RJF - Earnings call transcript Q3 2019 | Raymond James Financial, Inc.

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Operator

Good morning and welcome to the Earnings Call for Raymond James Financial Fiscal Third Quarter of 2019. My name is Jessa and I will be your conference facilitator today. This call is being recorded and will be available on the company's website.

Now, I will turn it over to Paul Shoukry, Treasurer and Head of Investor Relations at Raymond James Financial.

Paul Shoukry

Thank you, Jessa. you joining thank call. on and morning all us for the Good appreciate in interest time James We and Raymond your Financial. Financial and With are us Julien Officer; Paul today Chief Jeff Reilly, Chairman on and Chief the Officer. call Executive

Following the open for questions. operator the line remarks, prepared the will

certain note statements. during statements call made may Please forward-looking constitute this

financial not and of results litigation regulatory developments Forward-looking are information future anticipated limited statements include, strategic results, concerning economic conditions. general to, but objectives, business prospects, and

results XX-Q, would, such events, We that In recent on there our actual in as most believes, identify as as materially addition to which and necessarily future well expressed our no XX-K other could website. on forward-looking described those words those are urge subsequent that and are in statements not Form statements. available assurance to can Form will consider be differ note any expect, from to statements. depends Please you the risks intended

financial our During to reconciliation today's call, be measures release. the performance. non-GAAP view ongoing of schedule pertinent management's most information these A measures the our measures accompanying provide business we'll found GAAP may also to press of use certain comparable non-GAAP in to

the CEO Paul? turn to I'll that, James Chairman and over With Reilly, of Paul call Financial. Raymond

Paul Reilly

right. us. morning, All Thanks everyone. Good joining Paul. Thanks for

And a discuss detail. for questions. As the more up call turn I'll summary our usual, Jeff, the of will outlook going XXXX to give and then brief come third open over I'm I'll give our quarter back and results for who then to to

some performance number decline encouraged strong Investment business elevated with by both metrics I'm quarter. our results were and during of Banking Overall, the largely the in were for quarter, pleased solid the areas a I despite timing-related, third key in am revenues and that expenses

lifted quarter. Group compared Private X% period. per and $X.XX, increased to a fee-based billion share diluted higher net $X.XX ago over by preceding of the primarily higher third Client at increased year's of fiscal year the Bank over generated revenues James net quarterly interest income, We quarter and prior X% Quarterly earnings assets Raymond

for financial of We $XXX.X billion, net as X,XXX, Group of results assets record ended the advisers financial Bank period loans assets management for with well total of under billion. $XXX.X Client of as record $XX.X under RJ billion Private client and administration

Investor for return Annualized quarter XX.X%. we return in while that equity. does looked at on isn't metric use, return on seem higher our tangible common total quarter basis on adjusted annualized you points to the equity. on adjusted the been equity would world for equity approximately and towards Day discussion June, Analyst moving XXX our was in the than And And be and tangible if a reporting on on last basis our the measuring return preceding it have

a Given result we fairly this be similar metric, quarter. would same think that consistent

adjusted Through million, we up our of revenue record XX% up four million, net months revenue And up nine the segments of the and record during $X.XX which last core first was XX% over to nine $XXX first year. first of notably which was months. was months of nine of the $XXX which fiscal net generated generated all income the net X% net fiscal billion, income year, compared

experience during In X%, both and pre-tax results. to turning prior generated of of over growth quarter. billion Now net income we segment Client the revenue we $X.XX year's the continue the million of the Private Revenue Group, $XXX largely quarter, admin to fees, assets the very third and Client driven management of quarter and under the preceding Private accounts. growth strong and as by fee-based Group higher related assets was

that by XXXX. fee-based financial is of XXXX equity billion, will quarter reflecting total accounts, of segment long-term has over and net we growth which the market of over utilization a trend record to and the These increased March representing fee-based XX% of This industry $XXX account June in believe of of XX% a been strong client X% at appreciation growth ended growth driven our and advisers, assets continue additions assets see.

advisers. Most retention June in financial number X,XXX the continue increasingly resulting affiliation service XXXX environment, and in us to of of and culture, solid, XXXX. over the the resonate robust XXX recruiting period, net client-facing of adviser remain achieving multiple importantly, and with XX financial record solutions and healthy Even over of March recruiting options competitive existing increases end at of our a prospective advisers

let Now segment. me for the headwinds touch some on

this declined and from increased sweep balances due payments, slightly the $XX.X other the money allocation in decline largely quarter, to cash prior advisers of market as quarterly funds. money allocation believe X% was fee investments. option caused to in market to domestic of positional increase client the conversion investments sweep our seasonality elevated balances their other billion cash First, quarter clients and the such to June tax-related We as

fee due July that period month events expenses on. in recognition The timing Other segment. of Jeff the the also made quarterly resulted balances the reflected for advisers similar in This sweep will development in that in development business to quarter. this sequential touch payments decreased year first experienced business increase expenses advertising and are we which the expenses ago in increased conferences, each quarter have elevated Cash during segment of with experienced

and The income of $XXX generated $XX pretax net the Capital million Markets revenues million quarter. segment of for

