Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to Raymond James Financial's Second Quarter Fiscal 2023 Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website.

Now, I'll turn it over to Kristie Waugh, Senior Vice President of Investor Relations at Raymond James Financial.

Kristina Waugh

Good afternoon, everyone, and thank you for joining us. We appreciate your time and interest in Raymond James Financial. call Paul Paul Shoukry, the Executive Chairman on and Officer; Chief us today Reilly, are Chief With Financial Officer. reviewed being Investor presentation today on available The Raymond Relations website. is James

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

and results, note of concerning Calling during level statements divestitures, business future our statements. statements strategic this X. not our are financial forward-looking made include, constitute objectives, or certain but litigation integrating your anticipated may economic limited success Slide benefits acquired attention results These anticipated to acquisitions and timing Please and call developments to, regulatory of prospects, conditions. information businesses, of

that In to could, of necessarily anticipates, future addition, events or identify will, well negative may, such continue such words expects, terms forward-looking believes statement as statements. depends are as on intended or as other any

there will results and Form these consider which that website. available most in that note expressed not are Forms We our differ can the urge Relations be our assurance in Forms from on XX-Q you and to subsequent those described statements. no actual Investor X-K, Please risks XX-K materially recent

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

Paul? Now Chair the Reilly. CEO, turn I'll call to over Paul and

Paul Reilly

joining us Florida. you Paul for Orlando, joining afternoon. Good from I Thank today. and are you

having as we other time back here. have sessions It's people an advisors mood great good conference. X,XXX have to getting our really such attending well upbeat educational all independent as We see and together the over people a

us XX James placing positioned an years well over commitment keeps over conservative through has founding to maintained decision-making long the Raymond that our term. Since clients first unwavering ago,

And it's very term through always to philosophy that time. the in our easy system carries even challenged While the as these thrive. not appreciated served it has us on but or remaining such good well only times, when been us fully not focused financial has is enables over long in itself times us

examples few have our XXX our thanks weeks to fantastic bank over ratio at FDIC and our regulatory deposits all industry, A-level including later, were revolver of benefited Tier partners. of $X.X the our the insured, relationship we with amongst highest Fitch have prices. we and back XX% be our of remaining three which requirements includes Further, XX.X%, have the James in of we capital were with shares turmoil. of X A under renew capitalized. to all Just differentiated height were positioning of credit of upsize bank are Xx capacity of terms, leverage with we able recently the Bank still buy X-year entire we in nearly March agencies committed XX% million a believe rating And able reaffirmed attractive authorization. the we Board few what that to enhanced the from at to billion well Raymond

like and are them these, client-focused we benefit long-term of our a keeping the approach times placing first. the In appreciate reminded of to dedication and firm's stakeholders' importance

the results. first volatility net the the market market our revenues we the high Despite record fiscal to challenging and generated turning Now months and during year, six earnings. of record

Slide revenues common of record quarterly to X. billion diluted on firm share. $X.XX million $XXX starting net shareholders and net results, quarter income or The per $X.X second Reviewing available reported of

to was available common income net adjusted shareholders diluted million $X.XX acquisitions, to or $XXX related per share. expenses Excluding

net revenue XX.X% the income of adjusted with XX%. returns robust market X% we and The increase common And despite shareholders of and annualized increased prior conditions capital position, common strong equity year. tangible generated revenues common significant return annualized challenging in return and XX.X%. on to drove earnings equity our the rates over interest-related available interest grew short-term driven Net by growth on

and attracting growth, Slide to X.X% $XXX X. on representing accounts billion. financial PCG quarter strong of advisors, high-quality PCG again PCG with evident $XXX assets period client consistently billion which under of the ended our organic trillion, assets. the management and on growth Moving and this domestic assets $XX.X the administration domestic net supporting total With continued We assets fee-based assets billion, rate of generates quarter focus with of beginning $X.X financial under an is new of retaining, annualized

the channels, production XX million assets at During months, firm. our and offset with $XXX nearly XXXX. financial quarter their through cash trailing the December at ended billion, prior billion recruited of approximately we employee domestic $XX client previous XX Savings Total of Enhanced contractor activity, expected Program and of Savings advisors and from XX% independent which reflects Enhanced clients' down The the domestic our partially of $XX.X by launch sequential balances sorting decline the Program. was sweep

clients the early success our Savings insurance. This Raymond product product clients in FDIC while the a for the the is with pleased of certainly rates competitive fantastic We believe this a are and maintaining current We unique of Enhanced seeking level Bank option offered environment. the PCG Program. industry appealing is James in really high

have Savings $X.X As Program of surpassed billion. Enhanced this week, balances

higher modest the reflecting decline a bank billion, due securities-based preceding environment. loans rate X% quarter to from loans to primarily interest Total decreased in $XX

We months later over prudent to our very will the loans growing but touch corporate plan volatile market several remain on next with more on conditions. the given this we call,

