RAYMOND JAMES FINANCIAL INC

Previous wording

Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions (including changes in interest rates and inflation), demand for and pricing of our products (including cash sweep and deposit offerings), acquisitions, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the Securities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.

Current wording

Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions (including changes in interest rates and inflation), demand for and pricing of our products (including cash sweep and deposit offerings), anticipated timing and benefits of our acquisitions, and our level of success integrating acquired businesses, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the Securities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.

Previous wording

For our fiscal second quarter of 2024, we generated net revenues of $3.12 billion and pre-tax income of $609 million, each 9% higher than the prior-year quarter. Our net income available to common shareholders of $474 million increased 12%, and our earnings per diluted share were $2.22, reflecting an increase of 15%. Our annualized return on common equity (“ROCE”) for the quarter was 17.5%, compared with 17.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.0%(1), compared with 21.3%(1) for the prior-year quarter. Excluding the impact of $26 million of expenses related to acquisitions completed in prior years, such as compensation related to retention awards and amortization of identifiable intangible assets, our adjusted net income available to common shareholders was $494 million(1)for the three months ended March 31, 2024, an increase of 11% compared with adjusted net income available to common shareholders for the prior-year quarter. Our adjusted earnings per diluted share were $2.31(1), an increase of 14% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 18.3%(1) and adjusted annualized ROTCE was 21.8%(1)compared with adjusted annualized ROCE of 18.2%(1) and adjusted annualized ROTCE of 22.3%(1) for the prior-year quarter.

Current wording

For our fiscal third quarter of 2024, we generated net revenues of $3.23 billion, an increase of 11% compared with the prior-year quarter, and pre-tax income of $644 million, an increase of 33% compared with the prior-year quarter. Our net income available to common shareholders of $491 million also increased 33%, and our earnings per diluted share were $2.31, reflecting an increase of 35%. Our annualized return on common equity (“ROCE”) for the quarter was 17.8%, compared with 14.9% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.2%(1), compared with 18.3%(1) for the prior-year quarter. Excluding the impact of $23 million of expenses related to acquisitions completed in prior years, such as compensation expenses related to retention awards and amortization of identifiable intangible assets, our adjusted net income available to common shareholders was $508 million(1)for the three months ended June 30, 2024, an increase of 27% compared with adjusted net income available to common shareholders for the prior-year quarter. Our adjusted earnings per diluted share were $2.39(1), an increase of 29% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 18.4%(1) and adjusted annualized ROTCE was 21.9%(1)compared with adjusted annualized ROCE of 16.1%(1) and adjusted annualized ROTCE of 19.7%(1) for the prior-year quarter.

Previous wording

The increase in net revenues compared with the prior-year quarter was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Brokerage revenues also increased compared with the prior-year quarter largely due to an increase in client activity in the PCG segment, partially offset by lower fixed income brokerage revenues due to lower market volatility compared with the prior-year quarter. Investment banking revenues increased compared with the prior-year quarter due to higher merger & acquisition and advisory and debt underwriting revenues. Combined net interest income and RJBDP fees declined compared with the prior-year quarter, as the benefits of higher short-term interest rates and higher average interest-earning assets and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined, while balances in the higher-cost ESP, which was introduced to PCG clients in March 2023, and certificates of deposit increased.

Current wording

The increase in net revenues compared with the prior-year quarter was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Brokerage revenues also increased compared with the prior-year quarter primarily due to an increase in client activity in the PCG segment. Investment banking revenues increased compared with the prior-year quarter largely due to higher debt and equity underwriting revenues. Combined net interest income and RJBDP fees from third-party banks declined compared with the prior-year quarter, as the benefits of higher short-term interest rates and higher average interest-earning asset balances and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances in our Bank segment, as RJBDP balances swept to the Bank segment declined and a significant portion was replaced by higher-cost ESP balances, which was introduced to PCG clients in March 2023.

Previous wording

Compensation, commissions and benefits expense increased 12%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 65.5%, compared with 63.3% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 65.2%(1), compared with 62.8%(1) for the prior-year quarter. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year quarter, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.

Current wording

Compensation, commissions and benefits expense increased 13%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 64.7%, compared with 63.7% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 64.4%(1), compared with 62.7%(1) for the prior-year quarter. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year quarter, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.

