Raymond James missed analyst estimates, with a 35% year-over-year drop in net income to $169 million, or $1.20 per share, for the quarter ending March 31 — mainly due to the bank loan loss provision of $109 million tied to the coronavirus fallout.
Revenue, though, beat estimates at $2.07 billion, up 11% over the prior year and 3% from the preceding quarter.
This growth, the firm says, came from higher asset management and related administrative fees in Private Client Group fee-based accounts — which have $384 billion of assets — and higher brokerage revenue in both PCG and Capital Markets.
“Our solid financial performance during a tumultuous quarter highlights the resiliency of our diversified and client-focused business model,” said Chairman and CEO Paul Reilly, in a statement.
“I am proud of our associates and advisors for their remarkable response during this time of extreme market volatility and economic turmoil,” Reilly explained. “Supported by a robust technology platform, advisors and support associates were able to transition to working remotely and provide continued service for their clients.”
Private Client Group Earnings
The Private Client Group’s advisor headcount jumped 286 from last year to hit 8,148 on March 31, which is up by 88 from December 2019. The number of independent advisors is 4,772, while employee advisors total 3,376.
“Our financial advisor recruiting pipeline remains strong … ,” according to Reilly, and “we are now leveraging virtual capabilities to resume critical parts of the recruiting process such as home office visits and advisor transitions.”
The unit’s net revenue was up 18% from last year to $1.50 billion, and its pretax income jumped 29% to $170 million.
Cash sweep balances were nearly $53 billion, up 27% from a year ago. “While these balances reached record levels, the spreads earned on cash balances have been negatively impacted by the Federal Reserve’s rate cuts,” according to the firm.
Private Client Group assets under administration of $734 billion weakened 3% from a year ago. They are roughly 52% fee-based.
Like other firms, Raymond James says billing for assets in fee-based accounts is tied to balances from the start of the quarter. Thus, the 14% sequential drop in these assets in the first three months of 2020 is expected to hurt related fees in the quarter ending June 30.