R. James Boosts FAs, But Lowers Earnings

Raymond James Financial has reported a 5 percent decrease over the prior year's quarterly net income to $56,242,000 or $0.47 per diluted share, for the first quarter ended December 31, 2007. Net revenues increased 14 percent to $685,827,000, while gross revenues grew 17 percent to $829,191,000.

Raymond James says it has more than 4,770 financial advisors serving approximately 1.6 million accounts in 2,200 locations throughout the United States, Canada and overseas - up 20 advisors from three months ago. In addition, total client assets are approximately $217 billion, of which $37.3 billion are managed by the firm's asset management subsidiaries; this is a $2 billion increase in total client assets from the previous quarter.

"Although we have avoided the losses directly attributed to the sub-prime financial debacle experienced by many large banks and securities firms, our results have been negatively impacted by the fallout. As a result, our earnings are down 5 percent from last year's comparable first quarter in spite of a 14 percent increase in net revenues," states Chairman and CEO Thomas A. James in a January 23 statement.

"Good relative results in our Private Client Group, Asset Management Group and Raymond James Bank have been overshadowed by a $10 million reduction in the Capital Markets segment's profits. Part of that decline relates to the absence of the largest merger fee in our history, which occurred in last year's first quarter. As a result of the stock market's volatility and apparently negative direction, underwriting activity has also come to a virtual standstill, which accounts for the rest of the decline. Absent this factor, Raymond James would have achieved earnings generally in line with analysts' estimates," James continues.

"The real question is whether the current market decline will worsen as a result of a combination of increasing risk of a recession and higher rates of inflation. Although I do not claim to have a crystal ball, [I believe] that risk has certainly escalated in recent weeks as employment statistics have weakened. If investor perception worsens and/or actual corporate earnings results manifest that reality, results in the financial services sector will continue to disappoint. We will do our best to navigate these troubled waters. In any case, I remain confident that we will continue to outperform our peers."

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