In response to a Florida press report, Raymond James Financial Chairman and CEO Thomas A. James says the firm is continuing with its plans to convert Raymond James Bank from a thrift to a commercial bank. The decision to seek the status of a financial holding company, though, was not taken as part of the recent Wall Street upheaval, the firm says. Instead, it has been part of long-term planning discussions for several years.
The board of Raymond James has been concerned about the limitations associated with Raymond James Bank's thrift status, leading to alternative charter considerations, the company says. The move would permit a higher proportion of corporate lending, which has historically been more profitable and bears less interest rate risk.
"It's an unfortunate misperception that Goldman Sachs, Morgan Stanley and now Raymond James are fundamentally changing their business models," explained James. "In fact, these changes are more form than substance in that regard."
James says that the company he heads takes a "conservative approach to the use of leverage," unlike some of the Wall Street firms that have been hurt by their auction-rate securities and related products.
Raymond James Financial has more than 4,900 financial advisors and client assets of $211 billion, of which about $36 billion are managed by the firm's asset management subsidiaries.
"One thing that has not changed in these turbulent times," adds James, "is that Raymond James' commitment to remaining independent is still the right thing for our associates, financial advisors and their clients, and RJF shareholders - no matter the firm's holding company status or its supervisory authority."
"It's important to note that this move isn't in response to an immediate need or to follow in the footsteps of other firms - although it's becoming obvious that the future of the industry is to be regulated by the Federal Reserve," explains Raymond James Financial CFO and Raymond James Bank Chairman Jeff Julien. "While it's possible things could move faster in the current environment, our original timeline for these changes was set for summer of 2009.
"Both Goldman and Morgan Stanley will have a grace period of approximately two years to modify their business model in order to meet Fed requirements," Julien continues. "We're not in an emergency situation or trying to quickly secure funding; instead, we're simply moving forward with our plan, while, of course, paying attention to the market environment."
As the parent company to Raymond James Bank, Raymond James Financial will apply to become a bank holding company. Once approved, the letter will be submitted to become a financial holding company, under regulation of the Federal Reserve. Oversight at the Raymond James Bank level will transfer from the Office of Thrift Supervision to the Office of the Comptroller of the Currency. Otherwise, the switch will have little impact on the firm's overall operations and organizational structure.