Fixed Income decline by were in quarter segment's relatively another negatively large results While had sequential the impacted revenues. M&A strong

M&A about believe -- this and strong but business. inherently all-time, the of optimistic we're record that you a of M&A lumpy, the half the As had year first timing closings this very is after the M&A and remains even record a has pipeline recall, we quarter

of $XXX XXXX. increase XXXX and Management record over during assets $XXX.X quarter million billion, million the segment at income pretax quarter. record X% and ended an March revenues Asset $XX management generated under The of June record over of Financial the a X% of of

with management of by given utilization in be Carillon market Tower has which fee-based the offset continues segment, to actively positive appreciation under extremely largely assets the driven inflows increased market financial accounts Client equity managed of Group Advisors, the net for growth experienced challenging the than outflows products. by Overall, associated the more Private and

bank, third record the and of our the X% and The by net the loans in mortgage In Group. Record and of $XX.X during to million income the securities-based growth portfolio, quarter. during fiscal James loans Client quarterly was $XXX Private X% XXX million quarterly quarter C&I record revenues residential year-over-year net Raymond Bank generated grew pretax driven loans billion of sequentially. loans

third in ago basis Jeff the RJ Bank's on affected net what and interest basis fiscal margin quarter, the points points quarter more over the quarter. seven to get XXX into two basis a points year will preceding up modestly third expanded detail NIM. over

the quarter, strong, net remains loans growth Importantly, of the during the million despite of that credit loan the the loan to $X criticized payoff loan handful a bank's quarter. strong of of quality this loss contributed portfolio including benefit

first So the strong a quarter, fiscal for overall a nine record months year.

Now, I'll more provide financial turn Jeff, it on Jeff? will color to who results. over the

Jeff Julien

you, Paul. Thank

items revenue that virtually see your the the from items in accurately all side particularly new with ago. line P&L, time to of is the guess only I from On line the we've a year had gotten which pleasing story this across consensus minor model variances

larger to to of to couple from So, adding I'm a my comments the limit color changes quarter. the dollar going preceding

-- quarterly that with asset-based billed in as double-digit relevant the period nice which exactly are in which the the line these assets with item fee growth in is fee-based First saw is in that XX% we our PCG March time the quarter revenues from gain of was sequentially line revenue the the advance. largest

quarter, Implication June this there perfect won't it growth indicative the course current in was of quarter X% the item, should be of time. QX in that line growth although assets it correlation is for that be a like the always these

due large we off other of record again, which record quarter a to fairly quarter it of of just the revenues course March The was coming a current decline that was hard all was to variance dollar-wise The follow. the closely. that fact was not act which M&A this think sequential weak, I a had you in Banking estimated was Investment more

if total were $XX for course in revenues P&L. bottom X% in much were revenues as down on do I details just quarter. Capital line The The smack is M&A the pagination of XX, up sequentially pretty net down. billion million press line $X.XXX have that same actually the revenues was Page you the for that are on release model. So with of Markets the consensus the

have the two go a were little On I'll has and than the those in got two we a our XX.X% course M&A factors you presented a been quarters. order Compensation, I've in comp add just bankers. of is about they positives P&L. and negatives expense which side, high talked up ratio to about. really productivity in in that that There from in involved margin are is incremental talk recent it to the that the revenues was drop higher just as that very one of couple

would in to a aggressive pace That compliance the hiring the full effect hiring areas. we're the -- effect we're the falls we've of our Second the the of but into by hiring of the be, of so getting fairly course little in starting now year done bit supervision PCG last predominantly. slowed or now, it's over see previous segment to has P&L. This starting

relative than portion is is third, the press can as well. our this employee portion third a Private did a by the the as to percentage of release. the Group you grew it which with faster employee faster FA on larger start counts independent it in segment factor see And percentage basis, contractor quarter than on a larger Client somewhat it's though grew Actually even side the basis

has month. have at on part is left really higher And which attendant to we these didn't an the to out the We that reason that So most are XX.X%. our all a ratio. things revenues the that impact much recent Investor change last Day of target Analyst comp those pay going

for year. we're for course the So of that under quarter and the still

talked we be going the and the XXs to mid-XXs to low continuing of to for had where trend averaging average. at the processing, beginning it to like, that's well below or on year. We in had looks more It Communications low so or information guided high year. XXs about the it's

sort spending It's anticipated, capitalizable we're necessarily projects not we significantly expected. can see being spent of you And that. that it's large on that more than we it's but less had of that really

detail over asset and fixed last at If we these you And periods. current the future our number that's the comes that give that Ks, of into grown pretty of of course a P&L and amortization have capitalized you period we software balance see few guidance our the the the years. can in look of those course sheet steadily

to lives in what that we GAAP. also to sometimes to you sometimes I tell we our err when will range. any I we're assigning capitalize low with mention useful keeping for that only would have toward of try But the here conservatism, do reasonable of principle we purchased, software end the developed And

continue So going -- is to factor of but amortization earnings. -- future a in to be be course

we the development, well time per of the reasons. At annual and million. really then quarter range similar that, quarters. first said, wider on is low-end quarters above that is this guidance somewhat exhaustively of below just I on we're talked year. Well We And experience, well end the kind between quarter, range. be quarters, than our think accurate that for in about In the two And to for top two but this that pretty ago. the And two second different of first the year line this $XX of the business our above still had $XX think it but the guidance, we had high-end average million we I were thought. in and expect a million a we little would item the that we $XX