Slide billion due declined income to with million. revenues declines. Client $XXX revenue Private Moving asset-based Year-over-year, market Group $X.XX pre-tax to generated results record of X. quarterly net and of

revenues benefit by interest and the fees. of However, were rates lifted results and higher PCG's interest-related

quarter market negatively investment Markets $XX revenues elevated banking Shoukry pre-tax explain banking, brokerage in revenues lower quarterly will $XXX well environment, segment by expenses some Capital lower as Revenues declined as more by million the this a income fixed near-term investment challenging prior for million. XX% strained segment. the The year compared driven net detail, quarter particularly seasonal extremely of was has Paul generated profitability to of the as legal mostly As impacted loss as revenues. and costs. The well of

However, we expenses controllable depressed. revenues are focused managing are as on near-term

Asset segment $XXX revenues net million and pre-tax The pre-tax declines. were attributable of into fee-based generated lower revenue assets into inflows on of Private The net by income net to million. fee-based decreases offset as largely Management income the were in year-over-year accounts market and accounts Client Group $XX

net inflows the expansion to points was quarter. due up expansion assets largely for net Solid ago bank's over margin pre-tax interest the provide management, basis third the flexible Revenue the of a net Investment XX year the continued reflected in which Management quarter, income and The record Raymond of $XXX NIM sheet. financial points million nature quarter. growth the from the X.XX% helped James and boost and generated The to tailwind of floating million. balance under Bank revenues $XX segment should fiscal XXX preceding quarter our for basis

Although expect some as which past levels do high over Shoukry to very will Paul the industry across headwinds explain, couple we the reached months. NIM, of

X. over and million, the of common Looking income at Slide up year-to-date available of the fiscal $X.XX We record XX%, X% billion net $XXX generated net respectively, to record and year's shareholders revenues prior results record. on

six-month on return for and of generated period. adjusted annualized tangible on of equity strong return XX.X% common annualized equity common we the Additionally, XX.X%

revenues, the the the brokerage the On environment of year Bank record segment the the benefit reflects investment the organic banking reflected especially the of primarily compared to first and interest-related growth year for for challenging PCG and and in strong Capital Markets in of revenues, half levels strength period. results Slide higher the whereas X, PCG weaker the ago activity when

now detailed going of over Paul? to And the a the for to review quarter Shoukry second I'm financials. call turn Paul more

Paul Shoukry

were record diversified revenues quarter, Market XX. up sequentially. so complementary revenues to $X.XX record businesses. billion Starting Consolidated over net during across a able Thank reinforces on when in prior X% the second a having of year period generate the you, were Being quarterly and and revenues Paul. challenged Slide the industry, value Capital X% the

the related quarter. higher billable fee-based assets of the Asset increased to quarter, compared XX% at and fiscal Management second X% administrative in accounts due the the fees year fewer by quarter offset and declined the sequentially and partially to days preceding prior end

and grew providing third This administrative quarter, quarter. X%, fee-based Asset fees related fiscal the a in Management for tailwind assets

of and sequentially. revenues year-over-year PCG X% revenues trail lower asset-based well This lower $XXX to Capital due million fixed the grew declined in revenues as XX% segment. largely in year-over-year Brokerage brokerage decline as was income Markets

declined I'll X% interest service fees banking of shortly. year-over-year sequentially. discuss million XX% net and grew $XXX Investment account revenues income and

difficult As experienced across a new too conducive investment a given industry, lot year-over-year deals XX% solid were and of timings banking quarter, and XX% this will and declining heightened pace It conditions particularly the launching revenues. say in pipeline market remains business of to the volatility. M&A remains there Despite closing, revenues and become when sequentially. increase activity, banking healthy uncertainty challenged to the

these XX. April. new Moving approximately new XX% attractiveness Enhanced until Clients' assets. billion this Silicon client strength billion, to at Enhanced portion brand-new and cash $XX.X viewed stability. Valley compared the following quarter good James down open the derived firm clients and new of quarter a of to Slide domestic being $X.X to and the Bank the PCG net Program of only to balances a Program collapse, preceding And Saving and X.X% balances were deposits product the offering highlighting was The week domestic as of representing Savings added ended in Raymond balances in the March as source from

offsetting Enhanced largely Paul in continuing balances, to partially and $X.X in said, Savings the grow to quarterly this week, the nicely anticipated decline fee exceeded billings As sweep billion April. due Program balances

we're decline while to who estimate the our peers March. sure have it's peers disclosures for thus those apples, cash through handful XX%. in declines balances sweep domestic to This we sweep approximately reported to difficult through far, make of apples of So compares a were year-over-year XX% year-over-year XX% to the to parse comparing

