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Raymond James Financial Inc.'s (RJF - Analyst Report) fiscal third-quarter 2013 (ended Jun 30) earnings per share of 65 cents were in line with the Zacks Consensus Estimate. Moreover, this compared favorably with 64 cents earned in the year-ago quarter.

Results on a year-over-year basis benefited from a rise in revenues, partially offset by higher expenses. Additionally, growth in assets under management (AUM) and assets under administration were among the positives.

GAAP net income for the reported quarter came in at $83.9 million or 59 cents per share, compared with $76.4 million or 55 cents per share in the prior-year quarter.

Behind the Headlines

Raymond James’ total revenue for the quarter came in at $1,137.7 million, climbing 2% year over year. Moreover, this surpassed the Zacks Consensus Estimate of $1,114.0 million.

The rise in total revenue was mainly driven by an increase in securities commissions and fees, investment advisory fees as well as account and service fees. These were partially offset by a fall in other revenues, investment banking and interest income.

Non-interest expenses increased 3% from the prior-year quarter to $980.6 million. This was primarily due to a rise in compensation and benefits expenses, communications and information processing, investment sub-advisory fees and other expenses. These were partly offset by a decline in occupancy and equipment costs, clearance and floor brokerage costs as well as business development expenses and acquisition related expenses.

As of Jun 30, 2013, client assets under administration rose 9% year over year to $405.8 billion. Similarly, financial AUM totaled $52.2 billion, increasing 28% from the year-ago quarter.

Balance Sheet
 
As of Jun 30, 2013, Raymond James reported total assets of $22.2 billion, up 5% year over year. Shareholders’ equity came in at $3.5 billion, increasing 12% from $3.21 billion in the prior-year quarter.

Book value per share at the end of the quarter was $25.62, up from $23.29 at the end of the year-ago quarter.

Performance of Other Brokerage Firms

Interactive Brokers Group, Inc.’s (IBKR - Analyst Report) second-quarter 2013 earnings were in line the Zacks Consensus Estimate. Results improved on a year-over-year basis owing to an increase in revenues and a decline in operating expenses.

Moreover, TD Ameritrade Holding Corporation’s (AMTD - Analyst Report) fiscal third-quarter 2013 (ended Jun 30) earnings marginally beat the Zacks Consensus Estimate. Better-than-expected results reflected higher revenues, partly offset by a rise in operating expenses.

However, The Charles Schwab Corporation’s (SCHW - Analyst Report) second-quarter 2013 earnings marginally missed the Zacks Consensus Estimate. Lower-than-expected results were due to higher operating expenses, partially offset by top-line growth and a benefit from provision.

Our Take

Raymond James’ strong balance sheet and its efforts to boost revenues by recruiting experienced advisors will likely be accretive to its financials going forward. Moreover, the company’s strong capital position and capital deployment activities are expected to make its stock attractive for yield-seeking investors.

However, regulatory issues, a low interest-rate environment, sluggish economic growth and persistently rising expenses will likely affect the company’s top-line improvement.

Currently, Raymond James carries a Zacks Rank #4 (Sell).

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