$XX is really, $XX is like to right, than think $XX million I the probably to million our So million. guidance $XX but rather more range million

first million also things that impacting in had Paul year as number And compared largest course advertising $X already we're advertising quarters. conference of quarter two this then well mentioned, events as multiple to of worth virtually a for similar had the this this of coming in expecting quarter. And we we our recognition none time as year. FA line So the

just line, we like bottom year think a fiscal we'll said be than I that right wider range it So on initially I anticipated. had for the

criticized related off the We offset pay loss Effect of the And $XXX had positive provision million criticized that growth to quarter. we quarter actually loan for net loan quarter. more loans you in was that bank other several now provision. during see can decline the the loans. than had actually the during the that And the of

my about on quarter. XX of million If the for detail bank down we have of page look $XX at the the again you the statistics where some bank release, they're

based balances people the always be our turned beneficiary are that as aggregate assets margin little basis interest, clients' cash one net Paul page have with the to smaller margin. they to the firm. a when XX their waterfall with on net bank's bit. of that in cash touched actually changed the interest And there's The we out or Net the aggregate of firm small accounts the was based first bank on the have our on so two -- improved The almost their generally bank about bank factors in detail of balances again interest are little bank which by points. bit a release, crediting they cash on But from primary main and balances first.

the obviously got a lower the rate than of larger which engender accounts, crediting they've balances. the majority So small

So a we firm. than in cost the they nicer experienced decline overall had funds of in actually

Another a cut a Fed may you'll to factor during rate And predictive with quarter. of down And in that moving in see that it that to portfolio and loan in of yield do largely LIBOR. decline our the the LIBOR. though Really corporate is substantially the pretty tied being loans. LIBOR on and commercial has you see side

ones repriced, whereas a hadn't the our came change changed. that really other and new in had loans than side not of we're this funds callable to but tied The had LIBOR cost did methodology those that moved on

for net remind net a interest. the still reflected So banks account XXX points. And in was swept where I will improvement remains things of two unaffiliated the it you really slight will under on service that was funds comment quarter. fees those spread our is to the about in that not and basis I little

dropped sweep in X.X% quarter. Cash balances the

going our this force sweep. opportunity to money be fund that the again where clients talked a to date of the and as And approached, funds. money think sales four reposition the people that were mostly took we to Analyst about given months' eliminating recent notice the we positional about Day I -- at generally had market we June in market number to

take balances. didn't effect those the came of out June sweep So That on XX.

of and are finances And although that that happens down now our the bank's the probably balances the track closely one most total RJBDP a that sweep sweep right which the we to of investments is really line conversion of grew to to I most mentioned option. be actually our also profitable other runoff growth net That and little because funds. bit this positional

As a of fees Paul both and mentioned, affect forward. net to some runoff and it's possibly obviously forward we lesser continue going now, sweep to account earnings balances, a bit although little going extent will interest see moderating service which

we of investable So call near would that constituted are in we'll really of have would the see right terms people to speculation getting who funds. what what call are if they is primarily balances of we're a our hopefully cash sweep some bottom in moved operational

a tell our we rate I course, near at/or our top would intend would of is we account you group all competitive be? question strata peer of of of cut common the sizes. impact the to what just position Fed in of maintain get, that A virtually the

our impact to largely So what going does. on is competition the dependent be

would that XX% week But XX between is with would cut I to you to points. which is deposit basis a that by XX% each basis again deposit quarter basis a to firms Day best basis XX there's as a million XX mentioned modestly there a would next we mean point rate our my associated to five follow decline about our clients, something as that beta in negative that remind a be if at to $X case point's that, have us. point Analyst spread And guess XX compress but impact and would beta

So can you XX math. points five do or basis the

of segments of the call our it pre-tax about quarter X revenues and would So improvement in segment But mean, both of for and performers our three Management I release. operating operating PCG, three talking in results bank. just the income. terms I'll wrap segments steadier up showed the primary Asset I page four sequential the

by Our came they were and in most volatile March. they quarter down record is M&A Markets, Capital segment far their because off