And order has declining sweep magnitude firms for time. of roughly sorting in expecting, experienced know, of you same most So we this most have quite dynamic for been the industry. really at of communicating some for activity the our been balances the preparing as and of

we Enhanced And continue through further other balances rates and over domestically expect organic X.X does cash we PCG. Savings sweep hope deposit to funding we given levels, the closer although our sources, when we and TriState's of And grow sorting beginning the $XX,XXX. current account is end franchise activity, near than average including if accounts believe in much dynamic forward, activities than we less to initiatives. Program, growth million would sweep diversified cash then offset expect out strong sorting settle per that to are to approximately we the sorting our to now the any Looking balance additional the are stabilize, the dynamic

domestic $X.X of Bank it cushion prudent, be banks, which March swept cash balances a lower cash strive to keep Meanwhile, quarter. we funding quarter. than at to plan would to the billion second segment, ended much grew also the the would from in where too December to maintain $X in to billion of fiscal the third-party strong elevated not end We

net term, us over margin the While long the flexibility optimize most these interest actions short over they the believe give don't we term.

banks to RJBDP offset Slide was segment over Combined by X.XX% third-party on XXX% The up year margin and quarter, basis in balances for and XX Bank net the from X% banks with increased interest bank interest income. RJBDP and to income Turning XX third-party average from interest to points decrease than the fees sequentially third-party the firm-wide fees as a quarter million, basis the preceding yield XX. sequential points X.XX%. more quarter, net prior over increased higher $XXX RJBDP net was

risk. high assets immediate compared floating of upside banks that higher the approach higher of rate also a short-term concentration relatively more not only long-standing had drive of preserve balance concentration duration sheet Our a interest much helped rates to flexible but to maintaining

expect said, over interest growing this and Looking always with still decline income plan the long are headwinds RJBDP are higher from believe we on cost lower maximizing NIM, from fiscal segments third-party third NIM have the to banks decrease income level we in after RJBDP average flexibility fees in as on preserving to from forward, impact we quarter third-party cash we But I of net banks. maintain expect behind interest third-party diversified we and focusing fees higher combined bank sorting fees balances net we for funding given near is period dynamic sources. to sequentially during But term, we the just positioned the net a well the do quarter reasons due as interest second the We the well as volatile of expect cash also explained. which focused the to and the balances contract RJBDP would term, given to instead us. for income

was XX. Compensation adjusted The expenses banks. Moving from The compensation from to with ratio for at was effective total benefit in compensation calendar ratio third-party was the on $X.X the higher billion, consolidated revenues of quarter. XX.X% as reflects Slide continues expense to quarter along during of taxes the XX.X%. fees salary interest higher compensation the the and net beginning The sequential RJBDP the in of payroll income the as increase impact X, on January reset increases year. well ratio compensation

to Capital XX.X% the these Markets. given ratio, a extremely generate compensation We environment are in factors adjusted very market and pleased challenging

all expenses and non-GAAP the legal and included including processing communication non-compensation of award The received expenses, provision This more largely higher sequentially. well $XXX of largely an bank charge-off loan favorable of the the settlement grew $XX the quarter. the been with information adjustments, first C&I technology as segment in are million our XX% several increase loan discuss the allowances a credit regulatory in was quarter, and related fiscal which higher arbitration has portfolio. unfavorable quality costs mailing. year-end credit the to expenses of Non-compensation increased for CRE XX% challenged driven reflect $XX for million seasonal losses shortly. quarter for the which impact and for continued of reflects in Bank higher as non-compensation I'll the totaling million, quarters investments during earning acquisition-related Adjusting along by expenses

In remain to and on clients. high and service summary, invest levels growth ensuring for expenses their we managing continuing while in advisors focused

we year. non-compensation always expenses fiscal guidance While and expected hit in we that differently the regulatory are none the last expenses predict. difficult But coming elevated seasonal are there has legal expenses much than and legal with are the inherently been some for calendar regulatory expenses noise provided quarter of and in when too some there the to this first year, quarter of

quarter, Slide and shows Markets. current result over past margin pre-tax pre-tax the XX we industry-wide margin Capital five the a XX.X%, pre-tax given impacting generated of challenges the strong XX.X% the of a trend adjusted quarters. In margin

X% very parent the quarter quarter Liquidity cash our total sequential reflecting XX. largely in were increase billion billion, RJF end, On Bank $X.X the billion corporate At quarter. Slide $X.X and cash a target. increase capital above during of the assets balances $XX billion, at remains strong. the the $X.X well at segment ended

more Tier well Tier ratio Xx be capital leverage would above be XX% requirements excess billion reflects capitalized. total ratio our Our the $X than of be well X to ratio of and X XX.X% to still double requirements capital The XX.X% of target, XX.X% conservative regulatory which capitalized. leverage are the both a regulatory

significant opportunistic provide growth. Our being capital to to continue in levels continue and flexibility invest

