RJF - Earnings call transcript Q1 2020 | Raymond James Financial, Inc.

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Operator

Good morning and welcome to Raymond James Financial’s Fiscal First Quarter 2020 Earnings Call. My name is Myra and I will be your conference facilitator today. This call is being recorded and will be available for replay on the company’s Investor Relations website.

Now I will turn it over to Kristie Waugh, Head of Investor Relations at Raymond James Financial.

Kristie Waugh

Thank you, Myra. thank joining and call. on everyone morning you us for this Good appreciate in interest time James We and Raymond your Financial.

Financial and With are us is Shoukry, available Officer; Relations James’ this Paul today presentation Chief Paul website. Reilly, Chairman on will on and Chief morning the review Officer. The call Investor they Raymond Executive

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

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

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

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

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

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

Paul Reilly

Thanks, Kristie, us. everyone. and joining morning, for good Thanks

part I’m because will refer me and over call. Paul, Paul over CFO taken hear not now third going to has the you if be the to call, this that Shoukry myself referring During in person of reins

guidance. who and over update and more overview will cover an I'm going of give details Paul it I'll the to to usual, turn As our

they guidance discuss me turn our Paul last deep those the rate before we until be. hold over As rate on off changes, to After to we it we knew will interest were how cuts then were would and that, going to announced, indicated the outlook. on call,

from recent So especially pleased rate on three million estimated which the earnings $XXX cuts, for our first of approximately impact significant with really an I'm results the interest negative quarter, pre-tax our have overall, headwinds given the annually. will

Slide As quarterly first quarterly which net from $XXX and net X% the down of from billion year's up were of $X.XX we prior share. revenues $X outlined the income on We quarter the quarter. in diluted per record generated record generated X, fiscal million or X% preceding set

we our is was do disclose basis, relevant On preferred annualized return to while the know, any And as this an metric for believe XX%. because you reluctant on have equity and return equity. total quarter we've not been we equity most on the

return a disclosing XX.X% We very we attractive or especially annualized On generated on given ROTCE metric our a are common in which has believe equity during industry. that tangible common capital return the quarter, common as basis, position. now equity tangible an become we our on strong is

administration of under On of achieved under Bank $XXX.X you Slide assets of $XX.X this our metrics, to accounts of PCG loans billion, assets and strong can also results see most quarter, we key the including client business of in addition records that financial for X, assets billion, PCG $XXX billion, at billion. in of financial advisors fee-based $XXX.X RJ financial total net X,XXX, management

our driven growth, market in sequential also financial for we the in significant assets equity X% in share market that Group been accounts retention and reflects strong increases XX% asset to industry-leading believe Client While, have by certainly metrics, and recruiting appreciation increases client that of PCG year-over-year growth of consistent advisors. contributed fee-based example substantial Private the

have year-over-year growth. increases our already ranged have fee-based XX% in that firms to year-over-year the well for example, XX% the assets For reported, below

in reached but XX% market sequentially positioning. down the of cash surge due year-ago which XXXX, high balances in in the the up volatility partially quarter following the quarter year-over-year in -- at planning $XX.X year-end were domestic billion tax were from X% December ended because watermark Client’s a the of to

the beginning the to impact But Client income first of declines several remember, stabilize we cash due fee in at balances have calendar the we quarter, last typically over each of and payments. cash months. billings quarter, within tax see balances seasonal appeared the quarterly to

aforementioned interest segment fees revenues Private The Slide let's rates record of the Now banks. driven net $X.X by by results X. assets turn third-party from income the fee-based billion, interest net partially offset in accounts and quarterly negative Group RJBDP and of lower which generated the to short-term on growth Client of primarily was starting impact

segment’s interest Paul as much improvement declines Quarterly and million, the due $XXX revenues banks after net income part. net largely a higher up on driven lower discuss sequentially. X% these basis, to income expenses. RJBDP for in X% this again, finish short-term more pre-tax And the lower to year-over-year was sequential pre-tax income fees Paul rates The in discuss was Shoukry was interest third-party in decrease will down due non-comp I The the will which the income and year-over-year by detail. from in was but segment

advisors, the Most very despite the of client which number planned grew are typical a assets of can slide, that and importantly, trends quarter. number December on bottom see the elevated to each positive you for retirements of X,XXX,

the there alone, left cases retired or quarter were substantially quarter, most client assets. that retained the XX in all advisors during the business in who we example, For where

decreases advisors other during the industry, to have in most our was additions as quarter financial compared of and net Our reported net have particularly year-over-year far so impressive who firms sequentially. in advisors all reported

But quality $X James. high-quality advisors some including attracting very Raymond even practices of is We're of million in net large joining impressive the million $XX the advisors and range. addition the to than more

production continues firms assets with robust with to four past prior billion and pipeline recruiting the the over across of James, XX a all $XXX affiliation affiliated over Over is our quarters, result. $XX spectacular And be options. trailing our of which financial at had advisors Raymond million of

fourth Markets results quarter revenue mixed X, the quarter. sequentially pre-tax year-over-year Slide as the basis during had were down compared to and fiscal but income segment up the to Moving Capital

brokerage debt income both the underwriting and and revenue were strong quarter. equity during revenues Fixed

equity year-ago the On quarter. the hand, M&A revenues and were brokerage revenues down other from