Previous wording

Non-compensation expenses decreased 6%, largely due to the favorable impact of a net legal and regulatory reserve release in the quarter of $32 million, while the prior-year quarter reflected incremental net expense including the impact of an unfavorable arbitration award. The bank loan provision for credit losses also declined compared with the prior-year quarter, reflecting an improved economic outlook year over year. Partially offsetting these decreases were higher communications and information processing expenses as we continue to invest in our technology for the benefit of our clients and advisors, and higher investment sub-advisory fees which are highly correlated with the increase in asset management fee revenues.

Current wording

Non-compensation expenses decreased 13%, largely due to a significant decrease in provisions for legal and regulatory matters, as well as a decrease in the provision for credit losses on bank loans to a benefit of $10 million in the current quarter compared with a provision of $54 million in the prior-year quarter. Partially offsetting these decreases were higher communications and information processing expenses as we continue to invest in our technology for the benefit of our clients and advisors and to support our growth, higher investment sub-advisory fees which are highly correlated with the increase in asset management fee revenues, as well as higher occupancy and business development expenses.

Previous wording

Our effective income tax rate was 21.8% for our fiscal second quarter of 2024, a decrease compared with the 23.3% effective income tax rate for the prior-year quarter, primarily due to a larger tax benefit recognized during the current quarter related to nontaxable valuation gains associated with our company-owned life insurance policies, compared to that for the prior-year quarter, as well as a favorable impact on our effective tax rate from lower nondeductible fines and penalties in the current quarter.

Current wording

Our effective income tax rate was 23.6% for our fiscal third quarter of 2024, a decrease compared with the 24.1% effective income tax rate for the prior-year quarter, primarily due to a change in the amount of nondeductible fines and penalties compared with the prior-year quarter, partially offset by the impact of a lower tax benefit recognized related to nontaxable valuation gains associated with our company-owned life insurance policies.

Previous wording

As of March 31, 2024, our Tier 1 leverage ratio of 12.3% and Total capital ratio of 23.3% were both significantly higher than the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.03 billion(2) of cash at the parent as of March 31, 2024. We believe our capital and funding position provides us the opportunity to manage our balance sheet prudently and to continue to be opportunistic and invest in growth. During the three months ended March 31, 2024, we repurchased 1.70 million shares of our common stock for $207 million at an average price of $122 per share under the Board of Directors’ common stock repurchase authorization. In April 2024, we repurchased an additional 336 thousand shares of our common stock totaling $43 million, for a total of $400 million repurchased for the fiscal year, leaving $1.14 billion available under the Board of Directors’ common stock repurchase authorization as of the date of this Form 10-Q. With the April repurchases, we have offset the dilution from shares issued as part of the TriState Capital acquisition. We expect to continue to repurchase our common stock to offset dilution from share-based compensation and be opportunistic with incremental repurchases; however, we will continue to monitor market conditions and other capital needs as we consider these repurchases.

Current wording

As of June 30, 2024, our Tier 1 leverage ratio of 12.7% and Total capital ratio of 23.6% were both significantly higher than the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.1 billion(2) of cash at the parent as of June 30, 2024. We believe our capital and funding position provides us the opportunity to manage our balance sheet prudently and to continue to be opportunistic and invest in growth. During the three months ended June 30, 2024, we repurchased 2.0 million shares of our common stock for $243 million at an average price of $122 per share under the Board of Directors’ common stock repurchase authorization. We expect to continue to repurchase our common stock to offset dilution from share-based compensation and to be opportunistic with incremental repurchases. Given our capital and liquidity levels, we expect to accelerate our share repurchase activity; however, we will continue to monitor market conditions and other capital needs as we consider the magnitude and timing of these repurchases.

Previous wording

As we look ahead to our fiscal third quarter of 2024, we believe we are well-positioned for long-term growth, with our strong capital position and total client assets under administration of $1.45 trillion. We expect our fiscal third quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 7% sequential increase in PCG fee-based assets and 5% sequential increase in financial assets under management as of March 31, 2024. In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline. While the timing of closings remains difficult to predict, we have a healthy investment banking pipeline and we expect investment banking revenues to improve along with the industry-wide gradual recovery. We expect our combined net interest income and RJBDP fees from third-party banks for the remainder of the fiscal year to be largely dependent on the level of short-term interest rates, the stability of client cash balances and the trajectory of loan growth, which has been subdued in the current interest rate environment. We have continued to experience headwinds for fixed income brokerage revenues due to flat or declining cash balances at many of our depository institution clients and we expect such headwinds to persist until short-term interest rates and cash balances at our depository institution clients stabilize. In addition, although our current loan portfolio credit metrics are solid and we continue to proactively manage our credit risk in our loan portfolio, future economic deterioration or changes in the macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.