unsecured announcement, deposit access credit to markets, debt listening are so In We our cushion, for Fitch and firm's banking environment the corporate to terms us rating on were with mid-March. approach. cited the this have pleased to significant A- partners you revolving partnership. like a market support the capital enabled million our strong execute thank sheet reason rating. I our to ability continued challenging reaffirmed I'd funding in revolver all strengthen to a X-year facility to of April, with of this from Fitch The our testament is relationships facility by A many the it conservative bankers million. committed contingent upsize to in to and long-term Also as and our and the know liquidity further our call, sources. your enhanced $XXX we other strong expanded renewed long-standing credit in balance drivers $XXX for among

significant contingent other We of funding. have also sources

For March, billion That the in XX. FHLB more leaves our borrowings from of be uncertainty the $XXX capacity March already given in proactive, December the we've million our FHLB increased us $XXX market segment. example, to Bank just segment $X in April. we only And down in Bank cash million position, strong than by given paid that of to XX

a of Slide quarters. our the actions over summary five XX capital provides past

shares stock second share. $XXX repurchased fiscal common firm $XX price at quarter, million million an for average per the X.XX of of the During

$X.X As attractive currently the previously, under we we has Board's don't market this as XX, authorization. X approved capital as April planned over discussed on remained as much next repurchase months. opportunities to approximately for intend repurchases billion support provided X using available And sheet the on continuing of stock volatility growth particularly our us, we and common plan balance to

ended reserve the Slide key Raymond loans provide a as loans corporate end. supply total a chain quarter are of investment bank portfolio. ended credit the investment total closely our held for on Criticized higher The and loans losses for but as interest remains this we healthy. at for just rates percentage appropriate percentage quarter we an of which The quarter for Capital X.XX%. credit TriState believe Bank. The loan segment, corporate We corporate held loan on represents credit was James impacts at X.XX%. Lastly, percentage loans allowance to continuing held X.XX% a loans constraints, as the loan investment quality metrics for XX, credit portfolio recession inflation, any bank loan allowance and Bank of potential losses at of for Bank includes a monitor on

know lot given industry, property estate with been on there's rates. challenges I and interest attention value a commercial the of the real across

billion, of and the loans. we REIT me CRE portfolio. let approximately total So have loans segment, Across $X.X XX% which Bank our briefly cover a our represents

of is real loans. Our portfolio XX% only estate office these

but deliberately lot a the closely origination underwrote loan loans us on given pressure conservative and loan-to-value most appraisals, portfolio around the higher industry, So probably average with this is on of along segment's the Based approximately which office recent of with challenges. have our on portfolio given providing criteria, now, bit continue real office XX%, Bank underwriting and estate, valuations somewhere to Overall, this limited we X.X% each the in believe the portfolio office on of still industry-wide only monitor loans. we cushion a little the are we represents to exposure but is average. office we total what the

the turn Paul? Now I'll to Paul over our to Reilly outlook. call discuss back

Paul Reilly

of while And as fiscal is of the the earnings of strength, very I'm term in a a be there are ability our Thank call, our to well start and And what I uncertainty, of said X you, at during the Paul. market. over for the lot volatile we XXXX to businesses. with continues economic a pleased results still our all across generate drive position to months record I are near-term believe we positioned and of growth long first

In Client sequential favorably of results next be assets the accounts. increase will Group, the X% impacted by fee-based quarter Private in

third-party However, headwinds lower average some given expect banks, have we from RJBDP lower do to fees balances. from

on advisors growth and the will and more Focusing our leading product current client-focused term, to and industry-leading technology continue optimistic are values we delivering solutions. long as I'm attracted prospective our

advisor million $X from commitments our to $XX several teams in with example, annual For recruiting have pipeline, we current million production. of

M&A launching pressure cash the securities, on closing balances available stabilize. income market and In levels investing challenged deposit in in the conditions our good, are depository fixed brokerage Markets timing segment, declining and have activity. of less for Capital transactions will and and pace experiencing And remain be healthy are while space, engagement clients putting pipelines the until

from typically and this business as SumRidge volatility elevated our joining has us. enhances since rate excellent However, results produced benefits position

positioned growth the the market share. over continued quarters, significantly markets term, the have investments X are the for we made over which across the productive capital well and years, business past increased industry-wide capacity our couple long we given over expect next of While challenges we

financial more third manage revenues We if actions significant third quarter, preceding management to starting to conducive the the quarter, X% throughout revenues Obviously, up these Management continue Asset expenses will a In compared tailwind in the industry continue take we quarter. near-term to to term. the the markets fiscal under segment, are be which provide headwinds businesses the pressure. should to will remain prudently come assets under as more fiscal if prove long

that Client the growth drive fee-based confident assets strong of in will remain accounts assets We financial under in Group management. segment of long-term Private growth