On accounts advisors PCG, the management income, Carillon on than next record of results the financial Tower were modest Management Asset more record a of the and year-over-year Advisers offset appreciation, net basis net which addition record of pre-tax X% a reached outflows XX% These under segment driven by quarter. increased during net assets generated billion, and equity market of and fee-based utilization financial for and quarterly slide, sequential. revenues the $XXX.X and increases

X, decline quarterly as revenues the margin net million; loan income $XXX peaked the a net interest record seven Bank by offset rates. short-term slightly higher On out help of basis Raymond caused than again Bank's sequential in growth James to interest points Slide preceding quarter lower

loans loan of during a sequentially in loss up and C&I held payoffs loan by residential year-over-year which million allowance a the quarter, was of corporate on mortgage, credit lower loan basis resulted the income size Despite XX% benefit. and than lower for carries loans $X in an of rated loans benefit loss quarter. and uptick the X% concentration higher Pre-tax the growth certain on average,

the over September of was ended quarter up X% December over and loans XXXX at X% record Net billion $XX.X XXXX. a which

Now more provide results. financial the detail Paul? on Shoukry, over the to I'll will turn call Paul who Paul,

Paul Shoukry

Thanks.

but help I who's the have Jeff in Jeff been Jeff numbers, has over fortunately, into Before us this room the the sitting fill, a mentor transition. want with has just me to shoes And and to to Julien, around past several for big I year thank the to fantastic stick years. morning. friend a agreed with jumping certainly

thank Jeff. So you,

I out requested metrics this my five-rolling some point for prepared for which the that also first time earnings this out to to additions remarks. quarter I'll release, disclosures as over provides in want a but we our quarters. financial also provided using to addition the similar we're other point throughout presentation, supplement call,

As always, all us enhance disclosures. thanks feedback suggestions you of help our for continuously to and your to

$X and with compared are a record down revenues stated, which relatively XX, of the Paul in our XX% good the were X% about Slide quarterly predictability. asset-based up net providing to we as quarter. revenues net generated on Notably on basis year-over-year preceding Starting X% of achieved billion, revenues

Asset fee-based management and sequential the X% basis increase a in in XX% up a sequentially, accounts X% of with assets year-over-year consistent on fees preceding were quarter.

first Assets are quarter quarter second will in fiscal fee-based reflected preceding balances the the a in on based the quarter, of the accounts assets each Client Private beginning X% substantial the which during end of at of were quarter. up these billed at in be segment as Group the most

quarter. the about ending, combination of by the Also item based are and assets built Asset financial Management which a segment, driven management in beginning, is of under assets XX% average line throughout on remember primarily this

in Given X% the to management, increase to to basis. quarter around one and on first grow quarter fewer X% fees billing X% day quarter management financial assets compared second sequential would next we in the somewhere under the a expect asset sequential

Brokerage quarter of income revenues strong pretty as healthy revenues this quarter. were million $XXX again brokerage during fixed were the

the not sheet and institutional basis, impacting subdued they shift commissions accounts still across While much for by equity fee-based there do improved sequential revenues pretty are and risk. were in ours headwinds industry, to revenues firm the impacted PCG a balance as a brokerage revenues particularly structural cyclical brokerage that equity both like and are negatively as on brokerage brokerage PCG take

on lower positions Asset which X% year-over-year decline fees annuity as last which Partially the banks higher in market discuss fees in and June, XXXX balances, basis largely in an increase service next rates those will a service and Accounting was balances. to in down mutual items to the Management sweep well lower the attributable fees and slides. fund segment, fund average detail RJBDP of two compared lower as were more was interest X% from short-term first attributable to the The more $XXX mutual fund of fiscal the quarter money mutual offsetting of and to reflected third-party sequentially. I option is cash million removal due

billion compared the were Investment XX% year's up quarter, to preceding but quarter. last X% first banking revenues of down compared to $XXX

revenues a underwriting but and year-over-year on sequential Debt and both both strong were M&A declined basis. revenues underwriting equity

As banking prior-year’s was a $XXX record record. fiscal we the up generated from year million you may recall, approximately XX% that investment XXXX, which revenues in of was

year assuming revenues quarter. of about would our per $XXX how conducive conditions pleased of strong would Given result market an remain banking result were which be that average this investment in last to million investment match revenues year, banking we

So up the do we after catching quarter. to have first some

on on which quarter quarter, credit two drivers were revenues income this primary quickly interest tax valuation segment, both of next fund XXXX. strong for in gains investments lower equity other quarter, net very but substantially discuss private on two other the in were a had I'll fourth the which decline in down quarter revenues, fiscal the the first fourth to loss slides, the other revenues a and and modest compared

first we XX, quarter Slide PCG have to a balances fiscal of which fiscal to funding the third expect XXXX increased due sweep assets Moving elevated source income with balances back $XX.X the that the second client and are quarter These these our at positioning on banks representing at encounter low far due quarter domestic the partially is billion tax clients’ which fee payments. we in the stabilized fees have we year. quarterly billings domestic the tax the market the balances and generate as balances Unless of in ended volatility, the RJBDP third-party of interest as to the is primary quarter typical the assets, end calendar record since pressure cash X% earning X.X% for of that during data.