So slight they strong from just March actually showed a quarter. the decline

see in all month and in bearing But cash improvement pre-tax of you four all except primary impact -- results the which revenue segments improvement sweep been has of brunt balances. declining operating PCG, the negative the

out Group. of growth balances We the Private external cash those to of are bank. banks that the where finance Client continue coming spread go the would And to

comp bearing, about these in are talked And we expenses also so they -- and development. obviously, that some and elevated of business

line is year-over-year some help a the at So help bottom had we certainly months the had from we have you from little look improvement, interest during rates and when that nine for market. of period bit

the beginning year, decline in XX% of had decline we severe remember and Although the this pretty a S&P. in December

three quarters pretty we're We of year-over-year. didn't we had So three. billings. improvement have of the really showing only out nice two really still Yet fee good

talk little outlook And with let for that, a I'll about more Paul the QX. bit

Paul Reilly

Well, the Group on the entering the fee-based quarter. Great. substantially segment, we're all are X% fourth Private quarter a basis. in Thanks assets assets, balances billed remember Client first accounts up beginning in And on based Jeff. sequential of the with

pretty So good look in segment. billings should this

really has first couple picked the the we our not has is discussed may we employee we course to And led may quarters. to for had happens continue way adviser last And certainly overall allocations the come offset, very financial is of client other cash any close. our experience fact, and good up extremely and pipeline Of which -- to decline rates. in really retention recruiting whatever pretty side and recruiting. as have investments you interest independent record decline balances increased in the year, hit our And although solid. But where

the timing M&A, In we're in segment, predict while to optimistic always that Markets of strong. very I And Capital the closings pipeline are the think in very, is difficult area.

Fixed And for two the Income activity, interest environment results have quarters. rates especially as still is conducive trading last improved rate generally move.

process the we year. expenses of Fixed rightsizing the somewhat However, go through did the business and Income during

So and their has that to. should continue helped certainly margins

under Carillon segment, which X% return of fourth X% in as helped entered year-over-year here. Private also as the had Increased utilization billings. good Management management assets accounts fee-based Group with performance the quarter Asset help in sequentially, and financial The well we Client Tower should of

Bank, attractive net record quarter Raymond margin. started and interest with loan The we the balances fourth James

very the quarters loan I see think were I bank considered was when that that remained very, our credit its but in in of disciplined were certainly they add the to couple last numbers core. portfolio. our it non-core, expenses said we

was credit I of think good it just discipline. a measure

they're And I the good -- very about think positioning. bank's feel very so -- that we're

Our strong very capital total capital third XX%. the levels for remain with obviously quarter ratio

we to million a continue deploy deliberately the purchased shares capital. over quarter, We million. for third In little $XX our a

fiscal share months first for by share-based continue million with we March availability $XXX price share. $XX.XX authorization, Board the per And XXXX. of remaining increased which was compensation repurchase X.X of through proactive That the with while $XXX under nine of offsetting in the We'll repurchased of leaves million incremental dilution repurchases. of average Directors be million $XXX opportunistic shares at to XXXX us in an million

meet to of the the our active our this larger to fit cultural criteria in ones, Following hard business continue giving they guidance same you. and at good at and a Silver but strategic fit very opportunities price investments reasonable. strong be will integrate that's last something very, two and grow only very can we been follow the working can Lane continue last if we've ClariVest and pursuing to We're year a Advisors

of react spreads the which fiscal record M&A. entered of cash pipeline what happens of potential balances rate Client obviously we high a we certainly have balances fee-based XXXX advisors, the to. and lot So loans the we certainly changes Group advisor any for record start overall, fourth but we'll But than number quarter preceding recruiting Private of X% financial record and and of net strong control, record PCG of assets we've can't tailwinds; have higher quarter, impact declining there headwinds at RJ including Bank a and cash on of

the Jessa questions. So, I'm with to open Jessa? and turn for going over it to line that,

Operator

comes from Thank Instructions] first of the line go Siegenthaler Credit from you. [Operator Suisse. ahead. Your Craig question Please

Craig Siegenthaler

Good Hey, thanks. everyone. morning,

Paul Reilly

morning, Good Craig.

Craig Siegenthaler

on rates. So Bank? to from interest seat Bank I you recent compare third-party how also between to Raymond deposits you just your question James bank the the size after decline relative of the allocated in how the wanted And ask But do do returns the banks? determine Raymond and James also a the

Paul Reilly

our return on our at under and look sweep equity spread we get where we our points just no it. Well, XXX on earn on basis put matter XXX We bank.

So look how at controlled at capital we return the in just and growth allocate the bank. look on we it

we some and I large both on it similar to going seen internal go forward to that bank you've for all over we strategy years the how So in you're the few size think of But be have like we the deploy. last very how we'd governors as business. a see

Craig Siegenthaler

the we away Got follow-up, a of from And the the But seen rate improving backdrop pick-up in just migration given quarter in bit market the just wirehouses a shutdown. backdrop and we've break equity seen have as little to in you March trend advisers I'm of including broker due a partly broker-dealers year-to-date? my government it. smaller wondering the slowing saw

Paul Reilly

Honestly, we slowdown. haven't of a seen lot

pace we be last at So again are nearer to year's record.

number You advisors that it of the now. can see have we by

of the it's pipeline at and commits look you robust. very visits very, If

say employee if certainly the be recruiting. the the all in market. is three been our it good but active. in active and again And really really affiliation having very options we're on usually first But results an anything Independent's side comes goes I'd of So there may side. increase with quarters, employee

Craig Siegenthaler

Thank you.