Current wording

As we look ahead to our fiscal fourth quarter of 2024, we believe we are well-positioned for long-term growth with our strong capital position, total client assets under administration of $1.48 trillion, and net bank loans of $45.1 billion. We expect our fiscal fourth quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 3% sequential increase in PCG fee-based assets and 1% sequential increase in financial assets under management as of June 30, 2024. In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline. While the timing of transaction closings remains heavily influenced by external factors, we have a healthy investment banking pipeline and we expect investment banking revenues to continue to improve over the next few quarters. We expect our combined net interest income and RJBDP fees from third-party banks for the remainder of the fiscal year to be relatively unchanged from our current quarter aggregate level, but such revenues are largely dependent on the level of short-term interest rates, client cash balances and other factors that may impact the current cash environment. In addition, although our current loan portfolio credit metrics are solid and we continue to proactively manage our credit risk in our loan portfolio, future economic deterioration or changes in the macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.

Previous wording

For the six months ended March 31, 2024, we generated net revenues of $6.13 billion, an increase of 8% compared with the prior-year period, and pre-tax income of $1.24 billion, an increase of 2%. Our net income available to common shareholders of $971 million was 4% higher than the prior-year period and our earnings per diluted share were $4.54, reflecting a 7% increase. Our annualized ROCE was 18.3%, compared with 19.3% for the prior-year period, and our annualized ROTCE was 22.0%(1), compared with 23.8%(1) for the prior-year period.

Current wording

For the nine months ended June 30, 2024, we generated net revenues of $9.36 billion, an increase of 9% compared with the prior-year period, and pre-tax income of $1.88 billion, an increase of 11%. Our net income available to common shareholders of $1.46 billion was 12% higher than the prior-year period and our earnings per diluted share were $6.85, reflecting a 15% increase. Our annualized ROCE was 18.2%, compared with 17.9% for the prior-year period, and our annualized ROTCE was 21.8%(1), compared with 22.0%(1) for the prior-year period.

Previous wording

Excluding the impact of $49 million of expenses related to acquisitions completed in prior years, adjusted net income available to common shareholders for the six months ended March 31, 2024 was $1.01 billion(1), an increase of 6% compared with adjusted net income available to common shareholders for the prior-year period which, in addition to acquisition-related expenses, excluded the impact of a $32 million favorable insurance settlement related to a previously-settled legal matter. Our adjusted earnings per diluted share were $4.71(1), an increase of 9% compared with the prior-year period. Adjusted annualized ROCE was 19.0%(1), compared with 19.7%(1) for the prior-year period, and adjusted annualized ROTCE was 22.8%(1), compared with 24.2%(1) for the prior-year period.

Current wording

Excluding the impact of $72 million of expenses related to acquisitions completed in prior years, adjusted net income available to common shareholders for the nine months ended June 30, 2024 was $1.52 billion(1), an increase of 12% compared with adjusted net income available to common shareholders for the prior-year period which, in addition to acquisition-related expenses, excluded the impact of a $32 million favorable insurance settlement related to a previously-settled legal matter. Our adjusted earnings per diluted share were $7.10(1), an increase of 15% compared with the prior-year period. Adjusted annualized ROCE was 18.8%(1), compared with 18.5%(1) for the prior-year period, and adjusted annualized ROTCE was 22.5%(1), compared with 22.7%(1) for the prior-year period.

Previous wording

The increase in net revenues compared with the prior-year period was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of each of the current-year billing periods compared with the prior-year billing periods. Brokerage revenues also increased compared with the prior-year period largely due to an increase in client activity in the PCG segment. Investment banking revenues increased primarily due to more favorable market conditions in the current-year period. Offsetting these increases was a decrease in combined net interest income and RJBDP fees from third-party banks, as the benefits of higher short-term interest rates and higher average interest-earning assets and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined compared with the prior-year period, while balances in the higher-cost ESP and certificates of deposit increased.