combined chart two items as On are net Slide the fees changes our basis, income from in RJBDP and XX, rates. displays banks firm-wide third-party directly these by impacted a on interest top short-term

combined three Raymond As which at of rate down high August pressure you streams, $XX on are XXXX put XX James in watermark loan and see, points million second a despite totaling these Bank. basis fiscal growth basis can the the has revenue since from quarter the cuts that's on

the slide, of provided disclosure a that been new portion you right of bottom the many have we requesting. On

beta third-party average average reached the XX% yield rate Prior averaged banks second three those of approximately the fees rate quarter on means which cuts, to the XXXX quarter RJBDP for During in the the was deposit from X.XX%. last cuts. the fiscal X% three yields

approximately down sweep our earnings X% reduction equates to clients’ current of level of basis an $XXX domestic spread of the roughly annual points cash balances, the XX of to million. X.XX%, pre-tax impact Given

NIM Those graph is obviously oversimplified the dynamics this the reflected to the are good based a portion duration. Now bank's sheet, of spreads vary and on on these portion where of on are math fund some balance left balances loan because the there's used bottom slide.

would pre-tax to on our ratio the would and XX% approximately in more million of based which XXX a of reflect year we'll to margin, adjusted pre-tax oversimplified impact But the discuss XXXX slide. approximately income negative XXX fiscal comp points on the next $XXX represent basis math, and

the Raymond net around mix, in preceding rates impact we short-term from lower and will this we five should cash be second assuming offset sweep mortgages competitive average pursuit of to the lower a margin near the the basis points the residential from X.XX%. around mix rates the at higher of top-end are and us reduction remain risk the bank's of yielding Bank’s week, largely the quarter basis similar rates. same would making James If by leave which negative interest points declined quarter seven NIM in asset expect remain level to as the constant,

similarly would average remain to X.XX%. expect -- the X.X% from on third-party would to we yield we banks fees around So RJBDP

XX. Now, expenses I'll on Slide discuss

few to on which increase PCG, as have largest as been net The revenues. First, let far with compensation payouts largely compensation revenues, net mix, while higher grown driven portion XX.X%. expense those non-compensable revenues of associated expense. a have revenue was is to declined of me by be spend from a compensable revenues minutes have in portion XX.X% This by a advisor increased which sequentially the ratio

fees, X% the interest As the affiliation revenues, decrease Investment include in significant revenues options average XX%. in revenues which up an I a prior were covered has Banking Private These segment on have slide, revenues. asset Client and of sequentially. management the the brokerage pressured Meanwhile, between compensable the Group revenues short-term in non-compensable payout approximately of portion rates our

than revenues revenue you PCG’s other increase. the compensation ratio when compensable So should faster sources, increase to expect

decrease Just rates XXXX substantially when XXXX. from increase as a through

fiscal the benefits this the the during to fiscal in million the overall firm's of dynamic, compensation Financial release accounts expected better during up started earnings quarter. To XX% first is in supplement, $XX quarter quarter assets of X% the as second or help the This $XX out understand and into which roughly sequential breaking represented increase Advisor and PCG total you dynamic fee-based increase. in were continue we compensation million the

the somewhere This year. Given the the compensation and ratio reset of advisor of But represents XX.X% calendar to revenue XXX basis and point primarily is compensation for growth revenues short-term the each again, change of compensable increase in the would the over of our taxes at payroll lower this be interest rates mix beginning adjustment prior of function a PCG. financial we around expect fiscal year, target. in between large portion

equities year-ago expenses. from preceding European the which million quarter and $XX the $XXX included included that and were declined from a research included of impairment million -- preceding goodwill million, non-compensation expenses with the our Non-compensation during associated XX% which quarter XX% the quarter Onto loss quarter disposition business. $XX

conferences year. would expect recognition during expenses throughout increase were or events the to Given loan the quarter, benefit major non-compensation the fact the there that loss and no we

the as quarter, wide items such is a revenue quarter-to-quarter. while around million or XXXX that $X.X range could this well about lot estimating target also certain quarter. in we fiscal experienced there in But higher $XXX a billion will of variables, expenses than And non-compensation first expect we're expected we as we XXXX growth We drive higher are total billion More in as non-compensation per a line two as currently this non-compensation average if X% that around an from to growth aforementioned specifically, expenses XXXX over on growth. represent still expense non-GAAP the fiscal containing included directly much items. while as sub-advisory we expenses revenue believe as possible, fee are given good for future. are a be expense tied as growth focused amount result are would $X.X which fiscal the growth extremely experiencing approximately would investing of of particularly of

of trend shows first fiscal The in past XX margin was pre-tax Slide the quarters. the XX.X% the quarter margin over five pre-tax XXXX.