Operator

Chubak Wolfe the of Your ahead. from Research. line go from Please next question Steven comes

Paul Shoukry

mute? hello. on you Steve, Are

Steven Chubak

sorry, My muted. Yes, I apologies. was

background the coughing in -- much So so earlier, figured

Paul Shoukry

No problem.

Steven Chubak

at I the in so the given NII easing forward Street anticipating the are revenue in momentum weigh by spread growth. Appreciate and some curve, I Fed quarter. will color role I'm if is beyond per continued the look on your expectations rightfully wondering comparable outlook, But think terms high of organic the on just which helped strong control cycle fee people revenue. just

as think the to your back the maybe multiple expectation growth achievable about line the is from something for comp And driven is half? about you by that's rate trying hold your thinking income philosophy And just in that primarily if on versus fee to given ability cuts the NII. here

Paul Reilly

fee we're we -- going Really think growth. have good should get market income to we the given

Now, cost really between cost the in comp those fee only revenue growth interest. not to difference streams is any net comp income we have a and

this So, fee net growth on I be any even into going to quarter, think X% a good be will certainly though the -- going offset interest certainly the income -- hurt. should is tailwind with

again so... than be to just long-term those we a think get of through of good short-term if adjustments markets do impacted. going more move are up I any job those or I are down think managing and -- But we'd But

Jeff Julien

you're It what depends projecting. on

rate NII projecting you're going I cuts be think not driver. a If that Fed to in you're is assuming then right revenue

dependent or to maybe how we're If or cash be cut projecting you're on to no well only it's going then able cuts, balances. grow hold one onto

Steven Chubak

understand. I

slow lower helped Just big other areas you one non-comp made just is as any of clearly bit guys lot there pace you've a to inflation that the as that flexibility manage more you to remarks backdrop NII challenging? expense debate systems in becomes non-comp to technology of the any at least and That's accelerate have investments follow-up maybe the the the of growth. made a Is years. organic of flex of last potential a over couple

Paul Reilly

to and have think on the outlook comp certainly expenses opportunity I in always medium we impact revenue non-comp. term the

a did to breakeven a XX% discipline. that of cost Fixed but we're can trends went helped to we're from in lot market those Part just look And to where other if and Income business was see have we sure. we the ROE. was at going for you areas in see discipline more that So, we market cost of

are and adviser stay somewhat to to expenses of a But on ahead you're right our elevated lot of get our growth.

But net support or it's payoff whether compliance a adviser had that's it or hit So, on comps. supervision growth. big short-term does systems

help to I So, the slow great down mean to think to I on recruiting. it'd on comp be us numbers

think flexibilities. we've we've don't In but those always and great I well think be think it's shown slowdown I that to -- that reacted done. we benefit if on discipline. And pretty certainly needed it's a have any or we'll so we do long-term cost recession

Steven Chubak

just fees. Paul. and on service Thanks one follow-up for me And account

the impacted quoted balances sheet rate. terms exit some in looks It volatility intra-quarter the off-balance wondering in balances fee XXX You of spread at I'm on given where calculated movement cash just points. the like basis the the right expectations, just the point of revenue? what's source June, off have biggest in and quarter we're that jumping sure account the make for want shortfall been modeling consensus seems that service to fee This to versus so appropriately.

Jeff Julien

be as model the because Raymond growth fluctuation that continue balances. you the a line that's whatever as we're by client the on we sweeps to That's client bank ones We've run negative item impact had item most impacted Again, it that assume long Bank want cash external can. will that obviously finance James are are to first had because line in of going how you impacted want to balances. to cash depends off

So, the the affected external item keeps are you get that's more extent it earnings. going to remainder banks line to that the -- that. the Then net than be to if want interest dropping the call

Steven Chubak

much. right. Thanks very All

Operator

question Please Your from of ahead. from Mitchell next Buckingham Research. go Jim the comes line

Jim Mitchell

Hey, good morning.

year's to a record. as when talked a look I year's be at last But of growth, it's close recruitment about could Just you about last growth. little year-over-year net maybe less half than

something or sort that a lot of be that analysis? stronger indicating are -- half trying I additions just second I'm could guess So I I you in guess am missing

Paul Reilly

that's look we I trailing XXs measure. look the we guys when FA So you at it, at And recruited. think look I count, at know

in XXXX, at but of we even close look lot trailing last in year individuals, it wasn't you If a had XX.

at look at [Technical than Difficulty] advisory we look So the trailing count recruited XX the itself. rather