Current wording

The increase in net revenues compared with the prior-year period was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of each of the current-year billing periods compared with the prior-year billing periods. Brokerage revenues also increased compared with the prior-year period largely due to an increase in client activity in the PCG segment. Investment banking revenues increased primarily due to more favorable market conditions in the current-year period. Offsetting these increases was a decrease in combined net interest income and RJBDP fees from third-party banks, as the benefits of higher short-term interest rates and higher average interest-earning asset balances and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as RJBDP balances swept to the Bank segment declined compared with the prior-year period and a significant portion was replaced with higher-cost ESP balances, as well as an increase in certificate of deposit balances.

Previous wording

Compensation, commissions and benefits expense increased 11%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio was 64.7%, compared with 62.8% for the prior-year period. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 64.3%(1), compared with an adjusted compensation ratio of 62.2%(1) for the prior-year period. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year period, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.

Current wording

Compensation, commissions and benefits expense increased 12%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio was 64.7%, compared with 63.1% for the prior-year period. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 64.3%(1), compared with an adjusted compensation ratio of 62.4%(1) for the prior-year period. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year period, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.

Previous wording

Non-compensation expenses increased $34 million, or 4%, largely due to a $32 million insurance settlement received in the prior-year period related to a previously-settled litigation matter, the impact of an FDIC special assessment of $11 million, as well as higher communications and information processing expenses resulting from continued investments in technology to benefit our clients and advisors, and higher investment sub-advisory fees resulting from growth in assets under management in sub-advised programs. Partially offsetting these increases in expenses, expenses related to legal and regulatory matters declined significantly as the current-year period reflected net legal and regulatory matter reserve releases while the prior-year period included elevated provisions for legal and regulatory matters including an unfavorable arbitration award.

Current wording

Non-compensation expenses decreased 3%, largely due to a significant decrease in expenses related to legal and regulatory matters, as the current-year period reflected net legal and regulatory matter reserve releases while the prior-year period included elevated provisions for legal and regulatory matters, as well as a decrease in the bank loan provision for credit losses. Partially offsetting these decreases in expenses, was the impact of higher communications and information processing expenses resulting from continued investments in technology to benefit our clients and advisors and to support our growth, a $32 million insurance settlement received in the prior-year period related to a previously-settled litigation matter that did not recur, higher non-interest expenses related to deposits, including an FDIC special assessment of $10 million, as well as higher investment sub-advisory fees resulting from growth in assets under management in sub-advised programs. Occupancy and equipment and business development expenses also increased compared with the prior-year period.

Previous wording

Our effective income tax rate was 21.4% for the six months ended March 31, 2024, a decrease from 22.6% for the prior-year period, primarily due to a larger tax benefit recognized during the current-year period related to nontaxable valuation gains associated with our company-owned life insurance policies compared to the prior-year period, as well as a lower amount of nondeductible fines and penalties compared to the prior-year period.

Current wording

Our effective income tax rate was 22.1% for the nine months ended June 30, 2024, a decrease from 23.0% for the prior-year period, primarily due to the impact of a higher tax benefit recognized in the current-year period related to nontaxable valuation gains associated with our company-owned life insurance policies, as well as a change in the amount of nondeductible fines and penalties compared with the prior-year period.

Previous wording

Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total common equity attributable to RJF. Average common equity is computed by adding the total common equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two. Average common equity for the year-to-date period is computed by adding the total common equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by three, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by three. Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period.

Current wording

Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total common equity attributable to RJF. Average common equity is computed by adding the total common equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two. Average common equity for the year-to-date period is computed by adding the total common equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by four. Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period.

Previous wording

Largely in response to inflationary pressures since the beginning of fiscal year 2022, the Fed rapidly and consistently increased its benchmark short-term interest rates commencing in March 2022 and continuing throughout our fiscal year 2023. Since the beginning of our fiscal year 2023, the Fed increased the Fed funds target rate 225 basis points from a September 30, 2022 range of 3.00% to 3.25% to a March 31, 2024 range of 5.25% to 5.50%. While the Fed has left its benchmark rate unchanged in our fiscal year 2024 to-date, in its most recent meetings, it has indicated that it intends to closely monitor market conditions to determine whether it will continue to hold rates steady or initiate interest rate cuts later in our fiscal year 2024. The following table details the Fed’s short-term interest rate activity since the beginning of our fiscal year 2023.

