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Raymond James Earnings Drop on Costs of Morgan Keegan Deal

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Raymond James (RJF) said late Wednesday that its fiscal second-quarter net income was $68.9 million, or $0.52 per diluted share, versus $80.9 million or $0.64 per diluted share, for the year-ago period. Analysts had expected earnings of $0.56 per share.

Revenues for the period were $871.9 million, a jump of 3% from last year and ahead of analysts’ estimates of $848.3 million.

Excluding a $21 million pre-tax charge for costs associated with its acquisition of Morgan Keegan (which closed on April 2), certain interest expenses and adjustments to shares issued for the purchase, its net income would have been $81.9 million, or $0.64 per diluted share.

“Our businesses all performed better this quarter, especially Raymond James Bank which reported record earnings driven by a significant increase in loans and improving credit metrics,” said CEO Paul Reilly, in a press release.

The firm reported quarterly records for both assets under management ($39 billion) and assets under administration ($292 billion) as of March 31, 2012, up 11% and 8% respectively, over the previous quarter.

Private Client Results

The Private Client Group reported record quarterly revenues of about $567.8 million, up 7% from the previous quarter and 2% over the year-ago quarter. Pre-tax income was up 1% from last year but down 6% from the previous quarter at nearly $46.3 million.

The number of financial advisors in the United States, United Kingdom and Canada – including about 340 investment advisor representatives – is 5,398 versus 5,350 in the earlier quarter and 5,340 a year ago. (The Morgan Keegan reps were not encompassed in the fiscal second-quarter tally.)

In the United States alone, Raymond James had 4,532 advisors as of March 31 versus 4,504 in the earlier quarter and 4,472 a year ago

“We have continued to successfully recruit experienced financial advisors from other firms. The combination of growth in advisors and market improvement drove revenue growth,” Reilly, (above right), explained.

The bottom line was affected by a seasonal increase in compensation expenses (raises and employment taxes) and increased technology expenditures, he says.

“The increase in the S&P 500 during the second quarter should bode well for fee billing for our third [fiscal] quarter,” added Reilly.


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