Jeff Julien

are look lot certainly see advisory the And growth. looking I of you a at in their of instead we're mean some caution that well I growth lot of leave. they would at people the runoff people mean to that make I retire, cases, of how or asset business, also with don't their it total stay doing a other with here assets team the reasons advisers In advisers.

the that's of with and really creating part our the metrics growth it's said. records we're recruiting So, really gross and we're Paul more about important, talking as production asset

Paul Reilly

of I the first think retirements especially saw the too our a we the has. we've because impact quarter, that had do and quarter, lot in first as industry

talk talking measure look we we're away, retirements the the as of you net awful kept gross number. what unfortunately about number, into we recruiting, passed we asset. people got But about those lot we've when or So or an the

advisers. they've So gone to on other

And that's so. look we the we someone that's assets from It kind at the away, if keep a certainly passes It's negative. financial we what people is But the of attrition. and standpoint, it's Certainly, us regretted. a isn't track. it if so And death non-regretted know, as the in to family. why and people we really

Jim Mitchell

Right.

record, more you're this -- is it of class you versus is Just last still trailing getting assets XX% you're kind last there recruiting just the quality fees over XX%? to So, higher XXX%, recruiting year's? much FA how bringing from a do year's XX about this way on. last was close of year? trying the new of timing year think of and Is have to a there have or the think you If months it's to versus year's

Paul Reilly

aren't while a It's six due after, they hard in recruit growth think to and a a that looking really just because year, to may for is all because these grow. Most majority so the assets. to of months individualized. teams We first then it tell. It's have to trail their and we they're them bit little we production. get the It's of growth

so it's you're to So, as seen the going in But past. individualized. momentum you've see

are recruiting. going our And keep Assets coming those have to we're continue filled that the still over to push. -- from we pipeline

Jeff Julien

lag production something It's X-month of certainly assume assets versus a reasonable to recruited. like in coming

the is if this get with of I of kind this record And benefit way last year's production assets you coming in same lot assets. we year's So, mean year -- year. the a year, next those a have

Jim Mitchell

Great.

points costs just Okay. driving that the in your them. And basis was relationship quarter-over-quarter. -- down deposit, X Jeff, maybe follow-up were the change was deposit pricing Obviously, on one

that Do bit get basis? Is lower basis or next Just some this of an than a -- on all it quarter? some -- points? there a little is is some or in there -- there that centered dynamic bit quarter impacted we other average is more little and/or

Jeff Julien

of substantially we happen I that's the of -- That's It but would beginning all as the about the in quarter, modeled impact. it. exactly at didn't what

assume So any I benefit from that. wouldn't future

Paul Reilly

that think bank a at benefit up, especially LIBOR get is Fed predicted look do of I seen usually where that you has And and funds, bank -- going the LIBOR think when the loan lot already. that I before you moves repricing because

not be funds total cost in So under the any change in should deposit of and negatives.

Jim Mitchell

Great.

Okay, great. Thanks.

Operator

question next go of from Bill from line Your comes ahead. Please the Katz Citi.

Brian Wu

cash client you morning. Brian can provide Bill on This the on Katz. sorting. Wu Hi, cash for on Any client good is in July? Appreciate update comments

Jeff Julien

-- in taken think just subtraction. Paul -- account That's that think I are big I'm as another of continued of of have of mainly generally These -- I an number. through of runoff of -- the funds. billion – into been We've part quarter exact And sorry. beginning It's so, into the the don't I mentioned position to $X money have we the quarterly every yeah, today oh, market or see out that is – accounts. fee the

whatever quarter course into repositioning and coming quarter. interest of – it the the dividends for Over the next positions money through accounts the

$XXX coming $XXX quarter to fees at in right million So million about now. each of that the beginning number out is

But up been the it quarter, we a and over that builds the again of quarter. in the see really so reason, we that's July. back primary course far every see decline So

Brian Wu

Got it. to run And off? how the for think should the about mix we cash continues bank, client if funding

Jeff Julien

for more from – time. done It's bank's other at already that looking that funding – We've alt our entirely the sources We're we'll to alternative we CD. to of the the issuance already available see immediate at math, we're sources over have sweep don't looking some. market or not to one our continue secondary support in the we eventuality preparing – bank. funding sweep going given or our at a are level general growth us do if balances entertaining to whether limitations it And – internal whether to makes be sense already sources. program bank CD for we've continue to desk, place, the at us or external funding sense for to makes in grow run syndicated the possible aside bank We're it bank the looked our through with

a going know the don't latter, that definitive yet. answer's to for but I be fact think we the

sources exploring at So various types we bank. alternative are the funding of

the the We of about. better you're in for anticipation talking have of been year what part actually

Paul Reilly

everything are exclusively fine. moderate with be to point to some basically the exploring. agree the And caveat that's grow continue we and now Jeff got at down they said. we're right going or only alternatives go exit internally sweep is what and so balances we're If cash to Yeah, what you've funding almost have

Brian Wu

question. for Thank you Great. taking my

Operator

comes of Wells Fargo. from line from Harris Chris question ahead. next Your Please the go

Chris Harris

people cuts balances? you affect do because rate think a with to I'm lot if guys balances. ask How agree those would guys. that just you of stabilize actually will that? I Thanks, cash interest think would the wondering, help it question customer

Paul Reilly

our Our premise, ask people to why interest know –. don't with happen us – always rates going predict which what's your I given to

Jeff Julien

Or balances.

