Raymond James Financial Q3 2025 Earnings Report

Raymond James Financial EPS Results

• Actual EPS: $2.18
• Consensus EPS: $2.36
• Beat/Miss: Missed by -$0.18
• One Year Ago EPS: $2.39

Raymond James Financial Revenue Results

• Actual Revenue: $3.40 billion
• Expected Revenue: $3.38 billion
• Beat/Miss: Beat by +$18.85 million
• YoY Revenue Growth: +5.30%

Raymond James Financial Announcement Details

• Quarter: Q3 2025
• Date: 7/23/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 5:00PM ET

Raymond James Financial (NYSE:RJF), a financial holding company, through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products in the United States, Canada, Europe, and internationally. The company operates through Private Client Group, Capital Markets, Asset Management, RJ Bank, and Other segments. The Private Client Group segment provides securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance products to their individual clients; and borrowing and lending of securities to and from other broker-dealers, financial institutions, and other counterparties. The Capital Markets segment offers securities brokerage, trading, and research services to institutions with a focus on sale of the United States and Canadian equities and fixed income products; and manages and participates in underwritings, merger and acquisition services, and public finance activities. The Asset Management segment engages in the operations of Eagle, the Eagle Family of Funds, Cougar, the asset management operations of Raymond James & Associates, trust services of Raymond James Trust, and other fee-based asset management programs. The RJ Bank segment provides corporate loans, SBL, tax-exempt loans, and residential loans. The Other segment engages in private equity activities, including various direct and third party private equity investments; and private equity funds. Raymond James Financial, Inc. was founded in 1962 and is based in St. Petersburg, Florida.

Raymond James Financial Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Raymond James achieved its 150th consecutive profitable quarter and delivered record nine-month net revenues of $10.3 billion and pretax income of $1.98 billion, up 105% year over year.
• Negative Sentiment: Q3 net revenues rose 5% year over year to $3.4 billion, but pretax income fell 13% to $563 million due to a $58 million legal reserve increase.
• Positive Sentiment: The Private Client Group ended the quarter with record assets under administration of $1.57 trillion (+11% YoY), net new assets of $11.7 billion, and recruited over $60 billion in client assets over the past year.
• Positive Sentiment: Raymond James was named the #1 wealth management firm in J.D. Power’s U.S. Investor Satisfaction Study for both advised investors and financial advisors, highlighting its client-first culture and trustworthiness.
• Positive Sentiment: The firm returned over $1 billion year to date to shareholders through dividends and share repurchases—including $451 million in Q3—while maintaining strong capital levels for future growth.

Presentation

[Kristie Waugh, SVP - IR & FP&A at Raymond James Financial]

Good evening, and welcome to Raymond James Financial's Fiscal twenty twenty five Third Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations.

[Kristie Waugh, SVP - IR & FP&A at Raymond James Financial]

Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shukri and Chief Financial Officer, Butch Orlog. The presentation being reviewed today is available on Raymond James' Investor your attention to Slide two. Please note that certain statements made during this call may constitute forward looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments and general economic conditions.

[Kristie Waugh, SVP - IR & FP&A at Raymond James Financial]

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs such as may, will, could, should and would as well as any other statement that necessarily depends on future events are intended to identify forward looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Forms 10 ks and subsequent Forms 10 Q and Forms eight ks, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shugri. Paul?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Thank you, Christy. Good evening. Thank you for joining us. We are holding this call from the firm's annual summer development conference in Orlando, Florida, where financial advisors in our employee channel, along with their families, come for education, networking and activities, one of the great tradition of Raymond James and unique to our culture. I really enjoy being able to spend time and hear directly from such dedicated professionals.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Our results this quarter marked the firm's one hundred and fiftieth consecutive quarter of profitability. Since our inception, the firm has endured, thriving in good times, but also persevering through challenges, including recessions, financial crisis and events such as a pandemic and other global threats. This long term record of resilient profitability reflects the strength of our diverse and complementary businesses and our ongoing commitment to always putting clients first. As current market and macroeconomic conditions remain uncertain, we continue to adhere to strategies that have supported consistent success over the past one hundred and fifty quarters, guided by our vision to be the absolute best firm for financial professionals and their clients. I'm also excited to share that Raymond James has topped the J.

[Paul Shoukry, CEO & Director at Raymond James Financial]

D. Power rankings in its annual U. S. Investor satisfaction study as the number one wealth management firm for advised investor satisfaction. The firm also ranked as the most trusted and highest in the study's individual metrics on people and products and services as well as strong rankings in the J.

[Paul Shoukry, CEO & Director at Raymond James Financial]

