Raymond James Q3 2020 Earnings Report
Key Takeaways
Raymond James Financial, Inc. reported net revenues of $1.83 billion and net income of $172 million, or $1.23 per diluted share, for the fiscal third quarter ended June 30, 2020. While net revenues decreased compared to the prior year, net income increased sequentially due to non-taxable gains in the corporate-owned life insurance portfolio.
Net revenues decreased by 5% compared to the prior year's fiscal third quarter, driven by lower short-term interest rates.
Net income decreased by 34% compared to the prior year's fiscal third quarter, largely due to the bank loan loss provision.
Capital Markets segment achieved record net revenues and pre-tax income, driven by record fixed income results.
Private Client Group assets in fee-based accounts increased by 11% over the prior year's fiscal third quarter.
Raymond James
Raymond James
Raymond James Revenue by Segment
Forward Guidance
Near-zero interest rates continue to be a headwind for results in the Private Client Group segment, but the 16% sequential increase of assets in fee-based accounts should boost asset management fees in the fiscal fourth quarter. The fixed income business generated record revenues and pre-tax income during the quarter, driven by a high level of client activity, which has continued thus far in July. Given the high degree of uncertainty associated with the COVID-19 pandemic, we plan to continue selectively selling corporate loans in the secondary market to further reduce exposure to certain sectors.
Positive Outlook
- Advisor recruiting activity has continued to recover and the pipeline remains solid across all affiliation options
- The 16% sequential increase of assets in fee-based accounts should boost asset management fees in the fiscal fourth quarter
- Fixed income business generated record revenues and pre-tax income during the quarter
- High level of client activity has continued thus far in July
- Total capital ratio was 26.0% and the tier 1 leverage ratio was 14.5%, well above the regulatory requirements
Challenges Ahead
- Lower interest rates have negatively affected our financial performance
- Financial advisor transitions were initially disrupted by the crisis, particularly for our employee affiliation as offices were closed
- M&A revenues were negatively impacted by economic uncertainty and decreased activity across the industry
- Near-zero interest rates continue to be a headwind for results in the Private Client Group segment
- High degree of uncertainty associated with the COVID-19 pandemic
Revenue & Expenses
Visualization of income flow from segment revenue to net income