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Raymond James (RJF) Q1 Earnings Top Estimates, Stock Up 9.7%

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Shares of Raymond James (RJF - Free Report) jumped 9.7% in response to better-than-expected first-quarter fiscal 2022 (ended Dec 31) results in aftermarket trading. Adjusted earnings of $2.12 per share easily outpaced the Zacks Consensus Estimate of $1.77. The bottom line was up 42% from the prior-year quarter.

Results benefited from an impressive performance of the Capital Markets and Asset Management segments, which majorly drove revenues. A rise in assets balance, provision benefit and a strong balance sheet position were the other tailwinds. However, higher operating expenses posed an undermining factor.
Net income (GAAP basis) was $446 million or $2.10 per share, up from $312 million or $1.48 per share in the prior-year quarter.

Revenues & Costs Increase

Net revenues were $2.78 billion, increasing 25% year over year. The rise was driven by improvement in all revenue components, except other revenues. The top line also beat the Zacks Consensus Estimate of $2.67 billion.

Segment-wise, in the reported quarter, RJ Bank registered a rise of 10% from the prior year in net revenues. Also, Private Client Group and Asset Management recorded 25% and 21% growth, respectively, in revenues. Capital Markets’ top line surged 36% from the year-ago quarter. Others recorded negative revenues of $15 million against revenues of $4 million in the prior-year quarter.

Non-interest expenses increased 22% to $2.22 billion. The rise was mainly due to higher compensation, commissions and benefits, and business development charges and investment sub-advisory fees, which were partly offset by benefit from bank loan provision.

As of Dec 31, 2021, client assets under administration were $1.26 trillion, up 23% from the end of the prior-year quarter. Financial assets under management were $203.2 billion, up 20%.

Strong Balance Sheet & Capital Ratios

As of Dec 31, 2021, Raymond James reported total assets of $68.5 billion, up 11% sequentially. Total equity increased 4% from the fiscal third quarter to $8.6 billion.

Book value per share was $41.45, up from $35.73 as of Dec 31, 2020.

As of Dec 31, 2021, total capital ratio was 26.9% compared with 24.6% as of Dec 31, 2020. Tier 1 capital ratio was 25.8% compared with 23.4% as of December 2020-end.

Return on equity (annualized basis) was 21.2% at the end of the reported quarter compared with 17.2% a year ago.

Our Take

Raymond James’ global diversification efforts, strategic acquisitions and strength in the 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) fourth-quarter 2021 adjusted earnings of 86 cents per share missed the Zacks Consensus Estimate of 88 cents. The bottom line, however, grew 16% from the prior-year quarter.

Schwab’s results reflect solid client assets balance and a rise in new brokerage accounts. These were driven by solid client activity, which supported revenues during the quarter. A slight dip in operating expenses was a tailwind. However, fee waivers and lower interest rates were a drag.

Interactive Brokers Group’s (IBKR - Free Report) fourth-quarter 2021 adjusted earnings per share of 83 cents surpassed the Zacks Consensus Estimate of 82 cents. The bottom line reflects growth of 20.3% from the prior-year quarter.

IBKR recorded a marginal rise in revenues in the quarter under review. An increase in daily average revenue trades (DARTs) further aided the results. The capital position also remained strong. However, higher expenses hurt results to some extent.

LPL Financial (LPLA - Free Report) is slated to announce fourth-quarter and 2021 numbers on Feb 3. LPLA carries a Zacks Rank of 2 at present.

Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 4.9% south to $1.54 per share, implying an almost 1% rise from the prior-year reported number.