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RJ

RAYMOND JAMES FINANCIAL INC (RJF)·Q1 2025 Earnings Summary

Executive Summary

  • Record net revenues of $3.54B (+17% y/y, +2% q/q) and diluted EPS of $2.86; adjusted diluted EPS of $2.93. Strength was led by asset management fees (+24% y/y) and investment banking (+80% y/y); interest income declined (-2% y/y, -4% q/q) .
  • Capital Markets momentum continued: M&A advisory revenue hit $226M (+92% y/y, +10% q/q), driving segment net revenues to $480M (+42% y/y) despite seasonally lower affordable housing revenues .
  • Bank segment showed mixed trends: NIM fell to 2.60% (−14 bps y/y, −2 bps q/q) while net loans grew to a record $47.2B (+7% y/y, +3% q/q) with nominal provision; credit metrics improved (criticized loans 1.26%, down from 1.47%) .
  • Near-term guidance implies sequential moderation next quarter from two fewer billing days: asset management fees down ~2%, NII + RJBDP third‑party fees down 2–3%; firm reiterated FY25 effective tax rate ~24–25% and non‑comp expenses ex specified items ~$2.1B .

What Went Well and What Went Wrong

  • What Went Well

    • “Record” top‑line and EPS: Net revenues $3.54B (+17% y/y) and diluted EPS $2.86; adjusted diluted EPS $2.93 (+22% y/y) .
    • Robust advisory cycle: M&A and advisory revenue $226M (second‑best historically), with CEO noting “realization of the pipeline” and continued optimism for closings .
    • Asset gathering and fee base: PCG fee‑based AUA reached a record $876.6B (+17% y/y); domestic PCG net new assets were $14.0B (4.0% annualized), with management highlighting recruiting pipeline and technology differentiation .

  • What Went Wrong

    • Net interest pressure: RJBDP third‑party yield fell to 3.12% (−22 bps q/q) and firmwide NII + RJBDP fees declined; bank NIM slid to 2.60% .
    • Seasonality and mix: Affordable housing revenues were seasonally weaker q/q, weighing on Capital Markets sequential net revenue (−1% q/q) .
    • FX and specific attrition impacted AUA: Management cited FX (U.K./Canada) and the previously announced large independent branch departure impacting end‑of‑period assets; ex‑departure NNA growth would have been ~5.4% .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Revenues ($USD Billions)$3.228 $3.462 $3.537
Net Income to Common ($USD Billions)$0.491 $0.601 $0.599
Diluted EPS ($USD)$2.31 $2.86 $2.86
Adjusted Diluted EPS ($USD)$2.39 $2.95 $2.93
Pre‑tax Margin (%)20.0% 22.0% 21.2%
Total Compensation Ratio (%)64.7% 62.4% 64.2%
Asset Mgmt & Admin Fees ($USD Billions)$1.611 $1.662 $1.743
Investment Banking ($USD Millions)$183 $315 $325
Interest Income ($USD Billions)$1.057 $1.073 $1.027

Segment breakdown

SegmentNet Revenues ($MM) Q3 2024Net Revenues ($MM) Q4 2024Net Revenues ($MM) Q1 2025Pre‑tax Income ($MM) Q3 2024Pre‑tax Income ($MM) Q4 2024Pre‑tax Income ($MM) Q1 2025
Private Client Group2,416 2,476 2,548 441 461 462
Capital Markets330 483 480 (14) 95 74
Asset Management265 275 294 112 116 125
Bank418 433 425 115 98 118

KPIs and balance‑sheet metrics

KPIQ3 2024Q4 2024Q1 2025
Client AUA ($USD Trillions)$1.476 $1.571 $1.557
PCG Fee‑based AUA ($USD Billions)$820.6 $875.2 $876.6
Cash Sweep + ESP ($USD Billions)$56.448 $57.875 $59.736
Bank Loans, net ($USD Billions)$45.149 $45.994 $47.164
Bank NIM (%)2.64% 2.62% 2.60%
RJBDP Avg Yield (third‑party) (%)3.41% 3.34% 3.12%
Domestic PCG Net New Assets ($USD Billions)$16.517 $12.969 $14.020
Domestic PCG NNA Growth (annualized) (%)5.2% 4.0% 4.0%
NII + RJBDP Fees (third‑party) ($USD Millions)$672 $678 $673

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Asset Mgmt & Related Fees (seq.)Q2 FY25N/A~−2% due to two fewer billing daysLowered
NII + RJBDP Fees (third‑party, seq.)Q2 FY25N/A−2% to −3%, driven by fewer billing days and recent rate cutsLowered
Effective Tax RateFY25N/A~24%–25%Provided/maintained
Non‑comp expenses (ex bank loss provision, unexpected legal/regulatory, non‑GAAP)FY25N/A~$2.1B (~10% y/y growth on adjusted base)Provided
Dividend per Common ShareOngoing$0.45 (prior)$0.50 (11% increase)Raised
Share Repurchase AuthorizationOngoing$1.5B (prior authorization, ~$644M remaining as of 12/3/24)New $1.5B authorization; ~$1.45B remaining as of 1/24/25New authorization

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3, Q4)Current Period (Q1 2025)Trend
Advisory/M&A activityQ3: IB $173M; M&A down vs prior qtr, pipeline healthy . Q4: IB $306M; M&A $205M; environment more constructive .IB $317M; M&A $226M (near‑record); continued optimism .Up; pipeline converting.
Rates/RJBDP yieldRJBDP yield 3.41% (Q3) . Q4: 3.34% .3.12% (two 25 bp cuts in Q1 plus prior 50 bp); deposit betas ~35% sweep, ~100% ESP .Down yields; deposit beta offsets.
Bank NIM & loan growthNIM 2.64% (Q3), 2.62% (Q4) .NIM 2.60%; loans up 3% q/q to $47.2B; provision nominal .NIM down; loans up.
Recruiting/PCG growthQ3: strong recruiting and fee‑based growth . Q4: record fee‑based AUA .CEO/President emphasize strong pipeline; PCG fee‑based record $876.6B .Strong/stable.
Technology/AINot a focal point in prior press releases.Active investment program; formal AI initiatives to be detailed at Analyst Day .Increasing focus.
FX/Regional impactsNoted in Q1 that U.K./Canada FX impacted AUA .Adjusted NNA would be ~5.4% ex large branch departure .Transitory headwinds.

