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Raymond James (RJF) Down 2.9% as Q2 Earnings Miss on Muted IB
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Shares of Raymond James (RJF - Free Report) lost 2.9% in the after-hours trading following the release of its second-quarter fiscal 2023 (ended Mar 31) results. Adjusted earnings of $2.03 per share missed the Zacks Consensus Estimate of $2.17 by a considerable margin. The bottom line, however, was up 25% from the prior-year quarter. We had projected adjusted earnings per share of $2.15.
A weak investment banking performance amid heightened geopolitical and macroeconomic ambiguities hurt the Capital Markets segment’s results. Also, RJF recorded bank loan provision for credit losses during the quarter on the deteriorating macroeconomic outlook. Further, expenses increased during the quarter.
Yet, higher interest rates and a rise in loan demand acted as tailwinds, which led to a substantial jump in net interest income (NII). Further, the performance of the Private Client Group was robust. Also, the acquisitions over the past years supported the company’s financials to some extent.
Net income available to common shareholders (GAAP basis) was $425 million, up 32% year over year.
Revenues & Costs Rise
Net revenues were $2.87 billion, up 7% year over year. The top line, however, marginally missed the Zacks Consensus Estimate of $2.88 billion. Our estimate for net revenues was the same as the consensus number.
Segment-wise, in the reported quarter, RJ Bank registered a surge of 174% from the prior year in net revenues. Also, the Private Client Group recorded 12% growth in net revenues. Capital Markets’ top line declined 27%, while Asset Management’s net revenues fell 8%. Others recorded revenues of $10 million against negative revenues of $18 million in the prior-year quarter.
Non-interest expenses rose 3% to $2.32 billion. Our estimate for non-interest expense was $2.27 billion. Also, RJF recorded a bank loan provision for credit losses of $28 million, up from $21 million in the prior-year quarter.
As of Mar 31, 2023, client assets under administration were $1.22 trillion, down 3% from the end of the prior-year quarter. Financial assets under management of $194.4 billion were relatively stable.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2023, Raymond James reported total assets of $79.18 billion, up 3% from the prior quarter. Total equity grew 1% sequentially to $9.88 billion.
Book value per share was $46.67, up from $41.38 as of Mar 31, 2022.
As of Mar 31, 2023, total capital ratio was 21.4% compared with 25% as of Mar 31, 2022. Tier 1 capital ratio was 20.1% compared with 23.9% as of March 2022-end.
Return on common equity (annualized basis) was 17.3% at the end of the reported quarter compared with 15% a year ago.
Share Repurchase Update
During the reported quarter, RJF repurchased 3.75 million shares for $350 million.
As of Apr 26, 2023, nearly $1.1 billion remained under the buyback authorization.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to keep supporting top-line growth. However, continuously elevated 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) first-quarter 2023 adjusted earnings of 93 cents per share beat the Zacks Consensus Estimate of 90 cents. The bottom line also grew 21% from the prior-year quarter. Our estimate for adjusted earnings was the same as the consensus number.
SCHW’s results benefited from higher rates, which led to a rise in net interest income (NII). Thus, revenues improved despite lower bank deposit fees and higher volatility hurting trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher expenses were an undermining factor.
Interactive Brokers Group’s (IBKR - Free Report) first-quarter 2023 adjusted earnings per share of $1.35 missed the Zacks Consensus Estimate of $1.40. However, the bottom line reflects a rise of 64.6% from the prior-year quarter. Our estimate for adjusted earnings was also $1.35.
Results were primarily hurt by an increase in expenses. A fall in daily average revenue trades was another headwind. Nevertheless, an improvement in revenues was a tailwind for IBKR. Also, the company’s capital position was strong.
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Raymond James (RJF) Down 2.9% as Q2 Earnings Miss on Muted IB
Shares of Raymond James (RJF - Free Report) lost 2.9% in the after-hours trading following the release of its second-quarter fiscal 2023 (ended Mar 31) results. Adjusted earnings of $2.03 per share missed the Zacks Consensus Estimate of $2.17 by a considerable margin. The bottom line, however, was up 25% from the prior-year quarter. We had projected adjusted earnings per share of $2.15.
A weak investment banking performance amid heightened geopolitical and macroeconomic ambiguities hurt the Capital Markets segment’s results. Also, RJF recorded bank loan provision for credit losses during the quarter on the deteriorating macroeconomic outlook. Further, expenses increased during the quarter.
Yet, higher interest rates and a rise in loan demand acted as tailwinds, which led to a substantial jump in net interest income (NII). Further, the performance of the Private Client Group was robust. Also, the acquisitions over the past years supported the company’s financials to some extent.
Net income available to common shareholders (GAAP basis) was $425 million, up 32% year over year.
Revenues & Costs Rise
Net revenues were $2.87 billion, up 7% year over year. The top line, however, marginally missed the Zacks Consensus Estimate of $2.88 billion. Our estimate for net revenues was the same as the consensus number.
Segment-wise, in the reported quarter, RJ Bank registered a surge of 174% from the prior year in net revenues. Also, the Private Client Group recorded 12% growth in net revenues. Capital Markets’ top line declined 27%, while Asset Management’s net revenues fell 8%. Others recorded revenues of $10 million against negative revenues of $18 million in the prior-year quarter.
Non-interest expenses rose 3% to $2.32 billion. Our estimate for non-interest expense was $2.27 billion. Also, RJF recorded a bank loan provision for credit losses of $28 million, up from $21 million in the prior-year quarter.
As of Mar 31, 2023, client assets under administration were $1.22 trillion, down 3% from the end of the prior-year quarter. Financial assets under management of $194.4 billion were relatively stable.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2023, Raymond James reported total assets of $79.18 billion, up 3% from the prior quarter. Total equity grew 1% sequentially to $9.88 billion.
Book value per share was $46.67, up from $41.38 as of Mar 31, 2022.
As of Mar 31, 2023, total capital ratio was 21.4% compared with 25% as of Mar 31, 2022. Tier 1 capital ratio was 20.1% compared with 23.9% as of March 2022-end.
Return on common equity (annualized basis) was 17.3% at the end of the reported quarter compared with 15% a year ago.
Share Repurchase Update
During the reported quarter, RJF repurchased 3.75 million shares for $350 million.
As of Apr 26, 2023, nearly $1.1 billion remained under the buyback authorization.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to keep supporting top-line growth. However, continuously elevated 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 #3 (Hold). 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) first-quarter 2023 adjusted earnings of 93 cents per share beat the Zacks Consensus Estimate of 90 cents. The bottom line also grew 21% from the prior-year quarter. Our estimate for adjusted earnings was the same as the consensus number.
SCHW’s results benefited from higher rates, which led to a rise in net interest income (NII). Thus, revenues improved despite lower bank deposit fees and higher volatility hurting trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher expenses were an undermining factor.
Interactive Brokers Group’s (IBKR - Free Report) first-quarter 2023 adjusted earnings per share of $1.35 missed the Zacks Consensus Estimate of $1.40. However, the bottom line reflects a rise of 64.6% from the prior-year quarter. Our estimate for adjusted earnings was also $1.35.
Results were primarily hurt by an increase in expenses. A fall in daily average revenue trades was another headwind. Nevertheless, an improvement in revenues was a tailwind for IBKR. Also, the company’s capital position was strong.