Current wording

Largely in response to inflationary pressures since the beginning of fiscal year 2022, the Fed rapidly and consistently increased its benchmark short-term interest rates commencing in March 2022 and continuing throughout our fiscal year 2023. Since the beginning of our fiscal year 2023, the Fed increased the Fed funds target rate 225 basis points from a September 30, 2022 range of 3.00% to 3.25% to a June 30, 2024 range of 5.25% to 5.50%. While the Fed has left its benchmark rate unchanged in our fiscal year 2024 to-date, in its most recent meetings, it has indicated that it continues to closely monitor market conditions to determine whether it will continue to hold rates steady or initiate interest rate cuts later in our fiscal year 2024. The following table details the Fed’s short-term interest rate activity since the beginning of our fiscal year 2023.

Previous wording

Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Bank, and Other segments) and the nature of fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP (included in account and service fees), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Our domestic client cash sweep balances continue to represent a relatively low-cost funding source, while other deposit products utilized as part of our strategy to diversify our funding sources, such as our ESP introduced to our clients in our fiscal year 2023, have a higher relative cost than other alternatives.

Current wording

Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Bank, and Other segments) and the nature of fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP (included in account and service fees), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates have historically resulted in an increase in our net earnings and, notwithstanding potential offsetting favorable impacts in other areas of our business, we expect decreases in short-term interest rates to generally reduce our net earnings. As it relates to our net interest income, the magnitude of the effect of a decrease in interest rates depends on a number of factors impacting balances, asset yields, and the cost of funding. The magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Decreases in short-term interest rates generally also result in a decrease to our RJBDP fees earned from third-party banks, although the magnitude of the impact may also be impacted by demand for cash balances by third-party banks and the rate paid to clients on their cash sweep balances. Rates paid to clients on their cash balances are generally impacted by the level of short-term interest rates, as well as competitive industry dynamics impacting rates paid to clients and the demand for client cash. Additionally, any future changes to regulatory rules or interpretations governing the fees the firm earns on cash sweep balances could also impact the rates we pay to clients on cash balances. In recent fiscal years, we have sought to continue to meet client needs for higher yields on cash balances in a relatively higher interest rate environment without sacrificing the benefits of FDIC insurance on such balances by introducing new products leveraging our bank subsidiaries or through initiatives offered within the RJBDP. Such programs include our ESP which was introduced to our clients in fiscal year 2023 where such deposits are held by Raymond James Bank and offer enhanced rates and FDIC coverage of up to $50 million for certain accounts, as well as initiatives offered from time-to-time within the RJBDP program which may offer enhanced rates to clients on certain balances within the program. These programs, while meeting client needs and diversifying our funding sources, have a higher relative cost than other alternatives therefore reducing our net interest margin and yields on RJBDP balances.

Previous wording

Combined net interest income and RJBDP fees from third-party banks for the three and six months ended March 31, 2024, declined compared with the comparable prior-year periods driven by a decline in net interest income, as the benefits from higher short-term interest rates to-date in fiscal year 2024 over fiscal year 2023 levels, and higher average interest-earning asset balances were more than offset by a significant increase in interest expense. The increase in interest expense primarily resulted from a shift in the mix of deposit balances in our Bank segment, as lower-cost RJBDP balances declined and a significant portion was replaced with higher-cost ESP balances, which was introduced to clients in March 2023, as well as an increase in certificates of deposit. However, growth in the ESP balances since its introduction has allowed us to deploy a higher portion of RJBDP balances to third-party banks instead of our Bank segment which, coupled with higher yields earned on such balances, resulted in an increase in RJBDP fees from such banks compared with the prior-year periods.

Current wording

Combined net interest income and RJBDP fees from third-party banks was $672 million and $2.06 billion for the three and nine months ended June 30, 2024, respectively, compared to $708 million and $2.16 billion for the three and nine months ended June 30, 2023. The 5% decline for both periods compared with the comparable prior-year periods was driven by a decline in net interest income, as the benefits from higher short-term interest rates to-date in fiscal year 2024 over fiscal year 2023 levels, and higher average interest-earning asset balances were more than offset by a significant increase in interest expense. The increase in interest expense primarily resulted from a shift in the mix of deposit balances in our Bank segment, as RJBDP balances swept to the Bank segment declined and a significant portion was replaced with higher-cost ESP balances, which was introduced to clients in March 2023, as well as an increase in certificate of deposit balances for the year-to-date period. However, the growth in the ESP balances year over year has allowed us to deploy a relatively higher portion of RJBDP balances to third-party banks instead of our Bank segment which, coupled with higher yields earned on such balances, resulted in an increase in RJBDP fees from third-party banks compared with the prior-year periods.