Management Commentary

  • CEO Paul Reilly: “Fiscal 2025 started strong with year‑over‑year revenue growth of 17% and net income growth of 21%… driven by record asset management and related administrative fees and robust investment banking revenues.” He highlighted optimism entering Q2 with strong client assets, loan growth, and healthy recruiting and IB activity .
  • CFO Butch Oorlog: Expect asset management fees ~−2% and NII + RJBDP fees −2% to −3% next quarter due to two fewer billing days and recent rate cuts; reiterated FY25 ETR ~24–25% and non‑comp expenses ~$2.1B ex specified items .
  • President Paul Shoukry: Emphasized improving IB environment, rising SBL demand post rate cuts, and front‑footed stance on organic and inorganic growth; noted strong technology and adviser experience as differentiators .

Notable quotes

  • “Domestic net new assets during the quarter equaled $14 billion… Adjusting for those assets, domestic net new asset growth in the quarter would’ve been approximately 5.4%” .
  • “Based on current rates… we would expect the aggregate of NII and RJBDP third‑party fees to be down 2% to 3% in the fiscal second quarter” .
  • “Deposit beta has been averaging around 35% on the sweep balances, but… closer to 100% on… ESP” .
  • “We are well positioned to continue investing in organic growth and will be front footed in pursuing acquisitions” .

Q&A Highlights

  • Capital deployment and leverage targets: Management reiterated target Tier 1 leverage ratio of ~10% over time, prioritizing organic growth, selective M&A, then buybacks; excess capital remains sizable with flexibility to modulate repurchases .
  • Capital Markets margin trajectory: Over cycles, 15–20% pre‑tax margin is a reasonable range; >20% requires both equities and fixed income firing simultaneously, which is atypical .
  • PCG comp ratio and mix: Adviser comp near ~74–75% long‑run; recent mix and scale benefits observed; recruiting pipeline remains strong despite lumpiness .
  • NII/NIM outlook: Expect headwind next quarter from billing days, then stabilization with asset growth turning NII into a tailwind; AFS securities repricing ~$1.5B over next 12 months to fund higher‑yielding loans .
  • Cash programs and sweep trends: Client‑first cash offering across sweep, ESP, and money market platforms; long‑term sorting dynamic in later innings as rates fall; FX contributed to AUA optics .

Estimates Context

  • S&P Global Wall Street consensus EPS and revenue estimates were unavailable at query time due to a provider limit. As a result, explicit “vs. consensus” comparisons cannot be shown for Q1 FY25. Values retrieved from S&P Global were unavailable at this time.
  • Directionally, IB strength (M&A/advisory near‑record) and fee‑based asset growth argue for potential upward revisions to IB and asset management run‑rates, while management’s explicit sequential guidance (−2% asset management fees; −2% to −3% NII + RJBDP fees on fewer billing days and lower rates) suggests near‑term moderation in Q2 FY25 .

Key Takeaways for Investors

  • Earnings quality broadened: Asset management fees (+24% y/y) and investment banking (+80% y/y) drove a record quarter, offsetting rate‑linked NII pressures .
  • Advisory cycle is turning: Two consecutive quarters of strong M&A/advisory ($205M in Q4, $226M in Q1) support IB momentum into FY25, a likely stock catalyst if pipeline continues converting .
  • Bank trends: NIM drifted lower to 2.60%, but record loans ($47.2B) and nominal provisions plus improving credit (criticized loans down to 1.26%) limit downside from spread compression .
  • Near‑term setup: Expect sequential softness next quarter from two fewer billing days (−~2% asset management; −2–3% NII + RJBDP). Position sizing for event‑driven IB upside while hedging rate beta is prudent .
  • Capital optionality: Tier 1 leverage at 13.0% and total capital at 25.0% provide flexibility for organic growth, selective M&A, and buybacks; dividend raised to $0.50 per quarter and $1.5B repurchase authorization supports shareholder returns .
  • PCG engine intact: Record fee‑based AUA ($876.6B) and domestic NNA ($14B; 4% annualized) underpin recurring revenue growth; technology investments and multi‑affiliation model bolster recruiting and retention .
  • Watch FX and deposit betas: FX can create AUA noise; deposit betas (~35% sweep, ~100% ESP) indicate faster rate pass‑through on higher‑yield cash products, affecting RJBDP yields and NII trajectory amid a lower‑rate path .

Appendix: Other Relevant Press Releases (Q1 FY25)

  • Dividend declaration: $0.50 per common share payable April 15, 2025; preferred dividend declared for Series B .
  • Prior dividend increase and buyback authorization: Raised common dividend to $0.50 (from $0.45) and authorized up to $1.5B repurchases (replacing prior $1.5B authorization) .

Notes and Disclosures

  • Interest allocation methodology was updated effective Oct 1, 2024, increasing PCG interest income and reducing Other segment interest income; prior periods unchanged .
  • Non‑GAAP adjustments primarily reflect acquisition‑related retention and amortization of intangibles; adjusted diluted EPS was $2.93 (+22% y/y) versus GAAP $2.86 .