cuts. the around Analyst change the to reflecting the margin our provided know fiscal provided, Day rapidly expect know business. be three and estimate we decline short-term now, Given given recent we we I this XX% we before in just XXXX, for XXX guidance and our is points that Investor right all what under target pre-tax rate can basis would the expense Again, best things from

we million times a only $XXX remaining approximately stock-based we Slide of million We stock compensation actions at of repurchased under strong our first Furthermore, the to our least position, returned summary past also have fiscal our at back per to over increasing dividends dips book to dilution, liquidity capital offsetting had Board's to as XX share million authorization. remain of in X.X the quarters, shares will the last and starts consider around committed stated provides value. we shareholders repurchases, where We given $X which $XXX through which billion authorization. repurchases year. significantly is the but opportunistic we exhibited we capital five price $XXX levels quarter, XX over repurchase year if currently million and

buybacks, bank's In summary, sheet, we’re of capital to our our very more for being our increase our on utilizing securities through is or higher opportunities, more which aggressive and/or growth example, dividends, growth it the portfolio rapidly. whether be balance focus corporate our capital strong, accelerating given pursuing development by much with already the growing of the going deploying

turn So outlook. Reilly call with the our back Paul over that, to discuss Paul? to I'll

Paul Reilly

update and of Paul, Thanks, guidance there. thanks for lot

the as couldn't would hold interest most we rate interest this as until said these can And last you given we we recall by rate were you quarter. see of off call, the just But our predict, upcoming again, from caused changes changes. changes,

detail. it day. our provided Analyst at we Investor as do Typically would and we much So

last time call, in explain given than it our things the cuts later. update it to felt could we But was we sooner since person. So

we an since In rate summary, and Analyst our has Day three about income million. $XXX June, impact which on Investor had last cuts pre-tax our in

ratio our margin So adjust pre-tax points. XXX to we and basis comp needed targets by

of all Unlike their the our other many and almost growth. associated in we’re expenses in of businesses firms mode growth with

different than and adding net consistently advisors a transition compensation retention is alone assistance example, on million a representing most years basis, as in million That our $XXX consistently we've four expense adding financial and been larger losing net For to that for on been the prior. a net very XXXX revenues have we’re basis. creates advisors whereas amortization about $XXX firms our in trajectory larger reflected dynamic X.X% just

We're expensive, expanding and office, to the also adding paying so growth, Growth external our support at branches branch footprint, home is on. and a a non-comp the paying I expense transfer and this growth we it and at is size the X% for for very long-term ACAT And internal expenses good shareholders. result of but accounts recruiters, in management. given represents believe fees our good think

originally which role, the improving solutions just and as we growth have DOL has also expense benefit for but their done our since and but compliance of our in past to our future the three not With vacated, been responsible supervision to over in hindsight, could technology, we've explaining growth infrastructure clients. job investing by for a been ready get in the heavily, the manner advisors probably support better our years

and more other and implementing investments technologies AML we If fiduciary really glad for implementation struggled not investments made interest compliance year. Mantas I'm BI. requirements this now would past effective regulation out SEC’s years have for significant our efforts make standard we such as we and had other as is those few Actimize the and in did And those become best the supervision, over

our infrastructure we're able the But that are growth going personnel build-out, the businesses. decelerate across I and we’ll despite significant growth believe we is in stages expense of our to experiencing forward which we're confident be why late

we once larger in which we’ll complete our time. a of Importantly, to and result over scale support on build-out, clients should the financial number be able much economies advisors infrastructure

Group, our obviously with is really Private growth starts that the which Client largest business. And

this We’re consistently best-in-class producing business. growth in

Raymond assets four options. past their production have million remains very as the all plus prior and over our quarters, firms billion of XXX pipeline advisors James dollars $XX earlier, across said financial recruiting I strong and with of As with affiliated affiliation our of

This the quarter where represents a better flattish year's of in start number quarter we’re than advisors. first last

of which The year every at number quarter first of is typical significant year-end. retirements has

and advisors a is expected second the which to tailwind good average. is start this grow to We’re if fee-based industry helped among last best accounts we've of our in provide sequential basis to a on strong XX% year's off PCG our quarter. The existing on importantly result strong most on assets year-over-year organic nice averaging best sequential in and above with quarter retention an X% The basis has and recruiting a results, seen basis. fiscal growth quarterly very a the our revenues the not X%

we've records Markets, are healthy, Capital accustomed happy still In investing fiscal match last business. year’s heavily $XXX year, been our million if to we've levels M&A in XXXX. that business in as each but can become very new Activity achieving we be banking we'd in

on fixed sales balance and still positive the expect trends of trading as the continues of to trading providers. the touch business we’re business remain and we equity but to business side On low challenged shift sheet side seeing income the side,

fee-based challenging actively Group the segment Tower of managed business in products. from offset the Client growth passively due The managed products has the from accounts to Advisers continue asset flow Private benefit which to management shift for assets Carillon could the in to environment

quarter X% second fiscal under the entering year-over-year We’re sequentially. assets and XX% with management up

experience the the growth to loan low Group, Raymond mortgages, strong very given continuing James Bank, Client particularly In we’re environment. Private residential in rate

lower having our have the corporate client attractive very loans, adjusted of risk they yields than have also returns, while relationships. benefit strengthening mortgages dual our residential While

be extremely categories. with corporate growth to in are market we’ll we selective the loan where particularly cycle, Given the in loan continue

as our fully On Paul explained, committed Shoukry deploying we’re capital. capital, excess

manner be capital repurchases growing aggressive continue corporate development this more in of pursuing our be but other or extremely at including in has many opportunities a those but a levers; pricing opportunities continued on challenge balance been have these in engaged also the We cycle. in market We’ll deliberate sheet. evaluating point to the

second advisor assets, bull remains we loans focused number being a activity and as market, longest how advisors, the far I'm entering short-term overall, into financial The record cautiously So pipelines optimistic healthy. Bank. financial had we have the lower RJ record for managing a banking of at quarter levels client record on investment remain are ever, recruiting’s still expenses. strong, given interest But rates the net we’re

So to open I'm Myra? it turn going Myra. over with up that, questions to to it and

Operator

Thank you. Instructions]. [Operator

Please one only. and note allowed that analysts one follow-up question question are

line Our first Craig from question comes of the Siegenthaler from Credit Suisse.