Paul Reilly

if money right and sweep the But Or between if I than in. and cash option have balances. in a has think markets positional that decreases better money come is that markets that, spread rates I now the insurance. rates the the even FDIC come too to spread be and And attraction been that going think

So I what think we But with agree see we'll happens. that.

Jeff Julien

or stabilize the the balances cut it rate that camp second by the at help in am least so. will I

But second first big there or I I not a will many The one one. they may even that differential it are impact think can beyond think certainly maybe rate that if elsewhere. that, the – cuts get the have minimize

Chris Harris

great. would characterize portfolio specifically And again of follow-up to how loan of bank, compares my that risk today? relates looked how XXXX. wondering, picture the question profile say the to excellent Bigger credit this portfolio the profile in bank That's And loan risk guys you the right. how quality the quarter. All you think the

Paul Reilly

diversified. biggest XXXX mortgages And think pre-XXXX, was our C&I more or were portfolio. back difference is So really we in bank I that the purchase much almost the

I a the believe So is the other It's today and credit percentage. equation parts the C&I more C&I but good. is smaller of quality much is in certainly much diversified,

So product I view we're in in good portfolio. shape diversified more our and

Jeff Julien

extremely mortgages an have are in originated didn't our XXXX, versus is of of we business purchased. SBL And Most a source which now for us. good portfolio

extremely can base we we within in XXXX, are which have quality imagine. credit client to tax-exempt municipalities. and And good you a – loans we have as investment-grade didn't have our So portfolio, which

much particular or remember, and more So without – it's on than XXXX ugly we XXXX. probably hiccups. – I average -- better real it was And with no in diversified XXXX think quality in it's ugly survived

better just think it we're be So well-positioned. very -- to now, I shape in even

Paul Reilly

we're But so also carefully anything watch happen, it so. that very, cognizant can we very

Chris Harris

Very good. Thank you.

Operator

go next from JMP the line from Your comes of Ryan Devin ahead. question Securities. Please

Devin Ryan

Great. Good morning, everyone.

Paul Reilly

Good morning

Devin Ryan

on First question private just client commissions.

trailing little higher like that with they commissions funds only X% daily they quarter. mutual about a the balances which X%. were could increasing were think something just We better in up last thinking than from move been bit average from in I increased So have

be the Or sometimes funky. sales like offset the increases? curious, of daily just if bit was in slower So lag benefits being it balance there's lighter activity the accounting some average can any I'm new little transactional which a there just of

Jeff Julien

I trend see two steady in continuing PCG. commissionable heavy we're a trend there. it's just Private for that you've towards fee-based it's the activity just you'd continuation seen been of activity you I recruiting in Client -- a are last And pretty Group people fee-based alternatives. a the commissionable change users side. away think of the assets that if No real to three decline years, in think The from map

Devin Ryan

little it. then bit follow-up here be guys that And are opportunities, okay. business. at thinking are how we your wealth the kind financials Yes, balancing development. come perspective touched Investment a business development sell that their is this Banking, would may since know but activity I Investor long-term kind that's press Day, just How on business, then opportunities corporate you get along? just active of Got on that different kind USAA out cycle we so even in to M&A notable that there's but M&A wanted of something now? on I management a a late be just know it right looking And versus out about to function there a may views of

Paul Reilly

at of a all as And the or ever market active view at would looking pricing in -- I more lot by certain people as possible Look of Devin, as driven I us looking maybe would describe late sorts a that people opportunities. is it a categories think that, peak problem The it's are transaction. doesn't of growth. some that cycle. reflects The necessarily belief I

pricing that it little got may a of take So, you before still delta, so bit adjustment realizes.

that don't at our have a of they through model. transactions, happen if So we our view, are fit transactions There that first look just to fit. lot

because to would so there's reflect active we're say though. just us. just interest the the very cycle But for of kind a to But think they talking challenges. pricing aren't change, in folks and they good fits. -- and not I think that are going those some good peak is has aren't I to reality be the So, But the biggest fits culturally more are -- there

Jeff Julien

to lining market it correction silver cash increased the along whenever comes Another balances. with

Devin Ryan

Great. management in point, retention the even earn-outs actually because better at to Would that James bidder be -- the doesn't the do had I -- tends that lower always I've to impression time, Raymond especially over bit your price. be better, a the guess may just quite on the so need high seller because wealth

process? that an does thought in? play how And is So that accurate

Paul Reilly

high would -- our other it tried I offers -- firms We've don't to think higher. a by are on to I we've but of it's seen hard second it's and are ask spiritually results somebody than depends. choice first conservative, But I to bidder, when high be join at the people. were high bid in we a and so M&A what's comes company private or recruiting people that line the that public never retention to especially being XX% still us. be are we there are say in lower not bidder number something to are say end, other I'd If most where always a was about near impressive substantially ourselves price things of had we're agreements the know. substantially number yet the us we too some XX% with that that

And high. beat premium the So win to just pay anything frustration can't us deal. you too more been else someone preferred, bids but was I where for to a than were the just outlier was think we that's willing

again for disciplined shareholders ROE bigger. is just and job So we to remained to an not just be said our have

Devin Ryan

Yeah. Great. you. Thank

Paul Reilly

Thank you.

