Press Release

FOR IMMEDIATE RELEASE

January 25, 2012
Printable version

RAYMOND JAMES FINANCIAL
REPORTS FIRST QUARTER RESULTS

ST. PETERSBURG, Fla. – Raymond James Financial, Inc. today reported net income of $67,325,000 or $0.53 per diluted share for the first quarter of fiscal 2012, compared with net income of $81,723,000, or $0.65 per diluted share in the first quarter of fiscal 2011, our all-time record earnings quarter. This compared to net income of $68,927,000, or $0.54 per diluted share, for the previous quarter.

Net revenues were $782,777,000 for the current quarter, down 4 percent from both the prior year’s quarterly net revenues of $813,829,000 and the previous quarter’s net revenue of $817,783,000.

“As mentioned previously, we started the quarter with a headwind in both Private Client Group and Asset Management, as wrap fee assets billed quarterly in advance were 6 percent lower on Oct.1 than they were July 1, said CEO Paul Reilly. “Unfortunately, we were unable to overcome that lower fee level, thus both segments trailed the previous quarter in revenues and pretax profits. On a positive note, asset levels were significantly higher on Jan. 1, which augurs well for the March quarter for this particular business segment.”

Assets under administration on Dec. 31, 2011 of $270 billion are up 3 percent over last year’s first quarter end and 5 percent over the previous quarter end. Similarly, assets under management of $35 billion were up 5 percent over last year’s first quarter and 9 percent over the previous quarter end.

“Despite an increase in lead managed deals to nine, this quarter was difficult for Equity Capital Markets as both commissions and investment banking revenues declined from the prior period,” Reilly said. “In a challenging quarter for the entire industry, we believe we performed relatively well given market conditions. The environment and results were better for the Fixed Income portion of this segment.

“Net loans at Raymond James Bank grew $467 million, or more than 7 percent, to more than $7 billion over last quarter. The bank enjoyed its second most profitable quarter ever as interest spreads held up nicely. Equally important, the entire net loan loss provision for the current quarter related to loan growth, which should help to grow earnings in future quarters.

“We are also pleased to announce that Raymond James Bank has received approval to convert to a national bank from its current thrift status. We anticipate effecting this change on Feb. 1, at which date Raymond James Financial will become a bank holding company and a financial holding company. Following the conversion, we expect approval of the acquisition of the loan portfolio of Allied Irish Bank in Canada.

“Last but certainly not least, we are excited about the strategic impact of the acquisition of Morgan Keegan, announced Jan. 11. Although still in the early days, integration discussions have gone extremely well due to the strong cultural fit and synergies between the two organizations.

“Despite uncertain market conditions, we anticipate improving results this quarter and are confident in our long-term future. We will continue to focus on our operating results while simultaneously preparing for the integration of Morgan Keegan.”

The company will conduct its quarterly conference call Thursday, Jan. 26, at 8:15 a.m. ET. For a listen-only connection, visit raymondjames.com/analystcall for a live audio webcast. The subjects to be covered may include forward-looking information. Questions may be posed to management by participants on the analyst call-in line, and in response the company may disclose additional material information.

About Raymond James Financial, Inc.
Raymond James Financial (NYSE-RJF) is a Florida-based diversified holding company providing financial services to individuals, corporations and municipalities through its subsidiary companies. Its three principal wholly owned broker/dealers, Raymond James & Associates, Raymond James Financial Services and Raymond James Ltd. have approximately 5,400 financial advisors serving 2 million accounts in 2,400 locations throughout the United States, Canada and overseas. In addition, total client assets are approximately $270 billion, of which approximately $35 billion are managed by the firm’s asset management subsidiaries.

To the extent that Raymond James makes or publishes forward-looking statements (regarding management expectations, strategic objectives, business prospects, anticipated expense savings, financial results, anticipated results of litigation and regulatory proceedings, and other similar matters), a variety of factors, many of which are beyond Raymond James’ control, could cause actual results and experiences to differ materially from the expectations and objectives expressed in these statements. These factors are described in Raymond James’ 2011 annual report on Form 10-K, which is available on RAYMONDJAMES.COM and SEC.GOV.