Investment solid marketing continue our increased months expect this synergies. generated we the net the help Management, over diversified focus to funding which will addition, Raymond scale, further In quarter James through and be balance several distribution, segment, source. to drive In next growth the operational fortifying sheet inflows with Bank

their demand recover, to very continue uncertainty. support eventually in corporate market loans we for will we'll when While prudent our be growing PCG loans given clients

as there higher will as have during And opportunities will across been market uncertain more do widen and market required downside risk prices our the when entire we selling corporate environments in a for industry. to to premium reflect credit of believe risk. future the believe spreads in to banking cost continue loans the portfolio, the derisk attractive be funding in secondary the certain and past, did We be not higher we we the further opportunistic especially reflect the fully just

the to X dry possible as attractive our in is environment Bank XXXX. what build will approach next more to growth segment to for X months over a be fiscal for opportunistic believe as and we overall, loan much the powder So

stability our every ample And and these our trusted continued want reflection strong are cash and for and for advice thank providing times service like future their your The each I growth direct liquidity. excellent firm their positioned is advisors most. In to closing, of well are day. associates we dedication and strength the we to with perseverance clients Uncertain to and a and commitment. their need prospects believe of when clients

all for So you thank do. all you

And and up line for with operator, concludes that, that remarks, we'll open the my questions.

Operator

Ryan Devin JMP of line the from comes with question first The Instructions] [Operator Securities.

Devin Ryan

I make understood sure on to a but just question income a on commentary. the late, the interest just net I minute I outlook. hopped had I want

kind related, of operate, I quarter is? reserves. growth can Or going I off the are fiscal expectation saying second a that step And back and that to you'll higher grow resume I level? to take you're it's going then heard off think, with guess that that of is Paul, new the you of So base near-term whatever

of just guess, how comfortable And bringing down? that? much is that make I So you drag a what would

Paul Reilly

Well, the but let -- I cash, which right know Paul reserve referring a I you're I'll we little think higher don't But carrying we'll go now be don't the to, I so. through mean, NIM. cash, reserve other anticipate reserves more maybe

Devin Ryan

Yes. I referring just was cash to the reserves, the cash.

Paul Reilly

There's I'll Go in ahead, the more Paul. cash let... bank.

Paul Shoukry

Yes.

So be we given did we bank, volatility at prudent. in would the thought increase balances cash it just March, the the

So up we finished by I quarter the think, $X billion.

So we were ending quarter up $X at segment. Bank $X quarter, billion for at the the cash of the billion

think swept fees know banks $X insurance, BDP combined cash cushion. you're that FDIC the the we so to around a of on that we're we're on basis, And for because outlook going closer because do at versus third-party maximum that keeping the plan drag expect new and we billion which on volatility. we given that's current putting is X% net gives the but NIM terms when a clients right loans near also a a X-or-so now. that all of level those really pullback we we just nice And the on It on earning the forward, on offers income is clients prudent you to think at term, in important earning book, look percent interest just us

$X at even that, doing down down average sequentially. by so probably be those are fees -- balances going be billion, XX% to will And

be down launching and funding will with be by net that cost of roughly, income and pressured then depending the we since will higher then having fees the Enhanced And higher rates things. on interest Program XX% happens cash other March. Savings in raised so balances what And those

we net decline I result then all think would a growing And somewhere good XX% would from there, balances jumping a sequentially. point. then that be as around that probably probably together, in So start off

Devin Ryan

it. Got

early looks just And nice the Okay. It follow mentioned I advisor the up there. reasonably Great of Enhanced on penetration. it's to topic. you probably, terms color. like you're want the assuming success same some Savings I'm still just I And having that guess in maybe Program.

advisors active that love the So for given in moving maybe customers' kind new. about of there. there term, growth just the to more just could near cash talk maybe And their expectation be it's

I rate yield-seeking pressure or suggesting do just side that -- data the that's the the has have so guess, the you majority out the of already of moved And the that could accounts? on cash liability

Paul Shoukry

Yes, yield rolled like lot of at to raised higher $X.X new brand April expanded the Most month I look money during the the seeking sort the it of actually of a would occurred. to was turmoil. was activity, the out tell activity we March, Savings in has firm the Enhanced to you, trends, the it when sorting When we looks Program strength new we billion flows of But until banking it in it and to certain of sales March. new money bank. of security to we firm the mid-March

close XX% of these of those to represents are an XX% that we in. But of balances, peers whereas today $X roughly cash their and being our enhanced sweep we're yield there the at savings. billion pleased see even of balances most come to were So yield balances enhanced balances savings that

together So still been on sweep balances though is well. rates at balances attractive even more we've on two when suits be very relative of funds cost you terms generous to via able clients those in look the of our the passing to as

clients prefer feel to of do we like now, right money well would have and hoping to fund insurance. is market we're positioned. a really So lot And FDIC hold positions we're what

win-win really the clients which in yield And think lot those moving is to the so are savings, now a enhanced the balances of we for firm. a

Operator

And comes Kyle the of from question line Voigt next the with KBW.