Previous wording

(1)Domestic Private Client Group net new assets represents domestic Private Client Group client inflows, including dividends and interest, less domestic Private Client Group client outflows, including commissions, advisory fees and other fees.

Current wording

(1)Domestic Private Client Group net new assets represents domestic Private Client Group client inflows, including dividends and interest, less domestic Private Client Group client outflows, including commissions, advisory fees and other fees. This metric for the three and nine months ended June 30, 2023 includes the impact of the departure of approximately $5 billion of assets under administration, representing the portion of advisors previously associated through a single relationship in the firm’s independent contractors division whose affiliation with the firm ended in the fiscal third quarter of 2023.

Previous wording

PCG AUA and PCG assets in fee-based accounts as of March 31, 2024 increased 6% and 7%, respectively, compared with December 31, 2023, and increased 19% and 20%, respectively, compared with March 31, 2023, due to equity market appreciation and net new assets, due to the favorable impact of our advisor retention and recruiting. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements.

Current wording

PCG AUA and PCG assets in fee-based accounts as of June 30, 2024 increased 2% and 3%, respectively, compared with March 31, 2024, and increased 15% and 18%, respectively, compared with June 30, 2023, due to equity market appreciation and net new assets, due to the favorable impact of our advisor retention and recruiting. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements.

Previous wording

The number of financial advisors as of March 31, 2024 increased compared with December 31, 2023 and March 31, 2023, as new recruits and trainees that were moved into production roles exceeded departures and planned retirements. Planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans, are seasonally higher in the fiscal first quarter. We have and may continue to experience transfers to our RCS division in fiscal 2024; however, consistent with our experience in fiscal 2023, we would not expect these financial advisor transfers to significantly impact our results of operations. Advisors in our RCS division are not included in our financial advisor metric although their client assets are included in PCG AUA.

Current wording

The number of financial advisors as of June 30, 2024 increased compared with March 31, 2024 and June 30, 2023, as new recruits and trainees that were moved into production roles exceeded departures and planned retirements. Generally, with planned retirements, assets are retained at the firm pursuant to advisor succession plans. During the three months ended June 30, 2024, approximately 50 financial advisors transferred to our RCS division, primarily related to one firm with financial advisors previously affiliated as independent contractors. During the nine months ended June 30, 2024, approximately 90 financial advisors transferred to RCS. Advisors in our RCS division are not included in our financial advisor metric although their client assets are included in PCG AUA. We may continue to experience transfers to our RCS division; however, consistent with our experience in fiscal 2023 and fiscal 2024 to date, we would not expect these financial advisor transfers to significantly impact our results of operations.

Previous wording

(1)In March 2023, we introduced our ESP, in which Private Client Group clients may deposit cash in a high-yield Raymond James Bank account. ESP balances held at Raymond James Bank as of the respective period end are included in “Bank deposits” on our Condensed Consolidated Statement of Financial Condition. As of March 31, 2024, we had placed $324 million of ESP deposits with third-party banks, and accordingly such deposits held at third-party banks were not included in our bank deposit liability balance on our Condensed Consolidated Statement of Financial Condition.

Current wording

(1)In March 2023, we introduced our ESP, in which Private Client Group clients may deposit cash in a high-yield Raymond James Bank account. ESP balances held at Raymond James Bank as of the respective period end are included in “Bank deposits” on our Condensed Consolidated Statement of Financial Condition.

Previous wording

A significant portion of our domestic clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their brokerage accounts are swept into interest-bearing deposit accounts at either of our bank subsidiaries, which are included in our Bank segment, or various third-party banks. Balances swept to third-party banks are not reflected on our Condensed Consolidated Statements of Financial Condition. Our PCG segment earns servicing fees for the administrative services we provide related to our clients’ deposits that are swept to banks as part of the RJBDP. These servicing fees are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients on balances in the RJBDP. Under our intersegment policies, the PCG segment receives from our Bank segment the greater of a base servicing fee or a net yield equivalent to the average yield that the firm would otherwise receive from third-party banks in the RJBDP. In the current interest-rate environment, the PCG segment RJBDP fee revenues are derived from the yield from third-party banks in the program and the Bank segment RJBDP servicing costs reflect such market rate for the deposits. The fees that the PCG segment earns from the Bank segment, as well as the servicing costs incurred on the deposits in the Bank segment, are eliminated in consolidation.