D. Power financial advisor satisfaction rankings in each of the employee and independent advisor surveys. This recognition is purely a reflection of what all advisors, branch staff and corporate associates do every day to serve clients so well. So thank you. These are well deserved honors.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Turning to our financial results for the quarter. The firm's values based client focused approach continues to generate steady performance. Quarterly net revenues of $3,400,000,000 grew 5% over the prior year quarter. Pretax income of $563,000,000 declined 13% compared to the year ago quarter. Results this quarter included a $58,000,000 reserve increase associated with the settlement of a legal matter related to bond underwritings for specific issuer, sold to institutional investors between 2013 to 2015.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Although the firm maintains and had strong defenses and denied any liability, given the complexity of the case and the unpredictability of litigation outcomes, we determined to resolve the long running dispute without admission of wrongdoing. For the first nine months of fiscal twenty twenty five, we generated record net revenues of $10,300,000,000 and record pretax income of $1,980,000,000 up 105% over the first nine months of fiscal twenty twenty four. These solid results were attributable to our diverse and complementary businesses, anchored by the private client group and augmented with the capital markets, asset management and bank segments. Across our businesses, we have achieved consistent success retaining and recruiting financial professionals who provide high quality advice to their clients. In the Private Client Group, we ended the quarter with a record $1,570,000,000,000 of client assets under administration, representing year over year growth of 11%.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Over the past twelve months, we recruited into our domestic independent contractor and employee channels, financial advisors with $336,000,000 of trailing 12 production and $52,000,000,000 of client assets at their previous firms. Including assets recruited into our RIA and custody services division, we recruited total client assets over the past twelve months of over $60,000,000,000 across all of our platforms. Quarterly domestic net new assets equaled $11,700,000,000 representing a 3.4% annualized growth rate. We saw net new assets improve throughout the quarter with June activity producing annualized growth in the high single digit level. Based on our robust recruiting pipeline and strong level of commitments, we're even more optimistic about our momentum and growth over the coming quarters.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Our best of both worlds value proposition where we offer a unique combination of an advisor and client focused culture coupled with leading technology and solutions continues to resonate with advisors across all of our affiliation options. Additionally, our strong balance sheet and commitment to independence is increasingly becoming a differentiator as well. To continue retaining and attracting the best advisors, we are continuing to make investments in our platforms and offerings. For example, in the private wealth space, we remain focused on providing education, training, accreditation and enhanced capabilities and product solutions to allow advisors to meet the needs of their most sophisticated clients. About three seventy advisors have completed or enrolled in our private wealth advisor program, which continues to attract strong interest from advisors due to its client benefits and contribution to business growth.

[Paul Shoukry, CEO & Director at Raymond James Financial]

We also continue to invest including AI to drive continued operational efficiencies and improve advisors' productive capacity. We are making investments to automate and streamline processes, which in turn frees up associates and advisors to do what they do best, which is to engage human to human and deepen relationships, add more value and importantly, have more capacity to grow their businesses by attracting new clients. In the Capital Markets segment, the investment banking pipeline is strong and we are becoming more optimistic about macroeconomic conditions relative to the near term, although the environment remains uncertain. However, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries we cover whenever the market does become more conducive. We remain committed to enhancing the platform by broadening and deepening its capabilities, whether through strategic hiring or acquisitions.

[Paul Shoukry, CEO & Director at Raymond James Financial]

In the Asset Management segment, net inflows into managed fee based programs in the Private Client Group were strong during the quarter, annualizing at nearly 5% and reflecting the complementary impact of our successful recruiting efforts. In the Bank segment, loans ended the quarter at a record $49,800,000,000 primarily reflecting strong growth in securities based lending balances, yet another synergistic impact from our growing Private Client Group business as we are able to deploy our strong balance sheet in support of our clients. Importantly, the credit quality of the loan portfolio remains strong. Turning to capital deployment, our long standing priorities have remained unchanged, and that starts with investing in growth. First, organically and complemented with strategic acquisitions. We continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and evaluations that would generate attractive returns for our shareholders. During the quarter, we repurchased $451,000,000 of common stock at an average share price of $137 Year to date, we have returned capital of over $1,000,000,000 through common dividends and share repurchases.

[Paul Shoukry, CEO & Director at Raymond James Financial]

As previously discussed in recent quarters, the capital deployment plan is to repurchase shares on a consistent basis throughout the quarter with total amounts expected to be similar to the fiscal third quarter. This approach is expected to maintain capital liquidity levels, which provide ample capacity to fund organic growth initiatives and execute future acquisitions. Now, I'll turn the call over to our CFO, Butch Orlov to review our financial results in detail. Butch?

[Butch Oorlog, CFO at Raymond James Financial]

Thank you, Paul. I'll begin on Slide six. The firm reported net revenues of $3,400,000,000 for the fiscal third quarter. Net income available to common shareholders was $435,000,000 with earnings per diluted share of $2.12 Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $449,000,000 resulting in adjusted earnings per diluted share of $2.18 and our adjusted pre tax margin was 17.1%. We generated annualized return on common equity of 14.3% and annualized adjusted return on tangible common equity of 17.2%.

[Butch Oorlog, CFO at Raymond James Financial]

Solid results for the quarter particularly given our conservative capital base. Turning to Slide seven, Private Client Group generated pre tax income of $411,000,000 on quarterly net revenues of $2,490,000,000 Results were driven by higher PCG assets under administration compared to the previous year, the result of market appreciation and the consistent addition of net new assets. Pretax income declined year over year primarily due to the impact of lower interest rates. Fiscal year to date, PCG generated record revenues. Our Capital Markets segment generated quarterly net revenues of $381,000,000 and a pretax loss of $54,000,000 Net revenues grew 15% year over year, driven primarily by higher investment banking, fixed income and equity brokerage revenues.

[Butch Oorlog, CFO at Raymond James Financial]

However, sequential results declined 4% largely due to lower M and A and fixed income brokerage revenues, which were partially offset by higher underwriting and affordable housing investments revenues. Pretax income was negatively impacted by the $58,000,000 legal reserve increase previously described. The Asset Management segment generated record pre tax income of $125,000,000 on net revenues of $291,000,000 Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the twelve month period and strong net inflows into PTG fee based accounts. We had strong net inflows of approximately $2,100,000,000 into managed programs on our platform. The Asset Management segment generated record revenues and pretax income fiscal year to date.

