October 24, 2012

Raymond James Boosts Q3 Earnings, Loses 37 Reps

The firm says it is upbeat about recruiting, as lower-producing Morgan Keegan advisors depart

Raymond James (RJF) said its net revenues grew 14% in the fiscal year ending Sept. 30 vs. the same year-ago period to $3.8 billion as net income expanded 6% to $296 million. The fiscal 2012 results include six months of Morgan Keegan operations.

Earnings per share were $2.20 per share, up $0.01 from a year ago. Excluding $59 million of pre-tax charges for acquisition-related expenses and other non-GAAP items, net income would have been $334.2 million, or $2.51 per share on a non-GAAP basis.

The St. Petersburg, Fla.-based firm said it had assets under management of $43 billion and assets under administration of $390 billion. Still, its headcount as of Sept. 30 -- as measured by the number of financial advisors -- fell slightly vs. the prior quarter, though this figure was up sharply for the full fiscal year thanks to the Morgan Keegan acquisition.

“I am pleased with our results as we have so far successfully navigated our largest acquisition in a very volatile market,” said CEO Paul Reilly (left). “With the exception of our Equity Capital Markets segment, which faced headwinds most of the year, all of our businesses continued to grow while also integrating Morgan Keegan. Our bank had an exceptionally strong year as we have successfully added $1.44 billion of net loans while maintaining our conservative lending strategy.”

For the fourth fiscal quarter ending Sept. 30, net revenues gained 30% from the prior-year period to nearly $1.1 billion, a drop of about  2% from the fiscal third quarter ended June 30.

Net income of $83.3 million was up 21% from a year ago and 9% from the preceding quarter. Earnings were $0.60 per share, up 11% from last year and 9% from the earlier period.

Excluding $19 million of pre-tax charges for acquisition-related expenses, net income would have been $95.7 million, or $0.69 per share, up 33% year over year and 8% consecutively; analysts had expected earnings of $0.63 without the charges.

Results this quarter were lifted by a beneficial tax rate as overall operating results from our combined segments were essentially flat with the preceding quarter,” stated Reilly. “Although the segment results were impacted by Morgan Keegan integration efforts and increased technology spend, all of our businesses performed largely as expected given our current cost structure and operating environment.”

Private Client Results

Private Client Group revenues grew about 1% in the Sept. 30 period vs. the preceding quarter to $694 million, an increase of 26% from the year-ago quarter.

“This segment was negatively impacted by the S&P 500 being down 3.3% in the preceding quarter, which affected our advance billings. In the current quarter, the S&P 500 was up 5.8 percent, which will provide a lift going forward,” the company said in a press release.

Pre-tax net income for the segment was $50.4 million, down 21% from last year and 22% from the prior quarter.

For the fiscal year, PCG grew sales 13% to $2.48 billion. Pre-tax income, however, declined about 4% to $210.4 million.

“Integration and technology spend and certain one-time charges primarily impacted the pre-tax income for this segment during this fiscal year,” the company stated.

It expects technology and Morgan Keegan-integration costs (from headcount and consultants) to stay “elevated throughout the system conversion targeted for February 2013.”

As for recruiting, as measured by the number of prospective experienced financial advisors visiting the firm's home office, this activity “continues to pick up for both the employee and independent-contractor divisions.

As of Sept. 30, Raymond James has 6,330 advisors vs. 5,350 a year ago and 6,367 in the earlier quarter. It has 5,452 in the United States, while the rest are in Canada and the United Kingdom; this figure is up from 4,504 last year and down 37 reps from about 5,489 in the earlier period.)

“The financial advisor headcount decrease for the quarter was almost exclusively related to lower-producing Morgan Keegan advisors,” the company explained. “Retention level remains extremely high for those Morgan Keegan advisors offered retention packages.”

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