Your line is open. ahead. Please go

Craig Siegenthaler

I from, a and are seeing wire lot those houses though? big also other different I competition groups coming now the you X% if the retirements had and those the independent banks have healthy on advisors question increasing a little a and from So, failing year, advisors clip competition a of recruiting. for advisors grew the you But your over in quarter. like color mean, are more some fourth advisors on last why where for brokers, did can you provide you’re the in

Paul Reilly

them that in them James still shift Well, their has a our We advisors and environment with have as what's I the that think no give product just clients best it's clients. we philosophy do where allows to the push. an for Raymond platform

for quotas what's I any advisors any we no do best don't have mean, product, on really managers them. have We want incentives. to

flexibility some both there's for structures places. of platform I a like of attractive payouts advisors an So or banks technology, their they've time, and less tightened long today’s the they've leading been and but think we've I lot feel in other us, for a had as leaving just not and think for

have is has So, kind come, a wire I that's house on record backlog. most regional it and house any from the recruiting of same from think the -- pace. a the firms before, and that where wire beneficiary been continued, the in the firms. larger the slowdown of cost of don't And see us year the of We trajectory of the year we're has was firms. Last near so

the still backlog of record, as today, it's see growth. don't or So record know. whether we But in same a interest I shorter than

the it our been that's don't of for changing So, strategy number short-term we mid-term. see years in a to and

Craig Siegenthaler

Paul, questions I Thanks had or three and in two there.

in back queue. the get I'll So

Paul Reilly

Myra.

question? Next

Operator

Stanley. from next question We Manan have Gosalia of our Morgan line from the

You may your question. ask

is line Your open.

Manan Gosalia

Hi, longer-term, bring I that But you puts I maybe was about how in the could to be in was the little of over know the for and wondering you And takes the by wondering, billion. line talk line mentioned down that should years non-comp puts line. non-comp talk maybe the next you and I couple much around room if full-year, takes the the bit. to can you a line? have of $X.X some

Paul Reilly

and can have puts about takes. I’ll Paul give talk overview an you the I to and

You've seen year, of that couple line years. decelerating last accounting really taking the away really over the change last

So year last year deceleration. was a a deceleration further this and is

where on But we accounting change to up again sometimes some gross with had the that. expenses revenue recognition, people on lose

efficient the the advisors, more manage actually systems, think become and actually systems with help the with client their we've management. we it also and better to down. we continue And So investing

large So a that's been decelerating. and started been the build-up it's few relationship. really years The ago

item? to you talk do want Paul, line Now, particular about any

Paul Shoukry

two expenses well reported but to that That’s as to over X% the Paul of as right. And add gross up the of recognition. items as to year, expenses the prior-year due last half stated, revenue was non-GAAP non-comp what due grew more the color to in

So, throughout the a looking this maintain represented to apples-to-apples deceleration, at growth expense kind billion. items, and build year given up so just year. development first trips relatively was sort loss low other business that conferences or credit level off get same a we're Obviously of the the you the started to quarter look $X.X to non-comp loan that kind and significant low the recognition if of to of size, given around no in and expect we

growth. I revenue thing with last et these lot on fees, would professional the to cetera directly a of are lines, tied banking fees investment But sub-advisory deals, this is associated say

can as So growth we tied growth want to to fully we the the directly contain, appreciate growth. we that also want as much contain revenue to expense that is

Manan Gosalia

fiscal separately little more room and side? betas relatively quarter, into mentioned wondering to still to quarter. bring second into into you around should fiscal Got outlook NIM it. room for is deposit is even bring quarter deposit was could be the I XX%, down the as full-year, the costs know on room there the go the flat the maybe more a to speak you more is NIM there or the And With in you that if down? third I side, then But half there second costs of next going the

Paul Shoukry

this assuming NIM is cut quarter, down don't after points. point room staying I making a deposit believe current to our from think more the reflects take rates in much know I not cost we're stay week do X stable costs stable, I this No, that of basis average there's second X cut. basis that about

other NIM cash create today yield have at credit the we that that our equal bank, the of firm bank's would if risk -- for bring portfolio would the would overall item portfolio. earning is would what's bank's balance the for portfolio which NIM lower the the only the because on But would have the down than a off table, sheet do on a securities be the securities on And X.XX%. pressure pickup Bringing get it credit which the growth accelerate being at we're as mention is all taking I overall. NIM else doesn't balance sheet

Paul Reilly

that that's sheet interest spreads in show thing bank but the so. consolidated NIM the it's if because lower would it’s we it's one balance better earn impacted firm off off move higher assets, Yes, balance we sheet, grow and with will bank's would NIM be a the it that as we

Manan Gosalia

is to pre-tax better neutral be it So to would slightly NIM, margins that detrimental and slightly right? to

Paul Shoukry

Right, yes.

