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According to Reuters, Raymond James Financial Inc. (RJF - Analyst Report) is set to pull down the shutters of its equity research wing in Brazil. The company held the country’s intricate tax system and stricter regulatory landscape responsible for the unit closure in Sao Paulo.

Raymond James, after a thorough analysis, inferred that the difficult legal and tax environments are increasing the costs to run the unit. These costs were eating away a significant portion of income from the unit. Under these circumstances, the company came up with the decision of shuttering this operation.

The closure will have a massive impact on the workforce that Raymond James employs in the country. Although small in number, all the employees will be retrenched upon the closure. It has eight analysts in Sao Paulo and four employees supporting Latin American trading and sales in New York and London.

However, Raymond James will continue its operations in other Latin American countries – such as Argentina and Uruguay – along with its other global operations centered in the United States, Canada and Europe. The company employs a team of around 400 diligent analysts overseas with about 400 companies under their coverage.

Earlier this year, Raymond James concluded the acquisition of Morgan Keegan & Company, Inc. – the securities brokerage arm of Regions Financial Corp. (RF - Analyst Report). The deal was signed for $1.2 billion. Following the closure of the deal, Raymond James also laid off 218 positions, representing less than 2% of about 13,000 workers of the combined firms.

Of the total jobs cuts, 143 were at Morgan Keegan and 75 were removed from Raymond James. The equity capital markets and fixed-income groups specially witnessed a reduction in number of staff.

Shutting non-profitable/ non-core units to focus more on fundamental activities seems to be the latest strategy employed by financial institutions to improve the performance profile amidst a tough economic backdrop. Ceasing the non-performing Brazilian unit by Raymond James reflects this very strategy. This step will surely bring down costs and positively impact the top line of the company.

Currently, Raymond James retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we maintain a long term Neutral recommendation on the stock.

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