[Butch Oorlog, CFO at Raymond James Financial]

The Bank segment generated net revenues of $458,000,000 and pre tax income of $123,000,000 On a sequential basis, Bank segment net interest income grew 5% driven by continued loan growth and a seven basis point expansion of net interest margin to 2.74% resulting from a favorable shift in asset mix along with a higher portion of lower cost deposits. Turning to consolidated revenues on Slide eight. Third quarter net revenues grew 5% over the prior year and were flat sequentially. Asset management and related administrative fees of $1,730,000,000 grew 8% over the prior year and were slightly higher than the preceding quarter. Record PCG fee based assets equaled $944,000,000,000 at quarter end, up 15% year over year and 8% over the preceding quarter.

[Butch Oorlog, CFO at Raymond James Financial]

As we look ahead, we expect fourth quarter asset management and related administrative fees to be higher by approximately 9% over the third quarter, primarily due to higher PCG assets and fee based accounts at quarter end and one more business day during the quarter. Brokerage revenues of $559,000,000 grew 5% year over year due to higher revenues in capital markets and PCG. Investment banking revenues of two twelve million dollars increased 16% year over year and declined 2% sequentially. The sequential decline reflected lower M and A and advisory revenues, while underwriting and affordable housing investments results were higher in the quarter. Moving to Slide nine, client domestic cash sweep and enhanced savings program balances ended the quarter at $55,200,000,000 down 4% compared to the preceding quarter and representing 3.8% of domestic PCG client assets.

[Butch Oorlog, CFO at Raymond James Financial]

Program balances increased by nearly $1,000,000,000 in the month of June after seasonal declines for client tax payments and fee billings resulted in decreases early in the quarter. In July, domestic cash sweep and enhanced savings program balances have declined to date in line with July's record quarterly fee billings of approximately $1,700,000,000 Turning to Slide 10. Combined net interest income and RJBDP fees from third party banks increased 1% to $656,000,000 as the decline in RJBDP third party fees was more than offset by higher net interest income. Net interest margin in the bank segment grew seven basis points to 2.74% for the quarter, the result of the factors I described earlier. The average yield on our JVDP balances with third party banks decreased four basis points to 2.96%, primarily due to deployment of incremental cash sweep program balances from third party banks onto the bank segment balance sheet.

[Butch Oorlog, CFO at Raymond James Financial]

Based on current interest rates and quarter end balances net of fourth quarter fee billings, we would expect the aggregate of NII and RJBDP third party fees to decline approximately 2% in the fourth quarter, largely the result of the lower beginning of the quarter sweep balances held by third party banks. Keep in mind, there are many variables which will influence actual results including any interest rate actions during the upcoming quarter and factors affecting our balance including changes in our loan and deposit balances. Turning to consolidated expenses on Slide 11. Compensation expense was $2,200,000,000 and the total compensation ratio for the quarter was 64.8%. Excluding acquisition related compensation expenses, the adjusted compensation ratio was 64.5% better than our 65% target recently shared at our Investor Day.

[Butch Oorlog, CFO at Raymond James Financial]

A good result especially in a challenging capital markets environment. Non compensation expenses of $633,000,000 increased 20% sequentially. Adjusting for the previously mentioned legal matter reserve in the quarter, non compensation expenses of $633,000,000 increased 20% sequentially. Adjusting for the previously mentioned legal matter reserve in the quarter, non compensation expenses were $575,000,000 up 9% sequentially. While the third quarter typically experiences higher seasonal costs related to conferences and events, a large portion of this quarterly increase also supports firm wide growth initiatives, including advisor recruiting, professional fees associated with increased underwriting activity and higher investment sub advisory fee expense.

[Butch Oorlog, CFO at Raymond James Financial]

Through the first nine months of the fiscal year, we are on track with our guidance for full year non compensation expenses of approximately $2,100,000,000 excluding the bank loan provision for credit losses, unexpected legal and regulatory items and non GAAP adjustments presented in our non GAAP financial measures. On Slide 12, we provide key credit metrics for our bank segment. We grew loans during the quarter by 3%, primarily in support of our clients with this loan growth continuing to be led by securities based lending and residential mortgage loan growth. These two loan categories represent well over half of our total loan book, reflecting 3620% of the total. The credit quality of the loan portfolio remains strong.

[Butch Oorlog, CFO at Raymond James Financial]

Criticized loans as a percentage of total loans held for investment were stable at 1.14% at quarter end and non performing assets remained low at 34 basis points of bank segment assets. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 93 basis points consistent with the prior quarter level. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.96%. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may affect our loan portfolios. Slide 13 shows the pretax margin trend over the past five quarters, which demonstrates the resilience of our diverse business mix and its ability to consistently deliver strong margins.

[Butch Oorlog, CFO at Raymond James Financial]

Adjusting for the legal matter reserve impacting the quarter as well as acquisition related expenses, our pre tax margin would be approximately 19%, slightly below our target of 20% adjusted pre tax margin largely due to the challenging capital markets environment. We remain committed to investing to support growth across the business while maintaining discipline over controllable expenses. On Slide 14, at quarter end, our total assets were $84,800,000,000 a 2% sequential increase resulting primarily from loan growth. Liquidity and capital each remained very strong. RJF corporate cash at the parent ended the quarter at approximately $2,300,000,000 well above our $1,200,000,000 target with a Tier one leverage ratio of 13.1% and a total capital ratio of 24.3%, we remain well above regulatory requirements.