Paul Reilly

to the banks. NIM but pre-tax better slightly and slightly detrimental to Yes, in

Operator

of from JMP line Our the Securities. comes Ryan question from Devin next

Your is line open.

may your ask questions. You

Devin Ryan

I so clearly in follow-up the lot growth. wanted that But get stages late dig a organic Question here had on leading this to support organic infrastructure commentary to question in helping guys the that’s on the of kind expense being little some expansion industry more of bit in also I implication. PCG, as making I of of first recent growth. just So kind just think driving a in to guess a or I investments you the and are ramp years infrastructure

accelerate, really fast could and an and you piece not perspective, infrastructure on kind so a ramp feel on where all the infrastructure update also how is just where the momentum North, So one East market can allow of faster, the seeing scenario place, to from you question capacity is asking you you potentially you there's the have that constraint how advisors just West as flavor the close of having in and organic share I'm been the and a there? and is recruit potentially most for, growth that full guys a can at more kind geographic had you're

Paul Reilly

that first we the can advisors have to fast I question; quality that We has an -- ramp on think we too. come So that do we have accept find to the want people first, with that how accept? we -- advisors we don't and

So pipeline issue. one is

our assistance year, competitors Secondly, we're match is we're to still last our below increased have. the like of without significantly the recruiting Competition many results market. transition able increasing but still same

assimilate is is how without So us existing and driving the because really fast advisors can we is numbers the retention. I grow service question really think what for our levels of hurting advisors

So that's focus one. number

Most of I pure the recruiting. investment hasn't what on call been

of I supervision to was just to Certainly, find reference And few advisors, and growing think more we could has lot up that in the to very be compliance large ramp and growth are AML them. you issue platform, a we years the headcount almost those going in Mantas if both running A decided and remember, went expensive. and there up, supervision Actimize and of larger But which AML been supervision investment other systems if systems Actimize we a our and we on we are in and heavily up fully invested compliance. firm. ago, it and we our and do a onboard could were have Mantas compliance that side. all the

can infrastructure So that That people. very than scalable. to ramp support advisors. of don't is have I us help and we increase And part it'll it, we'll or much ramp think will the lower increase

a has to really interest way that ago. So maybe that infrastructure a we biggest opportunity. in had part couple of And the spreads some build we of rate to invested been when our starting the years build

there. So we're in good shape

in the lowest is competitive assistance don't more So see non-comp. the amongst, see lower. the transition it in And think you'll I probably than we we're think competitors the I down, already we going but what pay it industry in

an business. those over, good standard. we is ACAP the to have those accounts kind when to And again, But away the mid that industry of exceptional to long-term expense benefits long-term people the industry we came go won’t fees for And that’s pay ROEs move believe kind for of and purely recruiting.

Paul Shoukry

Geography?

Paul Reilly

On to share I is investments mean, the percent think we're I would geography, still say our continue I we're the growing; given much activity seeing more our low. that And there. very increase growing, certainly a Northeast; we is West

being So flags what that I are is our expanded. like

wise, our we're over Northeast those think in we if I the rest lot than West of the the years of again, years, for of have get But a in achieve better if market to we and five highest percentage have just plenty done but opportunities. the the we've markets. Northeast; West, in growing the country we recruiting of we lot can we've a and that can share got growth next, three

progress. making we're So

Recruiting is process. leave going interesting, to Very someone who's if a it's just because they you do leave do quickly. rarely get long

make have you're in recruits I should and And Sometimes us. that was well, an have have two join I we for before and years so here issue, come they cautious. I in we the move. been there's XXXX they here said,

progress. momentum making build to still a opportunity both and takes I And good think of acceleration it we're in the a there. those doing while job I pipeline, we think So have markets

Devin Ryan

follow-up. color. just Great. And Thanks a for the quick all

there, quarter and understand targets or additional you going Fed mix big market from input of that out Do overall and comp the this appreciation kind cuts here? does comp put outlook, the a those and on to ratio equity was that just So is ratio well. any assume as targets I that be margin and business margin

Paul Reilly

those in way it'll need of we we kind This of or expect. The would think we mix is And payouts, path. our them it's sparingly. the always But what a our the static substantially only quarter I is and analysis to market. we rate do when do. go on this do to we think change we today's and environments I come interest change -- No, to depending really mix that like impact

we'll other at as and we we do. always look So through that look things, BI as

Operator

comes line question from next Research. of the Our Steven Chubak from Wolfe

go line Your Please is open. ahead.

