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Raymond James (RJF) Q4 Earnings Top Estimates on Solid NII Rise
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Raymond James’ (RJF - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) adjusted earnings of $2.08 per share surpassed the Zacks Consensus Estimate of $2.00. The bottom line was, however, down 2% from the prior-year quarter.
Higher interest rates and a rise in loan demand acted as tailwinds, which led to a solid rise in net interest income (NII). Further, the performance of the Private Client Group was impressive. Also, the acquisitions over the past years supported the company’s financials to some extent.
Yet, a rise in expenses and poor investment banking (IB) performance due to heightened geopolitical and macroeconomic ambiguities were the undermining factors. Also, RJF recorded bank loan provision for credit losses during the quarter, which indicates “a weaker macroeconomic outlook.”
Net income available to common shareholders (GAAP basis) was $437 million, up 2% year over year.
In fiscal 2022, adjusted earnings per share of $7.49 beat the consensus estimate of $7.37 and grew 3% year over year. Net income available to common shareholders (GAAP basis) was $1.51 billion, increasing 7%.
Revenues & Costs Increase
Net revenues were $2.83 billion, increasing 5% year over year. The rise was mainly driven by higher NII and account and service fees. The top line also beat the Zacks Consensus Estimate of $2.73 billion.
In fiscal 2022, net revenues rose 13% to $11 billion. The top line outpaced the consensus estimate of $10.90 billion.
Segment-wise, in the reported quarter, RJ Bank registered a surge of 143% from the prior year in net revenues. This was driven by higher interest rates and the inclusion of TriState Capital for a full quarter. Also, Private Client Group recorded an 11% growth in net revenues. Capital Markets’ top line declined 28%, while Asset Management’s net revenues fell 9%. Others recorded negative revenues of $207 million compared with negative revenues of $72 million in the prior-year quarter.
Non-interest expenses were up 4% to $2.22 billion. The rise was mainly due to an increase in all cost components except Compensation, commissions and benefits expenses and investment sub-advisory fees. Also, RJF recorded a bank loan provision for credit losses of $34 million compared with $5 million in the prior-year quarter.
As of Sep 30, 2022, client assets under administration were $1.09 trillion, down 7% from the end of the prior-year quarter. Financial assets under management were $173.8 billion, down 9%.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2022, Raymond James reported total assets of $81 billion, down 6% from the prior quarter. Total equity fell 1% sequentially to $9.3 billion.
Book value per share was $43.41, up from $40.08 as of Sep 30, 2021.
As of Sep 30, 2022, total capital ratio was 20.5% compared with 26.2% as of Sep 30, 2021. Tier 1 capital ratio was 19.2% compared with 25% as of September 2021-end.
Return on common equity (annualized basis) was 18.7% at the end of the reported quarter compared with 21.3% a year ago.
Share Repurchase Update
During the reported quarter, RJF repurchased 0.6 million shares for $62 million.
As of Oct 26, 2022, approximately $800 million remained under the buyback authorization. This included $38 million worth of repurchases done in October.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to keep supporting top-line growth. However, continuously mounting operating expenses, worsening operating backdrop and the volatile nature of capital markets businesses are near-term concerns.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Charles Schwab’s (SCHW - Free Report) third-quarter 2022 adjusted earnings of $1.10 per share handily beat the Zacks Consensus Estimate of $1.05. The bottom line rose 31% from the prior-year quarter.
SCHW’s results benefited from higher rates, which led to a rise in NII. Thus, revenues witnessed an improvement despite higher volatility hurting the trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds in the quarter. However, higher expenses were a headwind for SCHW.
Interactive Brokers Group’s (IBKR - Free Report) third-quarter 2022 adjusted earnings per share of $1.08 handily surpassed the Zacks Consensus Estimate of 99 cents. The bottom line reflects a rise of 38.5% from the prior-year quarter.
Results were primarily aided by an improvement in revenues. Also, the capital position remained strong. However, higher expenses and a fall in daily average revenue trades were headwinds for IBKR.