[Butch Oorlog, CFO at Raymond James Financial]

Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth. The effective tax rate for the quarter was 22.6%, reflecting the favorable impact of non taxable corporate owned life insurance gains that arose during the quarter. For the fiscal year 2025, we estimate our effective tax rate for the year to be approximately 24%. Slide 15 provides a summary of our capital actions over the past five quarters. We returned over $550,000,000 of capital to shareholders during the quarter and nearly $1,800,000,000 over the past five quarters through either common dividends paid or share repurchases.

[Butch Oorlog, CFO at Raymond James Financial]

We remain committed over the long term to operate our businesses at capital levels in line with our stated targets. I'll now turn the call back to Paul for some final remarks.

[Paul Shoukry, CEO & Director at Raymond James Financial]

As we enter the fourth quarter, we are encouraged by the strong tailwinds arising from fee based assets up eight percent, net loans higher by 3% and strong pipelines for growth across our businesses. Our advisor recruiting pipeline is growing significantly across all of our affiliation options, a testament to our unique culture and robust platform that is resonating with advisors. We are laser focused on providing a seamless transition as advisors affiliate with our platform, while importantly maintaining excellent service levels to existing advisors and their clients. While the investment banking environment is uncertain, based on the current pipeline and activity levels, we believe the next two quarters should be better than the prior two. Lastly, we have plenty of capital to support organic growth and acquisitions as well as continued share repurchases at a level similar to this quarter. As illustrated by our recent J.

[Paul Shoukry, CEO & Director at Raymond James Financial]

D. Power number one rankings, putting clients first has been the cornerstone of Raymond James' value since our inception and that commitment remains at the center of everything we do. This prestigious honor demonstrates the strength of our client centric culture and our steadfast dedication to supporting advisors and empowering them with sophisticated resources, support and technology. Our results reflect the many contributions of our associates and advisors and financial professionals across the firm. Thank you for contributing to 150 quarters of consecutive profitability by providing outstanding advice and service to your clients.

[Paul Shoukry, CEO & Director at Raymond James Financial]

That concludes our prepared remarks. Operator, will you please open the line for questions?

[Operator]

Thank Your first question comes from Michael Cho with JPMorgan. Your line is open.

[Michael Cho, Equity Research Analyst at JP Morgan]

Hi, good afternoon team. Thanks for taking my question. I just wanted to start on recruiting. Paul, you touched on the solid pipeline out there. You called out the June exit rate at a high single digit percent level. So I was hoping you could unpack a little bit more about that pipeline you see and maybe across different channels where you might be seeing better engagement. I mean, I recall you called out during Investor Day about changing some of the recruiting functions, maybe centralizing some things. So maybe is this the result of some of the actions you've been taking in previous months and quarters? And is high single digits kind of the right pace for now, given what you see in the pipeline?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Thanks, Michael. Yes, what I would say on the recruiting pipeline is in terms of the acceleration of activity, the number of events, that we are hosting, the number of advisers that we're meeting with, the entire team really across all of our affiliation options. You know, when we speak to the teams who have been with Raymond James for a long time, we really haven't seen this type of acceleration in activity since the financial crisis. And, of course, the advisers that we're talking to now are much larger than the advisers that were talking to us during the fight you know, after the financial crisis as a, safe haven, given all the disruption that was going on in the industry. So, we're really excited about this opportunity.

[Paul Shoukry, CEO & Director at Raymond James Financial]

It's all hands on deck, both recruiters and also want to give a lot of credit to our transition teams because we've and we've invested in the transition teams as well, given them more capabilities and capacities to really help with the uptick, to ensure that we have seamless transitions of the new advisers that are affiliating with the platform, but also ensure that we provide, and this is really important, exceptional service to our existing advisers, and their clients as well. So we don't want that service level to fall off. You know, their satisfaction is very high right now as, evidenced by the the number one ranking in the J. D. Power Award for service and trust.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And so we want to make sure we don't dilute that as we bring on the new advisors who are affiliating with us.

[Michael Cho, Equity Research Analyst at JP Morgan]

Great. Thanks for the color, Walt. If I could just switch to the balance sheet real quick. Saw some nice growth this quarter. You called out security based lending and also some growth across CRE and C and I.

[Michael Cho, Equity Research Analyst at JP Morgan]

Just wondering if you could just how you're planning the trajectory of balance sheet growth across some of the key segments for the remainder of the year? And then just on the other side, if we think about the third party bank mix, how should we think about the normalized level over time as you continue to experience maybe better balance sheet engagement? Thanks.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I think it was around this time last year that we were saying that clients are getting used to sort of the new level of interest rates and that we were expecting higher utilization of securities based loans after really kind of two years of a lot of pay downs and payoffs. And that's exactly what we experienced. So year over year, securities based loans to private client group clients are up 20% across the firm. So really exceptional growth.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And even mortgages are up 8% year over year across the firm. So really using the balance sheet to support clients and client demand and particularly clients of the Private Client Group business. And so we don't know what the trajectory is going to look like going forward. The momentum and the pipeline for securities based lending continues to be strong. And so we fortunately have a strong deposit base and a diversified deposit base to continue supporting that growth going forward.