Steven Chubak

the you you're your to unpack first speak reduce as areas, to in return gearing the welcome alluded to of hoping value curve, CFO, a which of capital maybe might book, appreciate organic organic and end expenses couple to seat, are, some to really what returns, Paul, maybe you book the short how X.X the capital grow you and now and to little trading that if in a specifically so disclosure. I is maybe comments stock new official So your on threshold was look just book, disclosure securities the to, detailed securities on times I priorities could your of think capital, growth, appetite and I update call wanted bit enhanced appetite and some above just growth the

Paul Shoukry

dense a Steven, That’s you. but question there, thank

Steven Chubak

my take to follow-up. going still I’m

Paul Shoukry

And $X balance off is that cash; us what the substantially sheet. to over over of years the of assets portfolio, it time capital a and have billion In sheet, have telling on few of forward $X we're amount securities of and securities. to the terms amount at I And it's the doing the we're being of looking capacity incremental last grown the something of sort in accelerating balance here. period our actually we to curve is growth mean considering we just billion terms modest and grow the of maybe we've

backed would would over take earn we four This And every be XX And in again, to today securities with around we're not points changes basis today, with of years. you off but that pickup around incremental looking duration get portfolio. of to somewhere risk that three it mortgage credit mostly balance day, agency what sheet.

what been then repurchases, what -- very of we we're going long if repurchases doing the discussed remain increase we're we last stay to our levels, to pretty capital, we're going opportunistic said, obviously, authorization good price we to terms we to of drops doing then and and priorities we're time consistent going have year, as the detail offset I a going that's to plenty with other consider something already. in well. And which dilution expenses, committed where liquidity we've we've that to as have to and In for mean shown

Steven Chubak

disclosure growth? enhanced on the organic And just

Paul Shoukry

think quarters, are new two just net to the something I mean, I we metric of working asset over the on. we I three the -- Well, number last that But are or specifically not XX% that look you is working think requests highest in think assets in year-over-year for acknowledged inbound has because the the when at and accounts, the highest, subsided has fee-based everyone that somewhat I among growth the industry. if referring

have easier the So in at appreciate sort But to think metric organic to getting I credit of we're that we regard. sort of time, desire growth. for an track the same the

something are it's So at. we looking

is nothing But your free. expense kind on growth, to first back of question tying

And the across so have that other firm. we're doing priorities in the context of we our IT

Paul Reilly

the effective that of BI challenges the Reg focus is industry I is now to XX. our June for think one right is

systems we're but our we it’s that it's BI or do changes focused have till any sure now on get to on right been these start look up, at being document really and process disclosure first effectively them time, To to as out. we've capacity, things, that excess So and things excess compliant, do are have have done. all other them capacity, IT making priority, we we and required, had other rolling so focused ops and are there any

running by June place things and we start because XX. done roll doing have and them at to up not out to in have already, them June XX, starting and We’re

Steven Chubak

on one Hi follow-up and expenses. just me for

disproportionately comp You elevated that but some guys slowing margin. is the certainly weigh continuing of on evident pressure progress the cited pace in core to the non-comp, is

incremental ahead look PCG. within in stabilizing longer-term, we to compensable as how growth more the coming generating think and come most comes those dollars trying with activities. we As on, activities from view from of fee NIM margin I'm growth just should XQ, that about revenue

about algorithm earnings XXXX? to trying just beyond Now think growth the

Paul Shoukry

of are mix. obviously two current the environment, ratio we would pre-tax along for factors our given market as the revenue rate best margins, now tell right given is mix, impact think but think margin XX% comp can which XX.X% environment big best the I revenue for the that we the your with and and the as current I visibility XX.X% have

extent that interest changes our targets. mix changes, revenue then adjust would So to we market the those changes, rate environment environment we

Paul Reilly

I First they're quarter PCG versus business. cyclical; mean tax lower by which -- core they're are M&A credit and impacted never, was funds, the

rate is big our make that quarter. impacted the those from I it mean, and of pre-tax changes I'm but math. XX% revenue one up much that and the and lose change amazed could So three it almost of us, we interest make -- that that kind in that's just that's just up

That's So at its but is the growth, it's production. across I least our folks to don't again, profit payouts good only pay that But production for But at where change looking all going. that really system. growth. we expense and way is

to add can we revenues the grow ratio, that in growth the take margin. we'll faster So even and the

competitive fair. make time, want sure and we and that. as to And over at change look So they're we will shift things

Operator

Bill comes from Citi. of next Katz the from line question Our

ahead. go Your line is open. Please

Bill Katz

for very for taking enhanced you disclosure. Thanks the the questions. thank much Okay,

So discussion a to more. bit margin just little coming back

margin you -- then related that might of what that that where segment your how in for earlier beyond you drivers you the clients had you your mentioned there? and relative get sort private level comments, And XXXX wondering are levels? the XX% what's to market that look to payout at of and long-term As is outlook fiscal prepared sort

Paul Shoukry

on would of margin, depends group private tell I lot geography. of terms it Yes, client really you the in a

extent we've So which reflected management to James that we continue, benefits to Private we're Raymond gets that extent of Client fee-based obviously, to which in James in the asset had group. Bank, to a the the sweep growth relative more Raymond segment movement the cash our that have would with accounts lot the considering portfolio more margin doing securities at Bank even so to the increase we

So, really, management meaningful most look because their segment. platform and their asset firms consolidated comparing across think We margins of on we when management a lot fee-based at that's the kind have the a especially wealth basis. firms of bank their in

XX% is on So it pre-tax guess the consolidated a again better basis, our margins. we expect or right best for now

the payout, a in of the between just the range. channel contractor where paid independent our function then and is on XX% employee the a are And mix contractors payout channel

the on you to generate. is And are revenues on production, not but the when revenues payout blend you so that the get the type two advisors the compensable overall to where the XX% firm, the average

Bill Katz

Okay, it’s helpful.

