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Raymond James (RJF) Q2 Earnings In Line, Revenues Up Y/Y

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Raymond James Financial Inc. (RJF - Free Report) announced second-quarter fiscal 2018 (ended Mar 31) earnings per share of $1.63, which was in line with the Zacks Consensus Estimate. On a year-over-year basis, the bottom line jumped 27%.

Results were primarily driven by an increase in net revenues, reflecting solid investment banking strength. Also, growth in assets acted as a tailwind. However, higher expenses were on the downside.
Net income for the quarter totaled $242.8 million, up 29% from the year-ago quarter.

Revenues Improve, Costs Rise

Net revenues for the quarter amounted to $1.81 billion, rising 16% year over year. The rise was attributable to an increase in almost all the revenue components except net trading profits. Further, the reported figure marginally topped the Zacks Consensus Estimate.

Segment wise, in the reported quarter, RJ Bank registered an increase of 26% in net revenues. Further, Asset Management and Private Client Group depicted top-line improvement of 40% and 17%, respectively. However, Capital Markets witnessed a decline of 10% in net revenues, while Others reported improved revenues against negative revenues in the prior-year quarter.

Non-interest expenses increased 6% year over year to $1.48 billion. The rise was largely due to increase in all cost components, except for the absence of acquisition-related costs and losses on extinguishment of debt as well as lower other expenses and bank loan loss provision.

As of Mar 31, 2018, client assets under administration increased 14% on a year-over-year basis to $729.5 billion, while financial assets under management surged 55% to $132.3 billion.

Strong Balance Sheet, Capital Ratios Improve

As of Mar 31, 2018, Raymond James reported total assets of $36 billion, relatively stable sequentially. Total equity rose 4% on a sequential basis to $5.9 billion.

Book value per share was $40.82, up from $36.28 as of Mar 31, 2017.

As of Mar 31, 2018, total capital ratio came in at 24.1%, increasing from 22.7% as of Mar 31, 2017. Also, Tier 1 capital ratio was 23.2% compared with 21.8% in the year-ago period.

Also, return on equity came in at 16.7% at the end of the reported quarter, up from 8.8% a year ago.

Our Take

While the company remains well positioned to grow via acquisitions, elevated expenses, mainly due to higher compensation costs and bank loan loss provisions are likely to hurt bottom-line growth. Also, lack of geographic diversification remains a major concern for the company as it might hamper its financials and limit flexibility, going forward.

Raymond James Financial, Inc. Price, Consensus and EPS Surprise


Raymond James Financial, Inc. Price, Consensus and EPS Surprise | 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 of Other Investment Brokerage Firms

Interactive Brokers Group (IBKR - Free Report) released first-quarter 2018 results. Earnings per share of 63 cents surpassed the Zacks Consensus Estimate of 56 cents. Also, the figure was higher than prior-year quarter’s figure of 34 cents per share.

E*TRADE Financial (ETFC - Free Report) pulled off a positive earnings surprise of 11.4% in first-quarter 2018. Earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Moreover, results compared favorably with 48 cents recorded in the prior-year quarter.

Charles Schwab’s (SCHW - Free Report) first-quarter 2018 earnings of 55 cents per share surpassed the Zacks Consensus Estimate by a penny. Also, earnings surged 41% from the prior-year quarter.

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