[Operator]

The next question comes from Dan Fannon with Jefferies. Your line is open.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Great. Thank you. One more on just organic growth. So Paul, your comments this quarter seem a little bit more bullish, but generally consistent with what we've heard for the last few quarters. But yet the NNA, both on a dollar basis and on a percentage growth basis, is still below where you were last year and other periods.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

So what is the disconnect? Or could you talk to what maybe the negatives are that are maybe drawing down the overall growth level?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Well, I mean, hopefully, you're hearing us sound more confident about our recruiting pipeline because that's the intent. I mean, we the activity levels are accelerating and picking up. And so we are increasingly while we have been very consistently and successfully recruiting advisers across affiliation options, we have been consistent in our success there. We are growing even more optimistic just looking at the pipeline. So again, these are pipelines.

[Paul Shoukry, CEO & Director at Raymond James Financial]

You know, we we don't count our, you know, eggs until they hatch. And so, you know, we we'll we'll we have to convert the pipeline, and and and so they'll we'll look at that. And as a as a reminder, once you once the new adviser affiliates with the firm, there is a lag in terms of when that shows up into NNA because then they have to bring over their clients and they have to bring over their assets. So, it's not a just in time impact to NNA. From the time we feel good about a pipeline to the time we see it in NNA, it could be, three, six, nine months, just depending on how quickly that pipeline is converting.

[Paul Shoukry, CEO & Director at Raymond James Financial]

We are still seeing pressure on the existing adviser base, equity. We always say with the roll ups in the absence of a value proposition, they compete with big checks. And so while we're seeing that moderate a bit as I think some of the valuations have just gotten so lofty that I think across the industry, a lot of the participants are questioning, the valuations and the prices that these, private equity backed roll ups are paying, for certain advisers. I think, some firms are taking breathers, but there's still, you know, a handful of aggressive firms out there. And from time to time, that is disruptive, particularly in the independent channel.

[Paul Shoukry, CEO & Director at Raymond James Financial]

But aside from that, retention, morale, service levels, satisfaction levels have been very good, and our pipeline continues to accelerate.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Great. That's helpful. And then as my follow-up, just within brokerage, can you talk about the fixed income outlook? And what type of environment is best for that business to really accelerate?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I mean our biggest business in fixed income brokerage and this is an important distinction from the bigger bulge bracket banks and wirehouses who had really strong quarters the much higher volatility that you get with commodities and currencies and interest rates, especially in the environment we saw last quarter. We're really not heavily engaged in those higher volatility segments within fixed income. I mean, we're really serving our biggest client base in the fixed income business, our depositories, banks and credit unions, helping them manage their securities portfolio. So an environment where, they're deposit rich and, there's a lack of loan demand and an opportunity to earn more, by investing in securities out on the spread on the on the curve is an environment that's most conducive for us in fixed income.

[Paul Shoukry, CEO & Director at Raymond James Financial]

When there's spread volatility, that helps our Sumridge business. That technology enabled business has really driven more spread volatility. And spreads have been actually fairly tight and resilient. And so we haven't seen the volatility that you may expect given sort of the macro uncertainty surrounding it. So that business hasn't really seen the type of tailwinds that you would have otherwise expect with higher spread volatility.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Great. Thank you.

[Operator]

The next question comes from Devin Ryan with Citizens JMP. Your line is open.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Great. How's it going, Paul? First question just here on cash balances. The decline was maybe a bit more than we had expected. And I know there's a lot that goes into that with tax season and advisory fees and investors leaning in the market.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

But it's a bit difficult from the outside to parse through kind of what's cash shorting versus other trends. So just be good to get an update on what you're seeing around your client behavior there and what you've seen through July if you can share that? And then also just what you're expecting in the half of the year just given what you talked about with kind of accelerating organic growth. So how much that could help for kind of rebuilding some of that transactional cash? Thanks.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I'll let Rich speak to the cash movements, particularly in the quarter. What I would say is you're right. The pipeline as it converts as new advisors bring on new clients with new assets that should be all else being equal a tailwind to our cash balances. And before turning it over to Butch to talk about the quarterly change in cash balances, what I would do is kind of step back first and look at the year over year change in sweep balances, which have been pretty resilient.

[Paul Shoukry, CEO & Director at Raymond James Financial]

It's been almost flat year over year at right around $42,000,000,000, for the sweep balances. So, as we said maybe a year, year and a half ago, we feel like, cash balances are relatively stable. We're not ready to declare victory on that until we actually start seeing growth in those balances. And to your point, as Butch will talk about, that wasn't the case this quarter. Butch?

[Butch Oorlog, CFO at Raymond James Financial]

Yes. Thanks, Devin. As we talked about on last quarter's call that there's a seasonal element to cash balances in this quarter. Client tax payments and especially in the month of April typically having the adverse effect on client balances in the short run. And so we certainly experienced that as well as the industry at large.

[Butch Oorlog, CFO at Raymond James Financial]

And what we've seen in the month of June and we're encouraged by the month of June is what we've seen is we've seen 1,000,000,000 of growth in balances that occurred in the month of June kind of as those seasonal factors kind of reverse. And so we're hopeful that that portends a positive trend for the balances upcoming in the fourth quarter. As Paul mentioned, when you look at those balance levels on a year over year basis, I mean, there's continues to be relative stability in those balances year over year.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

All right. Thank you. Great color there. And then as my follow-up, I caught the press release on in the Canadian business you recently announced what you framed as a significant investment in F and

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Z to accelerate the digital transformation of wealth management infrastructure and then elevate the advisor client experience nationwide. So I appreciate Canada is a smaller piece of Raymond James today, maybe the more significant relative to the Canadian platform that did get my attention. So just a little bit, kind of get a sense of if you can kind of the sizing and strategy of that investment? Then more broadly, on this world where outright acquisitions in the space have been really competitive and maybe pricey, could we see more of these strategic investments as maybe an outlet for excess capital? Thanks.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. We've been in the Canadian market for a very long time, and it's certainly an important market for us, particularly in wealth management, but also in capital markets. And we have a profitable business management that generates good profitability. And we have a best of both worlds value proposition in Canada that's very similar to the value proposition that we have in The US where, you know, we're competing against the big six banks up there, and we offer more adviser centric culture and all the capabilities that the advisers that are mostly most of them come from those banks have become accustomed to having. And so that value proposition resonates up in Canada.

