October 19, 2011

Raymond James’ Income Flat as Advisor Headcount Rises: Q3 Earnings

Private-client sales for the past 12 months were nearly $2.2 billion, a 15% increase over the 2010 fiscal year.

Paul Reilly (left) and Dick Averitt, RJFS Chairman and CEO, at a Raymond James conference in 2010. Paul Reilly (left) and Dick Averitt, RJFS Chairman and CEO, at a Raymond James conference in 2010.

Raymond James Financial (RJF) said Wednesday that it had net income of $68.9 million, or $0.54 a share, in the quarter ended Sept. 30 vs. net income of $69.1 million, or $0.55 a share in the year-ago quarter, missing analyst estimates by $0.01. These results came despite strong year-over-year growth in its private-client unit and an increase in both its global advisor headcount and its U.S. advisor headcount.

“We are pleased with our quarterly results given a very volatile time in the marketplace. Three of our four major segments performed well. However, as we have discussed in our operating releases, the environment was very challenging for the Capital Markets segment,” said CEO Paul Reilly in a press release.

Raymond James boosted its overall number of advisors in the United States, Canada and the United Kingdom to 5,113 vs. 5,090 last year and 5,093 last quarter.

The U.S. total was 4,504 as of Sept. 30, up 1 from 4,503 a year ago and an increase of 12 from 4,492 in June.

“We have continued to invest in all of our business segments by recruiting financial advisors, investment bankers, lenders, public finance professionals, institutional salespeople and traders, while delivering record results,” Reilly continued.

Private-Client Results

The company said that its private-client unit had sales of $2.19 billion for the fiscal year, up 15% from last year. These sales represent roughly 65% of Raymond James’ overall revenue.

Pre-tax net income for the private-client group over the past 12 months was $218.8 million vs. $160.5 million for fiscal 2010, a 36% jump.

In the most recent quarter, the private-client unit had sales of $552.9 million, an increase of 12% over the year-ago period and a 1% drop from the prior quarter. Its pre-tax net income was $63.8 million, up 34% year over year and 20% sequentially.

“We are pleased with our quarterly results given a very volatile time in the marketplace,” explained Reilly.

According to the company, “The Private Client Group continued its outstanding results, achieving record financial advisor productivity levels in both the employee and independent contractor domestic businesses.”

During the quarter ended Sept. 30, the S&P 500 fell 14.3%, though its assets under administration declined 8%. Assets were $256 billion in the most recent period vs. $249 billion a year ago and $278 billion in the earlier quarter.

Corporate Results

“Overall, we believe Raymond James is well-positioned to continue to gain market share in a difficult market,” added Reilly in the release.

“Our balance sheet remains strong and our businesses continue to perform in a challenging environment,” he explained. “Although the short-term outlook for our industry is uncertain, we remain confident about our future as evidenced by our open market repurchase of approximately 1.03 million of our shares in the past 60 days.”

The company’s pre-tax net income for the fiscal fourth quarter was $125.8 million, a 19% year-over-year jump and a 60% increase from the previous period, which included a $45 million pre-tax estimated loss provision for auction rate securities.

Net revenue for the firm’s fiscal fourth quarter was $817.8 million, up 9% from the year-ago period and down 4% from the prior quarter. Net sales for the fiscal year were $3.33 billion, up 14% from last year.

For the full fiscal year ended September 30, Raymond James had net income of $278 million, or $2.19 a share, vs. $228.3 million, or $1.83 a share, last year.

“These results are impressive given that they were tempered by historically low interest earnings on cash balances and also include the charge for auction rate securities (ARS), which is now behind us,” said Reilly in a statement.

For more Q3 news, go to AdvisorOne’s Earnings Calendar for the Finance Sector.

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