Kyle Voigt

XX.X%. Maybe obviously, sitting just a first question the leverage at ratio, on

macro target, right feel target the as a about near-term XX% that with whether a you that good to curious uncertainty to still now? we're of think and macro Just environment with the kind facing level especially the

Paul Reilly

press, the hard and we're bank the to move But We Yes. going be cautious not the to aggressively. think a we're until tests think sorting smart even it, going if growing We the with good overaggressive in more the the that's one in a happening is industry short probably now. down is today field. the don't to be especially to that's right not that peg XX% of like kind level term, target. we're

those let now We priority. get to market. fund will those, time balances just lending balances sure right our the of the corporate it's continue into are increasing client and to the SBL because of side the the mortgage a We're good not

term, be be and down. think but ratio the to capital XX%, news shorter the to the comfortable settled cautious volatility we're to other the seen to market pretty we've not change I going So with things, during but like the today's going is going goal, we're over

Paul Shoukry

only thing have the to that we securities about other to of The would I of lot portfolio. their have unrealized a And some is add on of impact losses worry banks obviously. be XX%, our all we we in of But duration think those because contained well, would balance as on even relatively of those kept factored if losses we north sheet. I

strength a a you ratios of at our of we capital flexibility. like So lot in position and look have feel when we're

Kyle Voigt

Great. follow-up that. And a then just maybe question to

your were it's the as that just stock what light could Obviously, happening calendar Just M&A of kind segments expand of the in to in seeing banking you more price everything with that of your space if if you the first you're some helpful. But in valuation current opportunities And seeing the first kind be well, buyback the a of would that's seeing? those at that market, quarter, you're upon bit you're wondering opportunity you today. of any up in opportunities quarter compare -- stock where maybe here. can

Paul Reilly

would some includes are or close those job price a but conversations to whether We've are the the really always opportunities the issues they some more and that get staying we went and have other because the and the adjustments line and transactable seller good join are But that expectation complex back private Yes. away, or that to kind client and come firm space. clear, market. others. of those buyer M&A the like of done price the to Again, than in with of people

interest going until M&A it. happen of unitl and kind don't expect near-term to rates in a settle settles has think I view, used to lending As see not this to and here, we've out, get said return, people not that's our in increase volume we our market

be think So opportunity. will we -- M&A but there

handle to We have liquidity capital both that. the

very Our have balance you and we as and access. sheet, know, leveraged,

as downturns, and depends on as the would be advantage that and But in market. take other able opportunities presumption our we're to able -- factors and buyers most again, of So been the sellers we we've all market, to.

Operator

from the with Alex next Blostein the question And comes Sachs. line of Goldman

Alexander Blostein

the and So down Can can you heard correctly, with NII. help about quarter, rates outlook thinking that ultimate amount assuming underlying some the I to need from know decline? sheet. NII. you for wide wide second gotten And are be of for it run with you cash we with you start interest balance the to in you're what how XX% I on would the of guys assumptions of think XX% helpful terms have from you the maybe the to obviously, If NIM for underpinning

Paul Shoukry

fees Yes, well. the the includes XX% BDP Alex, decline, as

increase in that XX it's the basis of And May. show basis that as is point in the expecting factors combined a the market So kind we presentation. in it

we And that holding growing the plan the times, -- we we're so And plan than sheet. for volatile on being prudent. volatile during during selling in of being cash in and actually we're need on loans. balance loans, need in than deliberate hopefully bank's holding said, Paul corporate these opportunistic more these to just We as corporate stay times, we more terms on

million had in value loans. that loans we higher And $XXX get able over than get. to of those on rated for example, marks period credit par corporate them price lower much able growth the from So at what the We were -- to already we not were we're sheet sold perspective. a for that had this least cases, we've during balance some of volatility. over forecasted next And near

the market we don't certain that So fully on potentially the is believe loans. factoring in risk downside

And being we're we're opportunities knowing volatile of that periods, to the powder, so we've hopefully attractive. dry powder other just when just look capital both done and growth dry opportunistic, as more funding in sort building accelerate

Alexander Blostein

you. Got

close arbitration out appreciate the I question looks that. if was to were budgeting up I for. fee, of sense. more million around and second that you almost non-comp non-comp $XX look what lot is at you My the a sequentially. ex appreciate million it was this And like expenses. $XX makes Combined provisions backing it guys think Yes. But we Okay.

driving what's savings aggressive revenues backdrop, capital us effectively more just reconcile a peak in when growth? your challenging expect little should help to become So on markets cost a the given maybe rates And outlook bit you we for guys initiatives?

Paul Shoukry

Yes.