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Raymond James (RJF) Q4 Earnings Top Estimates on Solid NII Rise
Raymond James’ (RJF - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) adjusted earnings of $2.08 per share surpassed the Zacks Consensus Estimate of $2.00. The bottom line was, however, down 2% from the prior-year quarter.
Higher interest rates and a rise in loan demand acted as tailwinds, which led to a solid rise in net interest income (NII). Further, the performance of the Private Client Group was impressive. Also, the acquisitions over the past years supported the company’s financials to some extent.
Yet, a rise in expenses and poor investment banking (IB) performance due to heightened geopolitical and macroeconomic ambiguities were the undermining factors. Also, RJF recorded bank loan provision for credit losses during the quarter, which indicates “a weaker macroeconomic outlook.”
Net income available to common shareholders (GAAP basis) was $437 million, up 2% year over year.
In fiscal 2022, adjusted earnings per share of $7.49 beat the consensus estimate of $7.37 and grew 3% year over year. Net income available to common shareholders (GAAP basis) was $1.51 billion, increasing 7%.
Revenues & Costs Increase
Net revenues were $2.83 billion, increasing 5% year over year. The rise was mainly driven by higher NII and account and service fees. The top line also beat the Zacks Consensus Estimate of $2.73 billion.
In fiscal 2022, net revenues rose 13% to $11 billion. The top line outpaced the consensus estimate of $10.90 billion.
Segment-wise, in the reported quarter, RJ Bank registered a surge of 143% from the prior year in net revenues. This was driven by higher interest rates and the inclusion of TriState Capital for a full quarter. Also, Private Client Group recorded an 11% growth in net revenues. Capital Markets’ top line declined 28%, while Asset Management’s net revenues fell 9%. Others recorded negative revenues of $207 million compared with negative revenues of $72 million in the prior-year quarter.
Non-interest expenses were up 4% to $2.22 billion. The rise was mainly due to an increase in all cost components except Compensation, commissions and benefits expenses and investment sub-advisory fees. Also, RJF recorded a bank loan provision for credit losses of $34 million compared with $5 million in the prior-year quarter.
As of Sep 30, 2022, client assets under administration were $1.09 trillion, down 7% from the end of the prior-year quarter. Financial assets under management were $173.8 billion, down 9%.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2022, Raymond James reported total assets of $81 billion, down 6% from the prior quarter. Total equity fell 1% sequentially to $9.3 billion.
Book value per share was $43.41, up from $40.08 as of Sep 30, 2021.
As of Sep 30, 2022, total capital ratio was 20.5% compared with 26.2% as of Sep 30, 2021. Tier 1 capital ratio was 19.2% compared with 25% as of September 2021-end.
Return on common equity (annualized basis) was 18.7% at the end of the reported quarter compared with 21.3% a year ago.
Share Repurchase Update
During the reported quarter, RJF repurchased 0.6 million shares for $62 million.
As of Oct 26, 2022, approximately $800 million remained under the buyback authorization. This included $38 million worth of repurchases done in October.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to keep supporting top-line growth. However, continuously mounting operating expenses, worsening operating backdrop and the volatile nature of capital markets businesses are near-term concerns.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Raymond James Financial, Inc. price-consensus-eps-surprise-chart | Raymond James Financial, Inc. Quote
Currently, Raymond James carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance Other Brokerage Firms
Charles Schwab’s (SCHW - Free Report) third-quarter 2022 adjusted earnings of $1.10 per share handily beat the Zacks Consensus Estimate of $1.05. The bottom line rose 31% from the prior-year quarter.
SCHW’s results benefited from higher rates, which led to a rise in NII. Thus, revenues witnessed an improvement despite higher volatility hurting the trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds in the quarter. However, higher expenses were a headwind for SCHW.
Interactive Brokers Group’s (IBKR - Free Report) third-quarter 2022 adjusted earnings per share of $1.08 handily surpassed the Zacks Consensus Estimate of 99 cents. The bottom line reflects a rise of 38.5% from the prior-year quarter.
Results were primarily aided by an improvement in revenues. Also, the capital position remained strong. However, higher expenses and a fall in daily average revenue trades were headwinds for IBKR.