Operator

Sachs. from go the from Blostein Goldman Please Our Alex comes question of ahead. line last

Alex Blostein

you or all to of good asset your well bringing question time about echoes new earlier call recruiting Paul comments disciplined, impacting in that think the lower going you cost franchise? the up in ultimately you may of try and growth? of more result the financial guys some guys' are for Should you net we practices to thinking advisers going Raymond the on the stay are there. to slightly about a new around which James out guys just Thanks. Day Investor as How the regarding comments kind made Hey, morning. your competitive that at

Paul Reilly

We've So even the haven't number stayed disciplined far last is matched. slight a of high this more. seen year we've year's -- though I'd record close will increases we've some had of results very I we've increase say, yet to times substantially but result as that offering the close competitors to certainly gap, at so be the think the very, an we

that So we people right join good biggest reasons, it's us like are the some not our that focus is really people the just we that would check. the us for lose joining although

here. just and to it advisers a to we people we price. are the we disciplined we reinforce you what just their think and adviser the we stay get practice. the And right but overall And for they think for Certainly, thing what with in help that someone and when are that I say stay them advisers as well to at can do reasons. very offer can and bring hard helps the long-term disciplined, joining fair is really it's it's right fair And new culture the the want we the do think

like just it's So M&A.

but if the gets near sitting something hard end it's better so are of hardest, and You're it it's to want, we is. just do maybe the may sideline, off you're at -- cycle, and the there's worst an the you on if -- always the especially it's really out-priced, it indication

we're this our will with think doing discipline right just and be results competitive -- not are doing really the being even -- I pricing. felt and I have second-guess this we we think it we through last been year arrogant, And So we say, and always right year's almost our as ourselves as thing. good

Alex Blostein

the Right. All for makes Jeff. I you A basis points, points NIM. of the are to cut rate only Are to give Difficulty] you [Technical follow-ups sense. company about guys or would on in five majority, NIM back full I sensitivities talked XX picture. get compression couple guess us is guess about you a vast the basis about point And be basis talking the the but helpful that the bank just maybe NIM? it's if talking overall XX

Jeff Julien

partly be would Client would it Group. partly by the bank the account felt felt fees Private service It in and and be in the

to two what So a do we the it of those the on of two kind clients, would which be it segments. they it's a tell but we between feel are hard exact those proportion. to direct, split but both segments, Depends grid what pay

Alex Blostein

of that the billion clean before just then triggering restrictions? any much sources available Right. third-party terms sweep to still how ultimately funding in today of that earlier be to one $XX moved questions just bank last follow-up the in to is sits of of up bank through AJ And the

Paul Reilly

the of -- a we've a put market Well, been think so of do discipline their that's of internal that far benefits one an restriction our most our of of an had. more I competitors more sweeps. so seeing you're than lot cash

their do, sweeps whether because it's of it's stock back points read up on and they a other buying had number so much restrictions trigger firms could hit leveraged You've they've flexibility. what that or

still we have room. So

that I a going we're have people do think again, other our what don't But we while. we closer raise getting still flexibility. for to not think we're -- done. the to limits numbers, to We but ability have think So internal comfortably -- it

Jeff Julien

Yeah.

are we don't have triggers triggers clients' so $X insurance the through of then go bank we that will et We to hit, external the waterfall, as such violate there that too, ability our some put to limitations the internal FDIC cetera. want first that don't much some million but are in they and get

still little of billion without have do Those commitments, banks off which contractual we penalty could numbers a our fall we And but to over type that some less some because trying $XX some running also dodge directed $X that some certain, are be safe half in third-party below internal a a time with we're than be rates, triggered question, the bank and triggering are here comes number would won't not we be number have that constraints that to play. that. guess billion but I to again a before would use into

Alex Blostein

guys. very Great. much, Super. Thanks

Paul Reilly

Well, Is great. that it?

in appreciate I all ended good us and you we joining up think I've So we're -- shape. as

the this cut I all with see month. a next We'll happens rate outside cut, think And indicators there's cash rate really balances. of we'll most positive of you are talk indicators if what -- to this quarter. the

us. very you for thank joining So much

Operator

conference concludes This you. Thank today's call.

disconnect. You may now

Raymond James Financial (RJF) 25 Jul 192019 Q3 Earnings call transcript