The first two bit quarters in are little lumpy a always terms the expenses. of non-compensation

at how which out think, of for guidance it made provision, than $X.X billion lower loan combined million you basis, the backing guidance, which the provision. the backing look kind provided months excluding the is a trends it was loss for $XXX expenses, and on X the we acquisition-related around, year, I first actually the if I non-comp out of So costs the

because the expecting, not million -- which So regulatory, legal obviously, which this is -- none that we inherently quarter. we're we and the we of arbitration changing unpredictable, were being $XX and than for a other guidance time not still award, had

in, kind We course, line of the of all you then certainly that in of guidance. most year, and But things when change let are line we we X know. -- next of will the forecasted fiscal are other coming that what and months items update between provided the we now with

Paul Reilly

year -- in quarter fees I $XX we lumpy. we and that's certainly what line. run bigger guidance looks were million the We ballpark to. rate -- And last legal higher. think non-GAAP think that's -- think it's that comparison from of That they're the we because still kind yes, that higher recovery settlement was and see. But can the the really was in is driving, of last but

Paul Shoukry

environment while line also in deliberate with what market service it's expenses levels. those the said, And to investing high given all in we're in still growth while be we in with being expected, very managing going coming that

Operator

the Credit And Suisse. the with of line comes question Katz Bill next from

William Katz

Maybe stepping back and perhaps it's soon just too tell.

with leverage assets you early-stage capital evolution As earning the other how the on maybe some the and your of banking side associated in that Does collapse affect you regulators, for regulatory ratios. the and evolve how may industry you or that the about of with about see conversation for NIM XX% think your maybe the long-term do bogey? that. growth banking think changes then And structural

Paul Reilly

anyone Well, conservative over competitors I set well think and what we even close I target. even anything is still on any very see our -- regulation we're other things. think at to make capital, first, a would that can't We're XX%, that's that.

So we'd still have buffer there.

Like our and the we're quarter after even very of had fees liquidity, usually billion heartened we that's out Program that been go worried why Enhanced We over given there. the the not So Asset billion. come Management capital. environment, Savings in everything, that focused on $X.X payments paid are we we've rolled about out $X tax

are steady. Our still cash balances

liquidity good how the programs, side, billion liquidity just we is feel but the the on have that to our much -- or our not really, our $X even touching higher-yielding question So in raise about do we FHLB buffer. and advances

So see people banking could be loans. to investing aggressive. you M&A we we aggressive bad third start really opportunities them, in rates then we that the and in market, in we just to -- becomes very time we're going recessionary rising order investing opportunities, when growth when in the start environment, growing are them. think we'll Where not decide. it's the is If on take see have predicting act are that a don't to going corporate in good, think, the if and We're given in and assets be you we'll bank, to just we

to our So growth the much I balance next this would expand plans sheet -- quarter. say not we're are really

Paul Shoukry

prospects conservative question I the is banking NIM capital. have industry of about is I the think very industry. pretty think a efficient. asked already we And a The level the good future for you news

increase saying, saying we're expand return all the equity well, rules and preserve the said, capital and the cost certainly do all expect then the think even the big as would to of industry for to But were reasonable positioned spreads as equal that's else well average banks banks for I a extent the industry in well, for the NIM the deposit Paul as being the changes. you So those to are largest increasing a on across change industry. reasonable or

environment, now more the for long And that that stable extent will we term. can and to least a patient more so think attractive shareholders at serve the we opportunities over be well our wait

Paul Reilly

you'd if of think up. look years, certainly, folks industry and really spreads deposits extremely I But at you the loans expected the types weren't rates last are making. really what were are historically, cheap given honestly, over going few the

cost and We expand. that. I So going where to are the are spreads funds kind it's natural higher being this careful of in environment of people are that think believe

those in that's So watch be we that expand pretty the little we times, market. the happens balance two we prudent found we've and when, why can't but COVID sheet the or shown -- we things will quickly. say we loans off a happen, We've sold also or quarter can more as we'll in the in next other believe sheet whether shown during other the balance periods, with what we

that. about it sure we worried in just the environment. We're worried right not do making about we're So

William Katz

Understood.

there. follow-up just a one quick jumping a Just point and

maybe earning corporate the couple think framing a the Paul, for the some NIM? you maybe those hear securities are the on between how loan can asset about might bank maybe maybe in understand cautious difference the some of this spot associated about where think maybe a portfolio the sweep different loan with I to maybe the that. end about sales, sort to shrinkage of runoff I think year book, terms as levels, but think the impact, third-party you of you I you things where growth, As of And how be Sui your in investment maybe could year, versus the just unpack, on think unpack about basis

Paul Shoukry

in business. Client and Group certainly there can as Paul two, over securities-based to our to Half mortgages, a next we're change we're loans be, going in be in going lot where the extent learned And next months. the or month know Private a demand clients going to up last as the to, and to lot the X Hard of change X back we're said, the picks months. are for and our loans we've

of in to rate Now the rates, clients the them. could in normal support environment, higher there a come want get terms and used demand new to to we pressured be they've been back but in if rising

at least that around conviction As Paul book. be growing we'll the better sort risk-adjusted and conservative growing until said, of in we also have returns more a loans, corporate

