Raymond James Financial(RJF) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record net revenues of $3.7 billion for the fiscal first quarter, with net income available to common shareholders at $562 million and earnings per diluted share of $2.79 [12] - Adjusted net income available to common shareholders was $577 million, resulting in adjusted earnings per diluted share of $2.86, with a pre-tax margin of 19.5% and an adjusted pre-tax margin of 20% [13] - The annualized return on common equity was 18%, and the annualized adjusted return on tangible common equity was 21.4% [13] Business Line Data and Key Metrics Changes - The Private Client Group generated pre-tax income of $439 million on record quarterly net revenues of $2.77 billion, driven by higher assets under administration [14] - The Capital Markets segment generated quarterly net revenues of $380 million and a pre-tax income of $9 million, with revenues declining year-over-year and sequentially due to lower M&A and advisory revenues [14][15] - The asset management segment achieved record pre-tax income of $143 million on record net revenues of $326 million, attributed to higher financial assets under management and strong net inflows [15] - The bank segment generated net revenues of $487 million and record pre-tax income of $173 million, with net interest income growing 6% sequentially [15] Market Data and Key Metrics Changes - The company reported net new asset annualized growth of 8% this quarter, with $31 billion of net new assets, marking the second-best quarter ever [5][31] - Total client assets recruited over the past twelve months exceeded $69 billion across all platforms, reflecting strong recruiting momentum [6] Company Strategy and Development Direction - The company is focused on long-term capital deployment, including investments in technology, acquisitions, and share repurchases, with a commitment to maintaining a strong balance sheet [5][10] - Recent acquisitions, including Clark Capital Management and GreensLedge, are aimed at enhancing the platform and expanding capabilities [9][11] - The company emphasizes a culture that respects advisor independence and ownership, which is seen as a differentiator in attracting and retaining financial advisors [7][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth driven by a robust advisor recruiting pipeline and strong commitments from prospective advisors [7] - The company acknowledged headwinds from lower interest rates and seasonal impacts typical in the second fiscal quarter but remains focused on generating long-term sustainable growth [27][28] - Management highlighted the importance of personal relationships and a stable platform for advisors, which is expected to differentiate the company in a competitive environment [28][41] Other Important Information - The company repurchased $400 million of common stock at an average share price of $162 during the quarter, with a Tier 1 Leverage Ratio of 12.7% [11][24] - The effective tax rate for the quarter was 22.7%, with an expectation of approximately 24%-25% for fiscal 2026 [24] Q&A Session Summary Question: On net new assets and areas of strength - Management noted that $31 billion of net new assets in the quarter was broad-based, with strong retention of existing advisors and a robust recruiting activity [31][32] Question: On sustainability of net new assets growth - Management expressed confidence in sustaining growth based on strong pipelines and advisor satisfaction, despite competitive pressures [41][54] Question: On capital markets outlook and revenue growth - Management indicated a strong pipeline in capital markets, with expectations for revenue to improve above the current quarter's level [46][61] Question: On M&A results and advisory performance - Management acknowledged challenges in comparing results with peers but emphasized long-term growth trends and sector expertise [82][84] Question: On non-compensation expenses and technology investments - Management highlighted ongoing investments in technology as a key driver of non-compensation expenses, balancing growth with operational efficiency [88][89]