Current wording

A significant portion of our domestic clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their brokerage accounts are swept into interest-bearing deposit accounts at either of our bank subsidiaries, which are included in our Bank segment, or various third-party banks. Balances swept to third-party banks are not reflected on our Condensed Consolidated Statements of Financial Condition. Our PCG segment earns servicing fees for the administrative services we provide related to our clients’ deposits that are swept to banks as part of the RJBDP. These servicing fees are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients on balances in the RJBDP. Under our intersegment policies, the PCG segment receives from our Bank segment the greater of a base servicing fee or a net yield equivalent to the average yield that the firm would otherwise receive from third-party banks in the RJBDP. In the current interest-rate environment, the PCG segment RJBDP fee revenues are derived from the yield from third-party banks in the program and the Bank segment RJBDP servicing costs reflect such market rate for the deposits. The fees that the PCG segment earns from the Bank segment, as well as the servicing costs incurred on the deposits in the Bank segment, are eliminated in consolidation. See “Management’s Discussion and Analysis - Net interest analysis” for further information regarding factors impacting the servicing fees we receive related to the RJBDP, as well as the interest paid to clients on their cash balances.

Previous wording

The “Average yield on RJBDP - third-party banks” in the preceding table is computed by dividing annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balances at third-party banks. The average yield on RJBDP - third-party banks for the three and six months ended March 31, 2024 increased from the prior year largely as a result of the increases in the Fed’s short-term benchmark interest rate.

Current wording

The “Average yield on RJBDP - third-party banks” in the preceding table is computed by dividing annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balances at third-party banks. The average yield on RJBDP - third-party banks for the three and nine months ended June 30, 2024 increased from the prior year largely as a result of the increases in the Fed’s short-term benchmark interest rate; however, the average yield on RJBDP - third-party banks for the three months ended June 30, 2024 decreased 18 basis points compared with the preceding quarter as a result of an increase in certain balances in the RJBDP program which offered a higher yield. See “Management’s Discussion and Analysis - Net interest analysis” for further information.

Previous wording

Total clients’ domestic cash sweep and ESP balances increased slightly compared with December 31, 2023, but increased 11% compared with March 31, 2023 as growth in the ESP, which was introduced to clients in March 2023, more than offset a decline in client cash sweep balances. PCG segment results can be impacted by not only changes in the level of client cash balances, but also by the allocation of client cash balances between the RJBDP, the CIP, and the ESP, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors. For example, continued growth in the ESP since its introduction has provided us the flexibility to sweep more RJBDP balances to third-party banks and reduce the amount of RJBDP balances held in our Bank segment.

Current wording

Total clients’ domestic cash sweep and ESP balances decreased 3% compared with March 31, 2024, with decreases in both RJBDP balances and the ESP, which was introduced to clients in March 2023. Total clients’ domestic cash sweep and ESP balances also decreased 3% compared with June 30, 2023, where a decline in client cash sweep balances was largely offset by growth in the ESP. PCG segment results can be impacted by not only changes in the level of client cash balances, but also by the allocation of client cash balances between the RJBDP, the CIP, and the ESP, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors. For example, the ESP has provided us the flexibility to sweep more RJBDP balances to third-party banks and reduce the amount of RJBDP balances held in our Bank segment.

Previous wording

Asset management and related administrative fees increased $181 million, or 16%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter resulting from market appreciation, as well as growth from advisor recruiting.

Current wording

Asset management and related administrative fees increased $200 million, or 17%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter resulting from market appreciation, as well as growth primarily from advisor recruiting.

Previous wording

Account and service fees decreased $27 million, or 5%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of an increase in short-term interest rates, while RJBDP fees from third-party banks increased due to higher average balances swept to third-party banks, as well as the aforementioned increase in short-term interest rates. Partially offsetting the decline in total RJBDP fees was an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets.

Current wording

Account and service fees decreased $15 million, or 3%, due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment, while RJBDP fees from third-party banks increased largely due to higher average balances swept to third-party banks. Partially offsetting the decline in total RJBDP fees was an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets held in client accounts.