Paul Shoukry

Okay.

Bill Katz

sort And this sorry is is little a of a of but then interrupt I’m you, corporate just and my well pricing mentioned you follow-up, heavy. to -- bit development that priority is

you’re of of the wondering bolstering maybe you little a your or any think that be businesses now it year perspective there as was call backdrop years or maybe of bit or a segments some look the other I and whether de-emphasize So that mix bolster where where business. the about get ROE? from you most today get you conversely, least from you're are at then help could focused, And private side in in sort at two client or business

Paul Reilly

and is bank, of capital deployer. technology. we'd which the at that’s where is really or Private -- our that We'd like look in you it’s that biggest like ROE assistance capital like, the where if transition generated investment in group most including And deployed, is we Client first from where our business, is

open Private Group the and mix. like of our business. we're is Client kind we in So the businesses We're anchor honestly

we first, first to capital have now So as the of sense avoid open bound And there's we're right but to bigger to any would our better things economic to because we bigger, do if that opportunity shareholders actually the business ROE the businesses; the we grow relatively think segments, to will to make really something that now, market. we not they're just first that we it things just well to not don't performing has like look be always shareholders. but we're good

all on be dialogue. four, continue focused to we're So in we

dialogue too those assets ended over anyone assets think was was because was market fast the had say we the of on year a and the too just that we've the without agreed more lot But trading high. I just felt I would market last -- too high

do going something. not we’re something just So do to to

Operator

from our Mitchell line from the Research. Buckingham question have of We Jim next

open. Please go Your line is ahead.

Jim Mitchell

than could Total just the for in year-over-year. look faster for look look compensable comps we compensation comp at a advisors, bit, relative Maybe of total comps I sort total revenue if comp sequentially, the little I sequentially at I if growing just follow-up the on the revenue. in at year-over-year not to PCG but

it's comp would is other of getting slow comp, kind some at total recruiting can driving positive help some just off at is And to or absolutely so that us leverage line what's total Advisors? you you out maybe it think the negative get the of if is just and just incremental FA just point, understand the the point you're negative margins not that need I going margins revenue, even to incremental because comp,

Paul Reilly

about three and really build-up ago investments three accelerated that Yes, decelerating. now the starting biggest talked of is AML as I made couple it's we've supervision over driver significant years of of those growth of earlier the years and that, support. the Those all almost functions compliance last

out future. the the come in is think we'll And it we've think for play that's leverage going I built maybe to have from. some so little non-comp really to So a catch-up, areas that's our but get where we leverage

lot it. So that's of an awful

Paul Shoukry

total a around what's whole X% do the basis, payout of drive versus other number growth But to growth compensable needs. And accounts, et production, it's the compensable cetera. and that's have the revenues. both and revenues dialogue to on year-over-year the non-compensable in the is in infrastructure showing advisors Private group think really revenues to I X% going thing back support number Yes, of in you compensable revenues and the really our going and Client is

the X%. Private reasons X% than is non-FA being the And the still for is lower And Client higher in that is administrative the that the comp is mentioned. reason the the business. So X% group Paul

ago of three grew build-out, last years later line XX%, if group that look admin the you back this fact sort X% the kind and infrastructure that to in But we're of for for XX% support sort the we're of three of XX%, years it year-over-year the grew budgeting what it year. the that's quarter XXXX, comp PCG in year fiscal grew stages in

business. we've come in substantially, the build-up are stages Client in down as group this later of So Private it's --

Jim Mitchell

not to that further so Is slow sort be of continue so should and revenue. tied that fair? to And

Paul Reilly

Yes.

Jim Mitchell

and that assets do just more decide balance potential on about Okay, sort growth. you -- talking to that, be the quickly sheet follow-up a balance If decide sheet of XXXX? maybe more balance you then slow ahead and in Would you put if to could sheet? it, with impactful how just or go the do

Paul Reilly

You Jim. billion, rapidly, $X the portfolio pretty securities can billion grow $X

something it to couple still with that in having decide still do is still it's would we're to we billion -- So again, move with internally. -- to first forward discussions decide we we're if expect quickly. that. occur forward discuss move I that to But something it's pretty which the we're on still

Operator

back Paul Reilly. call to the I’ll turn That completes our session. question-and-answer

Paul Reilly

there for less see the data last you many been but would rate impacted because comp our right significantly to earnings off provide we one like or said mix. thank had it wanted And or we you or cuts happened, because Well, great. more I well, again are, how ratios now you joining could do again us. have this on see what one can cut cut, Analysts holding Day Okay, normally and year, we Investor to wait and

for got So we to you fast morning. could you. we gotten have we as but it bit this sooner, thank as wish And could. joining you Myra, a us you little to thank Right,

Operator

conclude Thank you for today. participating. does conference That our for all

disconnect. great now day. Have a may You

Raymond James Financial (RJF) 23 Jan 202020 Q1 Earnings call transcript