In addition to those factors, the following factors, among others, could cause actual results to differ materially from forward-looking or historical performance:  the possibility that regulatory and other approvals and conditions to the transaction are not received or satisfied on a timely basis or at all; the possibility that modifications to the terms of the transaction may be required to obtain or satisfy such approvals or conditions; changes in the anticipated timing for closing the transaction; difficulty integrating Raymond James’ and Morgan Keegan’s businesses or realizing the projected benefits of the transaction; the inability to sustain revenue and earnings growth; changes in the capital markets; and diversion of management time on transaction related issues.

For more information, contact Steve Hollister at 727-567-2824.
Please visit the Raymond James Press Center at raymondjames.com/media.

Raymond James Financial, Inc.
Unaudited Report
(in thousands, except per share amounts)
  Three months ended
  December 31,
2011
December 31,
2010
%
Change
September 30,
2011
%
Change
Total revenues $798,817 $830,333 (4)% $834,597 (4)%
Net revenues 782,777 813,829 (4)% 817,783 (4)%
Pre-tax income 110,851 130,514 (15)% 125,829 (12)%
Net income 67,325 81,723 (18)% 68,927 (2)%
           
Income for basic earnings per common share:          
Net income attributable to RJF, Inc. common shareholders $ 65,603 $78,838 (17)% $66,955 (2)%
Income for diluted earnings per common share:          
Net income attributable to RJF, Inc. common shareholders $65,608 $78,845 (17)% $66,959 (2)%
Earnings per common share:          
Basic $0.53 $0.65 (18)% $0.54 (2)%
Diluted $ 0.53 $0.65 (18)% $0.54 (2)%
           
Non-GAAP results excluding the loss provision for auction rate securities(1):          
Non-GAAP pre-tax income $110,851 $130,514 (15)% $122,220 (9)%
Non-GAAP net income $67,325 $81,723 (18)% $65,808 2%
Non-GAAP earnings per common share:          
Non-GAAP basic $ 0.53 $0.65 (18)% $0.52 2%
Non-GAAP diluted $ 0.53 $0.65 (18)% $0.52 2%

(1) The non-GAAP calculations exclude the impact of the loss provision for auction rate securities from pre-tax income for the three months ended September 30, 2011. Non-GAAP net income and earnings per common share computations also reflect adjustments to income tax expenses for the tax effect of this loss provision. The company believes that the non-GAAP measures provide useful information by excluding these items which may not be indicative of the company’s core operating results and business outlook. The company believes that GAAP measures and non-GAAP measures of the company’s financial performance should be considered together.

Balance sheet data
  December 31, 2011 September 30, 2011
     
Total assets $18 bil. $18 bil.
Shareholders’ equity $2,637 mil. $2,588 mil.
Book value per share $21.34 $20.99


Management data
  Quarter ended
  December 31,
2011
December 31,
2010
September 30,
2011
June 30,
2011
         
PCG financial advisors and investment advisor representatives:        
     United States 4,495 4,489 4,504 4,492
     Canada 454 442 452 445
     United Kingdom 61 59 61 60
     Investment advisor representatives(1) 346 363 333 331
          Total 5,356 5,353 5,350 5,328
# lead managed:        
     Corporate public offerings in U.S. 9 12 5 7
     Corporate public offerings in Canada 6 14 3 8
         
Financial assets under management:        
     Managed accounts $35 bil. $33 bil. $32 bil. $37 bil.
         
Client assets under administration $270 bil. $262 bil. $256 bil. $278 bil.
Client margin balances $1,521 mil. $1,511 mil. $1,517 mil. $1,551 mil.

(1) Investment advisor representatives with custody only relationships located in the United States and the United Kingdom.

