January 23, 2013

Raymond James Boosts Sales, Income; Tops Estimates

The independent broker-dealer improves results from the prior quarter and last year, though its headcount falls from September

Raymond James Financial (RJF) reported net revenues of $1.1 billion for the period ending Dec. 31, up 4% from the preceding quarter and a jump of 42% from the year-ago quarter. (The company acquired Morgan Keegan in the quarter ending June 30).

Net income for the quarter was $85.9 million, or $0.61 per share, up from $83.3 million, or $0.60, in the year-ago quarter and an improvement from $67.3 million, or $0.53, in the quarter ending Sept. 30.

Excluding $17.4 million of pretax expenses related to the Morgan Keegan acquisition, net income would have been $96.6 million or $0.69 per share.

Analysts had expected the firm to have earnings of $0.68 without special items and sales of $1.08 billion.

“The company generated impressive revenue given the market environment,” said CEO Paul Reilly (left), in a press release. “This quarter, the bottom line was satisfactory given that we continue to operate as planned at elevated support levels while we move toward completion of the Morgan Keegan integration.”

Revenue in the private-client operations grew 35% from last year and 3% from the prior quarter to $712.8 million. Pretax income in the unit was $52.9 million, up 7% from last year and 5% from last quarter.

Fees and commissions in the unit were $595.5 million, a jump from $432.7 million a year ago and $578.6 million three months ago.

Headcount Updates

The advisor headcount in the United States, Canada and the United Kingdom was 6,289 reps, down 41 from the previous quarter, but up 933 from a year ago.

In the United States, Raymond James had 5,427 independent and employee reps, down 25 from the earlier period and up 932 from a year ago, when it had 4,495 reps.

Morgan Keegan advisors—added in the quarter ending June 30—numbered 869 in the most-recent quarter, down 23 from 892 in the quarter ending Sept. 30 and off 69 from the June quarter, when they numbered 938.

Without the Morgan Keegan reps, Raymond James’ U.S. headcount was 4,558 as of Dec. 31 and 4,560 as of Sept. 30. Thus, the non-Morgan Keegan headcount dropped by two in the recent quarter but rose by 63 reps year over year.

(Employee advisors with at least seven years of industry experience will have a new payout grid starting in October.)

The company says that its advisor recruiting activity “remains robust,” and that the drop in financial advisors was “driven in large part by [the] attrition of lower-producing Morgan Keegan advisors.” Also, the retention levels of Morgan Keegan advisors that were offered retention packages by Raymond James as part of the acquisition is “extremely high.”

As for the Morgan Keegan integration, it also “remains on schedule,” and the company expects to convert Morgan Keegan’s Private Client Group to the Raymond James system next month.

“Morgan Keegan advisors are excited about getting access to our systems and products,” said Reilly. “We will continue to run at elevated support levels through the conversion and look to achieve our efficiency targets after integration is completed late in this fiscal year.”

In the most-recent quarter, the S&P 500 was down 1%, but the firm’s financial assets under management grew to $46.5 billion, up 8.6% from the preceding quarter and 33% from the year-ago quarter, boosted by the $3.1 billion of assets from its acquired interest in ClariVest Asset Management.

Assets under administration were $392 billion, up slightly from the preceding quarter’s $390 billion and a jump of 45.4% from last year's $270 billion (which did not include Morgan Keegan assets).

“I am proud of our team of professionals and support staff and all they have accomplished during this integration,” Reilly noted. “I am confident that this combination will result in a stronger and better positioned organization.”

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