prior year, indicating a significant increase of 18.6%[174] - The company reported net income for the three months ended March 31, 2022, of $323 million, a decrease of 9.0% compared to $355 million in the same period of 2021[196] - Pre-tax income for the three months ended March 31, 2022, was $433 million, a slight decrease of 3.1% from $447 million in the same period of 2021[202] - Adjusted net income was $331 million, with adjusted earnings per diluted share at $1.55, reflecting an adjusted annualized ROE of 15.4% and ROTCE of 17.2%[218] Assets and Liabilities - As of March 31, 2022, total assets at fair value on a recurring basis were $20.274 billion, with $10.968 billion in Level 1 assets and $9.255 billion in Level 2 assets[37] - Total liabilities at fair value on a recurring basis were $457 million, with $238 million in Level 1 liabilities and $281 million in Level 2 liabilities[37] - The company reported $2.0 billion in cash and cash equivalents from the Charles Stanley acquisition, with $1.9 billion segregated for regulatory purposes[30] - Total bank deposits increased to $34,685 million as of March 31, 2022, compared to $32,495 million as of September 30, 2021, reflecting a growth of 6.7%[140] - Total assets as of March 31, 2022, were $73,101 million, up 18.1% from $61,891 million as of September 30, 2021[205] Loans and Credit Quality - The total loans held for investment as of March 31, 2022, were $27,932 million, compared to $25,169 million as of September 30, 2021, showing an increase of 11.0%[94] - The company reported $441 million in purchases of C&I loans during the three months ended March 31, 2022, compared to $538 million in the same period of 2021, a decrease of 18.0%[98] - The allowance for credit losses was 1.17% of the held for investment loan portfolio as of March 31, 2022, compared to 1.27% as of September 30, 2021[94] - The credit quality of the bank loan portfolio is monitored monthly, with loans classified as "criticized" including special mention, substandard, or doubtful[109] - The company reported $92 million in nonaccrual loans as of March 31, 2022, compared to $61 million as of September 30, 2021, indicating a significant increase of approximately 51%[100] Capital and Regulatory Compliance - As of March 31, 2022, RJF's CET1 capital was $7,921 million, with a ratio of 23.9%, significantly exceeding the minimum requirement of 4.5%[186] - RJF's total capital as of March 31, 2022, was $8,297 million, with a ratio of 25.0%, well above the minimum requirement of 10.0%[186] - As of March 31, 2022, all active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements[192] Expenses and Cost Management - Compensation, commissions, and benefits expense rose by 12%, with a compensation ratio of 69.3%, slightly down from 69.5% in the prior-year quarter[222] - Non-compensation expenses increased by 40%, primarily due to a $53 million increase in the bank loan provision for credit losses[223] - Interest expense on deposits totaled $5 million for the three months ended March 31, 2022, compared to $6 million for the same period in 2021[144] Market and Economic Outlook - The company expects fiscal third quarter results to benefit from recent interest rate increases, with domestic cash sweep balances at $76.5 billion[225] - Future market uncertainties may lead to volatility in asset management fees and brokerage revenues, despite a robust investment banking pipeline[225]