Three months ended
  December 31,
2011
December 31,
2010
%
Change
September 30,
2011
%
Change
  (in thousands)
Revenues:          
     Private Client Group $528,618 $519,431 2% $552,910 (4)%
     Capital Markets 136,165 173,026 (21)% 151,146 (10)%
     Asset Management 56,795 55,587 2% 57,125 (1)%
     RJ Bank 77,416 77,441 - 67,616 14%
     Emerging Markets 4,652 8,589 (46)% 8,184 (43)%
     Securities Lending 2,442 1,750 40% 1,701 44%
     Proprietary Capital 473 670 (29)% 2,694 (82)%
     Other 2,661 3,403 (22)% 2,261 18%
     Intersegment eliminations (10,405) (9,564) (9)% (9,040) (15)%
          Total revenues $ 798,817 $ 830,333 (4)% $ 834,597 (4)%
           
Pre-tax Income:          
     Private Client Group $49,408 $55,740 (11)% $63,764 (23)%
     Capital Markets 10,001 24,646 (59)% 5,464 83%
     Asset Management 15,813 15,594 1% 17,762 (11)%
     RJ Bank 53,003 46,464 14% 42,180 26%
     Emerging Markets (2,549) 321 NM 308 NM
     Securities Lending 1,206 524 130% 311 288%
     Proprietary Capital (65) (142) 54% 1,949 (103)%
     Other (15,966) (12,633) (26)% (5,909)(1) (170)%
           
Pre-tax Income $110,851 $130,514 (15)% $125,829 (12)%

(1) The three months ended September 30, 2011 includes a $3.6 million pre-tax reduction of the loss provision for auction rate securities based upon actual repurchase activity.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Quarter-to-Date
(in thousands, except per share amounts)
           
  Three months ended
  December 31,
2011
December 31,
2010
%
Change
September 30,
2011
%
Change
Revenues:          
     Securities commissions and fees $511,334 $534,139 (4)% $541,250 (6)%
     Investment banking 39,336 58,969 (33)% 64,565 (39)%
     Investment advisory fees 53,505 52,411 2% 56,681 (6)%
     Interest 102,096 104,386 (2)% 95,289 7%
     Account and service fees 74,010 69,285(1) 7% 74,595 (1)%
     Net trading profits (losses) 9,343 6,322 48% (1,591) NM
     Other 9,193 4,821(1) 91% 3,808 141%
          Total revenues 798,817 830,333 (4)% 834,597 (4)%
           
     Interest expense 16,040 16,504 (3)% 16,814 (5)%
          Net revenues 782,777 813,829 (4)% 817,783 (4)%
           
Non-interest expenses:          
     Compensation, commissions and benefits 541,622 551,884 (2)% 563,538 (4)%
     Communications and information processing 37,567 31,145 21% 33,924 11%
     Occupancy and equipment costs 25,937 26,229 (1)% 28,458 (9)%
     Clearance and floor brokerage 7,454 9,917 (25)% 8,820 (15)%
     Business development 27,839 23,945 16% 23,310 19%
     Investment sub-advisory fees 6,562 6,904 (5)% 7,626 (14)%
     Bank loan loss provision 7,456 11,232 (34)% 5,423 37%
     Loss on auction rate securities repurchased - - NM (3,609) NM
     Other 23,692 25,827 (8)% 31,611 (25)%
          Total non-interest expenses 678,129 687,083 (1)% 699,101 (3)%
           
Income including noncontrolling interests and before provision for income taxes 104,648 126,746 (17)% 118,682 (12)%
Provision for income taxes 43,526 48,791 (11)% 56,902(2) (24)%
Net income including noncontrolling interests 61,222 77,955 (22)% 61,780 (1)%
Net (loss) income attributable to noncontrolling interests (6,203) (3,768) (65)% (7,147) 13%
Net income attributable to Raymond James Financial, Inc. $67,325 $81,723 (18)% $68,927 (2)%
           
Net income per common share-basic $0.53 $0.65 (18)% $0.54 (2)%
Net income per common share-diluted $0.53 $0.65 (18)% $0.54 (2)%
Weighted average common shares outstanding-basic 123,225 121,155   123,366  
Weighted average common and common equivalent shares outstanding-diluted 123,712 121,534   123,771  

(1) We changed the title of what had been known as “Financial Service Fees” to “Account and Service Fees” to better reflect the nature of the revenues included within the line item description. Additionally, we reclassified certain components of revenue previously included within Other Revenues into Account and Service Fees. The most significant elements of revenue subject to this reclassification include mutual fund and annuity service fees and correspondent clearing.

(2) Our quarterly tax provision was negatively impacted by a significant decline in value of the nontaxable COLI investment.

Click here for a printable PDF with additional information including the consolidated statement of income and financials for Raymond James Bank.