Previous wording

Compensation-related expenses increased $201 million, or 14%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Current wording

Compensation-related expenses increased $210 million, or 14%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

Non-compensation expenses decreased $7 million, or 3%, due to lower provisions for legal and regulatory matters as the prior-year quarter included the impact of an unfavorable arbitration award, partially offset by higher communications and information processing expenses and occupancy expenses as a result of our growth, and higher business development expenses.

Current wording

Non-compensation expenses decreased $6 million, or 2%, due to lower provisions for legal and regulatory matters, partially offset by higher communications and information processing expenses and occupancy expenses as a result of our growth, and higher business development expenses.

Previous wording

Net revenues of $2.34 billion increased 9% and pre-tax income of $444 million increased 1%.

Current wording

Net revenues of $6.98 billion increased 9% and pre-tax income of $1.32 billion increased 3%.

Previous wording

Asset management and related administrative fees increased $319 million, or 15%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year periods resulting from market appreciation and advisor recruiting.

Current wording

Asset management and related administrative fees increased $519 million, or 16%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year periods resulting from market appreciation, as well as growth primarily from advisor recruiting.

Previous wording

Brokerage revenues increased $43 million, or 12%, primarily due to higher client activity in the current quarter, as well as higher trailing revenues, largely due to higher asset values.

Current wording

Brokerage revenues increased $140 million, or 13%, primarily due to higher client activity in the current-year period, as well as higher trailing revenues, largely due to higher asset values.

Previous wording

Account and service fees decreased $44 million, or 4%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of higher short-term interest rates, while RJBDP fees from third-party banks increased due to the aforementioned increase in short-term interest rates, as well as higher average balances swept to third-party banks. Partially offsetting the decline in total RJBDP fees, mutual fund service fees increased, primarily from higher average mutual fund assets, and client account and other fees increased reflecting higher custody and account maintenance fees.

Current wording

Account and service fees decreased $59 million, or 4%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of higher short-term interest rates, while RJBDP fees from third-party banks increased due to the aforementioned increase in short-term interest rates, as well as higher average balances swept to such banks. Partially offsetting the decline in total RJBDP fees, mutual fund service fees increased, primarily from higher average mutual fund assets, and client account and other fees increased primarily due to business growth.

Previous wording

Net interest income increased $9 million, or 5%, primarily due to the increase in short-term interest rates.

Current wording

Net interest income increased $9 million, or 3%, reflecting the increase in short-term interest rates.

Previous wording

Compensation-related expenses increased $353 million, or 12%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Current wording

Compensation-related expenses increased $563 million, or 13%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

Net revenues of $321 million increased 6% and the pre-tax loss was $17 million, compared with a pre-tax loss of $34 million for the prior-year quarter.

Current wording

Net revenues of $330 million increased 20% and the pre-tax loss was $14 million, compared with a pre-tax loss of $34 million for the prior-year quarter.

Previous wording

Investment banking revenues increased $26 million, or 18%, compared with the prior-year quarter, primarily due to improvement in merger & acquisition and advisory revenues, which continued to be subdued although improved compared with the prior-year quarter, as well as higher debt underwriting revenues in both our fixed income and public finance businesses.

Current wording

Investment banking revenues increased $32 million, or 23%, compared with the prior-year quarter, primarily due to improvement in debt underwriting revenues in both our public finance and fixed income businesses, as well as higher equity underwriting revenues. Merger & acquisition and advisory revenues were slightly higher compared with the prior-year quarter.

Previous wording

Compensation-related expenses increased $9 million, or 4%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Current wording

Compensation-related expenses increased $23 million, or 10%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

Net revenues of $659 million increased 10% and the pre-tax loss was $14 million, compared with a pre-tax loss of $50 million for the prior-year period.

Current wording

Net revenues of $989 million increased 13% and the pre-tax loss was $28 million, compared with a pre-tax loss of $84 million for the prior-year period.

Previous wording

Investment banking revenues increased $63 million, or 23%, primarily due to a higher volume of transactions closed as a result of more favorable investment banking market conditions in the current-year period compared to the prior-year period.

Current wording

Investment banking revenues increased $95 million, or 23%, primarily due to a higher volume of transactions closed as a result of more favorable investment banking market conditions in the current-year period compared to the prior-year period.