[Paul Shoukry, CEO & Director at Raymond James Financial]

It's a very attractive market for us. It's one that we're committed to. And we're gonna continue just like we do in The US and in The UK to continue to invest in their resources. The The press release mentioned a new technology system for them that we're really excited about and the advisors there are excited about as well. So it'll just continue to be, and we look for acquisitions in the Canadian market as well.

[Paul Shoukry, CEO & Director at Raymond James Financial]

There's not as many. It's not as fragmented as the The US, although US is becoming a lot less fragmented too. But we would be if we find a firm up in Canada on the wealth side that's a good cultural fit, strategic fit and at a price that makes sense, we would welcome inviting him to the Raymond James family.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Okay. That's great. Thank you.

[Operator]

The next question comes from Kyle Voigt of KBW. Your line is open.

[Kyle Voigt, Managing Director at Keefe, Bruyette & Woods (KBW)]

Hi, good evening. So it sounds like some positive momentum on the recruiting side. Paul, you mentioned some easing dynamics very recently of maybe some firms in the industry taking breathers on transition assistance rates or recruiting packages. But just curious how you would describe the current environment competitive environment even after that easing versus where we've been over the past year or two? And then also wondering if you could comment on whether Raymond James has changed anything in terms of how it's approaching recruiting packages in recent periods?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I mean, I would just say, the environment remains competitive. It's been I've been with the firm for fifteen years and it's been competitive since I joined the firm and those who've been here much longer describe an environment that was competitive before that. So, the the dynamic that's relatively novel in the last five years is these PE backed roll ups cropping up everywhere. And, you know, over the last three years in particular, they've been extremely aggressive in, you know, trading and paying at higher and higher multiples.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And that I think they're getting to the point now, somewhat of a, inflection point, I think, in that business where they're trying to figure out You know? How much higher can those multiples go, especially when you compare them to public company multiples? I mean, it's significantly higher in many cases than public company multiples. So they're I think they're looking at what's next.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Is there is there a public market for that type of multiple? Are there strategic buyers for that type of multiple? Is there another private equity buyer or continuation fund? And so that's just, I think, surfacing those type of questions. But I don't want to overstate the impact that's having, on the competitive environment because, again, it only takes two or three firms that are earlier in their stage of deploying their capital that they've already raised to keep that competitive environment, you know, sort of, frothy.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And so that's that it's still a competitive environment out there. But I do think that the the tone I that I'm hearing is a little bit different from some of those, roll up firms, than maybe it was a year or two ago.

[Kyle Voigt, Managing Director at Keefe, Bruyette & Woods (KBW)]

That's very helpful. Maybe just staying on the recruiting topic and just regarding your earlier comments about the largest acceleration in activity since the financial crisis. Like do you think this is an industry wide dynamic where you'd expect to see overall industry wide churn levels increase over the next twelve months? Or do you think it's more idiosyncratic or something about Raymond James' positioning in the market currently that's made the platform more attractive and has caused you to see this acceleration recently?

[Paul Shoukry, CEO & Director at Raymond James Financial]

No. I think, I mean, there's certainly been M and A driven catalyst, particularly on the independent side of the business that, you know, as you all are well aware of. And so I think that, again, the success that we're having though is not concentrated only, you know, from that particular catalyst. We're we're seeing success from a a lot of different firms across our affiliation options. But, you know, that catalyst, certainly, is has led to or contributed to the acceleration in our recruiting pipeline and our recruiting activity.

[Kyle Voigt, Managing Director at Keefe, Bruyette & Woods (KBW)]

Great. Thank you.

[Operator]

The next question comes from Bill Katz of TD Cowen. Your line is open.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Great. Good evening, everybody.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Thank you for taking the questions. Maybe sticking on just sort of the dynamic of accelerating financial advisor and the new asset growth. I was wondering, could you talk a little bit about does that have any structural impact on your comp ratio? And also, was wondering with the assets that are coming in given that the teams are larger, does that have any kind of adverse impact on the client cash as a percentage of those assets that are coming in the door?

[Paul Shoukry, CEO & Director at Raymond James Financial]

I would say, again, we have one point over $1,600,000,000,000 of client assets. So for anything to really make a meaningful change to any of these firm wide ratios, it would have to be, you know, really substantial. So, I would say it'd be more of a glide path than a sudden change in any of the ratios, across the board with what we're talking about, just given the size of the base and the magnitude of what you'd have to bring on to move the needle given the size of the base.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Okay. And this is my follow-up. Thank you for that. Just from a big picture down at your Investor Day, you're pretty rigid in terms of looking at the market and saying it seemed a little heavy from an M and A perspective, pricing. You seemingly passed on a few things.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Wondering if you could update us on your thoughts about how the strategic backdrop is looking from an M and A perspective and where you might be most focused? Thank you.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. We continue to stay very, very busy in our corporate development function. And so we're developing relationships across the spectrum in terms of early inning relationships to more advanced discussions around potential opportunities. And so we would just continue to look for opportunities. Our biggest business is private client, and we envision that five, ten, fifteen years from now, that will still be our biggest business.

