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Raymond James (RJF) Q2 Earnings Beat, Revenues & Costs Up Y/Y

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Raymond JamesRJF second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of $2.51 per share comfortably surpassed the Zacks Consensus Estimate of $2.09. Also, the bottom line was up significantly from the prior-year quarter’s $1.20.

Results benefited from impressive Capital Markets segment performance, which majorly drove revenue growth. Also, a rise in assets balance, provision benefit and strong balance sheet position were the tailwinds. However, higher operating expenses posed an undermining factor.

Net income (GAAP basis) was $355 million, up 12% from the prior-year quarter.

Revenues & Costs Rise

Net revenues were $2.37 billion, increasing 15% year over year. The rise was largely driven by higher total brokerage revenues and investment banking income. The top line also beat the Zacks Consensus Estimate of $2.23 billion.

Segment wise in the reported quarter, RJ Bank registered a decline of 24% from the prior year in net revenues. Nonetheless, Private Client Group and Asset Management recorded 10% and 14% rise in revenues, respectively. Further, Capital Markets’ top line surged 49% from the year-ago quarter. Others recorded net negative revenues of $12 million.

Non-interest expenses were up 5% to $1.93 billion. The increase was mainly due to higher compensation, commissions and benefits, and communications and information processing, which were partly offset by provision benefit.

As of Mar 31, 2021, client assets under administration were $1.09 trillion, up 40% from the end of the prior-year quarter. Financial assets under management were $178.2 billion, up 39%.

Strong Balance Sheet & Capital Ratios

As of Mar 31, 2021, Raymond James reported total assets of $56.1 billion, up 4% sequentially. Total equity increased 3% from the fiscal first quarter to $7.6 billion.

Book value per share was $55.34, up from $49.69 as of Mar 31, 2020.

As of Mar 31, 2021, total capital ratio was 24.7% compared with 25.3% as of the Mar 31, 2020 level. Tier 1 capital ratio was 23.6% compared with 24.1% as of March 2020-end.

Return on equity (annualized basis) was 19% at the end of the reported quarter compared with 9.9% in the prior-year period.

Share Repurchase Update

In the reported quarter, Raymond James repurchased approximately 0.5 million shares for $60 million.

Our Take

Raymond James’ global diversification efforts, strategic buyouts and strength in investment banking business are expected to keep supporting top-line growth. However, continuously mounting operating expenses and lower interest rates remain near-term concerns.

Currently, Raymond James carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Performance & Earnings Date of Other Brokerage Firms

Charles Schwab’s (SCHW - Free Report) first-quarter 2021 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate of 82 cents. Also, the bottom line grew 38% from the prior-year quarter.

Interactive Brokers Group’s (IBKR - Free Report) first-quarter 2021 adjusted earnings per share of 98 cents outpaced the Zacks Consensus Estimate of 90 cents. Also, the bottom line reflects growth of 42% on a year-over-year basis.

Capitala Finance Corp. (CPTA - Free Report) is slated to announce quarterly numbers on May 3.

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