[Paul Shoukry, CEO & Director at Raymond James Financial]

So that is in terms of targets, where we would look for acquisitions first, but also capital markets and asset management. I think the bank, we already have two charters. And so and we have one branch and two ATMs across those two charters. So we have a really a utility bank to serve clients and not a brick and mortar type business structure there. And so we would continue we continue to remain active across all of our businesses and develop relationships again across the spectrum from, you know, early discussions, preliminary discussions to more advanced discussions.

[Paul Shoukry, CEO & Director at Raymond James Financial]

But most importantly, we're not going to do a deal to just do a deal. It has to meet our three criteria. First, being a good cultural fit. No matter how good the revenues and profits are, if it's not a good cultural fit, it's not gonna work in our business. And and if it's a good cultural fit, then it has to be a good strategic fit where, you know, one plus one gives us a chance of being more than two, where we make them better and they make us better. In our history of acquisitions, we've always tried to retain the management team, and, we have a great track record of doing that. Our public finance and fixed income business is still run by the leaders that came over from Morgan Keegan back in 02/2012, for example. And so we want to be better after the acquisition, not just add assets or revenues. And then finally, if those first two boxes are checked, then the valuation has to make sense for us and has to make sense to the selling party.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And so those we're going to remain disciplined in that regard.

[William (Bill) katz, Senior Equity Analyst at TD Cowen]

Thank you.

[Operator]

The next question comes from Alex Blostein with Goldman Sachs. Your line is open.

[Alexander Blostein, Managing Director at Goldman Sachs]

Hey, good afternoon. Thank you. I wanted to ask you guys a question around just the margins in the quarter, but also the targets and sort of relay that back to your capital markets commentary from early in the call. So 19% for the quarter, as you mentioned, it's running a little bit below the 20% target that you guys are shooting for. Is the pipeline in banking what you're right now and stuff that's tangible enough to get you guys into that 20% plus pre tax margin goal that you outlined at the Investor Day?

[Butch Oorlog, CFO at Raymond James Financial]

Yes.

[Butch Oorlog, CFO at Raymond James Financial]

With respect to the current quarter, we were pleased with the 19% pretax margin for the quarter given the softness in the capital markets segment the quarter that we experienced. And although we continue to see the Capital Markets business long term as a mid teens margin type of business, do continue to expect to be able to achieve that. And just with improvement in the capital markets environment, it would foretell well for us to be able to deliver on that pretax margin target of 20% that we shared at Investor Day. And as we previously mentioned, we feel also feel good about the tremendous tailwinds that we have in the private client business with the upcoming quarter with the 8% increase in fee billable assets. And so we continue to improve on the margins from this quarter.

[Alexander Blostein, Managing Director at Goldman Sachs]

Got it. Thank you. Second question for you guys just around opportunities to better leverage the wealth platform as you think about incremental revenues related to the alternative platforms, alternative businesses that are out there. Some of your peers, especially on the larger cap side, did quite a good job monetizing that opportunity, where effectively shelf space payments. How are you thinking about that for A.

[Alexander Blostein, Managing Director at Goldman Sachs]

J? It feels like the opportunity to increase penetration of alternative products, private market strategies continues to expand. So maybe some guidepost in terms of what percentage of the asset base is in private strategies today, where you guys think that could go and again, the revenue opportunity attached to that over time?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. Our penetration in the private markets is lower than some of the bigger firms that we compete against. So I think there's a lot of headroom there. But we unlike some of our firms that we compete against, we're not going to push the products to create more monetization opportunities or create more stickiness. That's really not our culture.

[Paul Shoukry, CEO & Director at Raymond James Financial]

So it'll be driven by demand of clients and their advisers. And so and there is more demand for those type of products that are just naturally organically happening. We're providing a lot of education and resources and a broader and deeper set of products, alternatives in that in that space. And so we'll continue to invest in it. We have a new leadership team in that space that we put in place four months ago or so.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And they're really investing in in the education and the increasing the awareness of the solutions to the advisers and the increasingly high net worth clients that, these products make more sense for. So we have a lot of in summary, I would say we have a lot of headroom. We've got a lot of investments in these areas. We have a great set of products across the spectrum, but we are not going to have quotas or push products or create sort of variable incentives to try to drive growth in those products. It's just not the type of culture that we have at Raymond James.

[Alexander Blostein, Managing Director at Goldman Sachs]

Yes. All makes sense. Thank you very much.

[Operator]

The next question is from Jim Mitchell with Seaport Global Securities. Your line is open.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Thanks. Good afternoon, guys. Maybe you mentioned a couple of times strong inflows into fee based assets in PCG. I know you don't disclose that data, but can you kind of give us a sense of at least a ballpark of the level of growth you're seeing in fee based flows? And is that materially better than NNA?

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

And maybe just talk about the dynamic between the two.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I mean, fee based flows have been stronger than the overall flows. And you see that with just the level of client asset. I mean, overall, if you look year over year, client assets under administration overall for the firm have grown at 11%, where fee based assets have grown 15%. And so that's the best way, I think, to just dimension the relative growth of fee based assets versus overall assets at Raymond James.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And we're now at 65% or so of our asset overall assets in the Private Client Group are fee based. And so we've always really led the industry in fee based penetration. And so but we also when it makes sense for clients, we also want to continue offering a competitive and robust brokerage solution as well.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

So you don't think it's like a difference in client mix that sort of gap between the two is really organic growth and fee based being a couple of 100 basis points higher than NNA growth?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Well, I mean, advisors over a long period of time have been shifting their business to more fee based business and advisory based relationships. But a lot of clients have both a fee based account and a commission based account because they have assets that have different objectives and priorities around them. And some of those assets might maybe better invested in a brokerage account or and some of those assets may be better invested in a in a advisory relationship in fee based accounts. So it's not that any advisor or any client just does one or the other. It's a mix, and it's really driven by what is best for clients.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Yes. All fair. So just maybe a follow-up on the recruiting pipeline. Is it pretty broad based across all affiliation options? Or is it more concentrated in one specific segment?

[Paul Shoukry, CEO & Director at Raymond James Financial]

No. I would say we're seeing good success across all of our affiliation options. Certainly, the acceleration rate within the independent channel is probably higher, but we're still seeing very good success in the employee affiliation option and the independent RIA option as well.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay, great. Thanks.

[Operator]

Your final question comes from Michael Cyprys of Morgan Stanley. Your line is open.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thanks for taking the question. Just on the investment banking side, I think you mentioned that you expect the next two quarters to be better than the prior two quarters. So just curious if you could elaborate a bit on what you're seeing, how the magnitude of pipelines has evolved and what you're seeing from an environmental standpoint supporting your confidence versus, say, 1.5 ago at your Investor Day?

[Paul Shoukry, CEO & Director at Raymond James Financial]

Yes. I think there was just an immediate and this was an industry wide statement, not just specific to Raymond James. But I think across the industry, in early April, there was a lot of shock with just the the tariff discussions and the magnitude and the breadth of the tariffs and people not really understanding exactly how that will pan out. And so as time has passed, as deals have been struck by the administration, as the administration has pivoted on deadlines and shown a willingness to to negotiate with the countries and and, come to a good, you know, overall, hopefully positive solution. I think the shock that we had in early April has not fully worn off.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And and, again, we could be shocked again tomorrow. Who knows? But, certainly, the the market sentiment now is more positive than it was in early April. And so and there there's a lot of pent up demand, and there has been for several months now because of two years of really lackluster investment banking business across the industry. We have a lot of motivated buyers and sellers, particularly private equity sponsors, which represent 60% of our M and A activity in any given quarter or year, roughly 60%.

[Paul Shoukry, CEO & Director at Raymond James Financial]

And so they have companies that are sort of beyond their original timelines in terms of being sold out of the portfolio so they could distribute capital back to their LPs. And then they also have on the buyer side, they have capital that needs to be deployed. So there's a lot of pent up demand. And I think as there's more certainty and less shock in the system, and more certainty around tax reform, which, you know, has was successfully implemented, and the tariff reform, and and now maybe around the interest rates to some extent, as long as there's certainty around those things, no matter what the outcome is, I think there'll be a better environment for that pipeline to convert to realizations.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. And then just as a follow-up question, more bigger picture. Just curious if you could just give us a little bit of an update, thoughts around digital assets, stable point strategy, how you're seeing the opportunities for Raymond James, what steps might we see you guys take, say, over the next twelve months as it continues to garner more attention across the marketplace?

[Paul Shoukry, CEO & Director at Raymond James Financial]

I think we're encouraged.

[Paul Shoukry, CEO & Director at Raymond James Financial]

I mean, what we've been asking for, for the last couple of years really is for the regulation and the regulatory framework to catch up to the demand into sort of the actual penetration and utilization of these type of products. And so we're encouraged. I think there's a lot more even as recently as last week. Our trade associations, I know, which we have senior leadership representation on, we're very engaged on the hill on trying to help regulations catch up to the demand and interest for these type of products. And so in the meantime, we've been, you know, as you can imagine, very deliberate.

[Paul Shoukry, CEO & Director at Raymond James Financial]

We we want to protect clients first and foremost. And and until the regulations catch up, you know, the the clients are at some level of risk that's disproportionate to the other securities where the regulations have been in place for a very long period of time. And so, you know, we're not bleeding edge on these type of products, but we are monitoring them very closely. We have teams that are focused on understanding what other competitors are doing and what's available and what's not yet available, what may be available. So we're studying it very closely and being to be as responsive as we possibly can to our advisers and their clients.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thank you.

[Paul Shoukry, CEO & Director at Raymond James Financial]

Great. Well, I think that was the last question. Just want to thank all of you for your time and interest in Raymond James. We certainly do not take it for granted. And I also want to thank all of our financial advisers, bankers, associates, and clients for trusting Raymond James and for doing such great work across the country.

[Paul Shoukry, CEO & Director at Raymond James Financial]

So we really appreciate it, and we wish all of you well.

[Operator]

Concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Kristie Waugh, SVP - IR & FP&A
• Paul Shoukry, CEO & Director
• Butch Oorlog, CFO

Analysts

• Michael Cho, Equity Research Analyst at JP Morgan
• Dan Fannon, MD - Research Analyst at Jefferies & Company Inc
• Devin Ryan, Director of Financial Technology Research at Citizen JMP
• Kyle Voigt, Managing Director at Keefe, Bruyette & Woods (KBW)
• William (Bill) katz, Senior Equity Analyst at TD Cowen
• Alexander Blostein, Managing Director at Goldman Sachs
• James Mitchell, Senior Equity Analyst at Seaport Global Securities
• Michael Cyprys, Managing Director at Morgan Stanley