And we NIM, higher our the So would cost just which of jumping a -- patience the with expect, cash the I served higher again, funding, us in with terms of well balances and at balances has off of cost of funding competitors or Many of savings I in the XX%. like are we XX% as savings our sweep because, have only yield well enhanced XX% said, yield enhanced our and again, higher program.

to pressure we grow as ability those grow those But So have balances, lot would NIM. we it a balances. of

think that points depending rate in probably XX due elevated of upcoming -- higher to again, XX sources holding so we the on that's cash what basis to up the on balances quarter, the basis maybe points, on And with balance funding or pressure there's the we increases. now again, plan sheet. and So happens

Operator

And the Manan Gosalia line of Stanley. next question the comes from Morgan with

Manan Gosalia

then near -- with happened in that 'XX because I maybe what as you March March? of you balances Can cash were sorting billion. $XX your us take ask release noted since cash in through month And and last press

you flowed billion Program. week if the the So Enhanced Savings last in exclude out it looks like about $X.X

So FAs slow what and us back were what you customers from this you through And gives hearing take from the confidence then? that maybe will here?

Paul Shoukry

of kind for jumping example. say I just where to are Yes. we would today,

So balances Program the balances at Saving sweep billion. we quarter with and Enhanced ended $XX.X

been we fast which we're the income and that Saving to payments. quarterly, fee and right we've billion Enhanced also billing $XX since forward $X.X billion around over today, we tax balances, are and You where that Program was do annual reflects

I right account as look comfortable back sort data. it's and per comments, of it on than feel end the the average the cash the is to beginning, point have as that that is dynamic the to now said around the we So closer been we $XX,XXX, far program confident as sorting has which low sweep a and

keep much commented, balances the So -- don't we'll them can. to deposit get products clients we attractive that we're coverage closer be but as and good as things that know our how good yields but continue. Meanwhile, to obviously, offer we them to are continue longer, will to give dynamic FDIC end, strong

Paul Reilly

to was it leave in They to asked it it put and I look, they the treasuries, just in and We the markets get give system. you yields think and in FA idle money reaction the us there put their program. didn't put yield. they been, they invest CDs And markets, like said they has and cash job money the

had money we once flowing in. out, we've roll it So

our And It's the how manage to is it in need. system. so just job much of we really

have to reserves very really with product, we now. a And levels right haven't we're we balance the going our We good to have very comfortable given touched. We just and that have feel operations. on at top that

be going it's think process you funds the how of just to I of So much the higher need the managing in cost market. given movement the

Paul Shoukry

since at pertinent have aggregate And -- started One balances. adding Program both really, is beta look to the spot sort rising. also a sweep the on Saving program data of the aggregate Enhanced this topic that And you I deposit on basis, it is that and other deposit at so our think funding we've which deposit metric this much our the at has more again, for in to higher mix being only us with have we the most cost And of able that's a seen is been And sweep than competitors juncture. XX%. higher program. they bet, XX% to clients to us of far, be rates generous

we point cost to lower deposits, cycle. I raise to this some than this is have aggregate beta So think XX% XX% point expected to the extent we all at that incremental much at in deposit the higher

and of funding, generating while to bandwidth we cost a kind still of returns. higher add attractive have So capacity lot

Manan Gosalia

demand the deposit question Can the after But continue here I'm that spread percentages you about points guess, some stops these from and to And we maybe will you likely the think there strong. deposits few the fee assuming on So a portfolio? over on rates, a as from basis hiking third-party of be be XX.X Is that drag. time, or also the at helpful. Fed rates betas the so quarters? related talk That's that rise offset as make then. bank I the will next for same

Paul Reilly

mean, in the I doubt. no There's for system. demand there's deposits huge

have you it. hungry are So extent banks the for cash,

would question the is, should rate with you demand, with spread and the assume So you get might So that what right? happens yes. increase,

markets point and So the have think today. increase, as those would or of there cash at recessionary Fed -- the sweep programs you into returning back you not regular would stops do prediction if -- programs, you a deposit but the you out raising we're spreads this our

look quarter year feel of very now. lot -- the hard really we if middle of it's because a next in a just since to than looking we've forward more a forward dynamic we been comfortable So right so, I market. or March -- want

Manan Gosalia

relatively relatively beyond sounds the fees also It third-party be balances are like flat should bank if second quarter? flat,

Paul Shoukry

will balances XX% look if keep You with them where have to even down the they the be at we ended the average flat average, quarter.

-- that, more depend then I guess, where it beyond to The way just easiest the on earn the is the it. the so but So spread drive balances. will banks, than balances describe that we from third-party

Manan Gosalia

much clarification just Yes. the portfolio, on Got was of valuation XX%. made? it. new the mentioned loan an of at versus quick the a on Perfect. And appraisals you How that office based time is then LTV

Paul Shoukry

now you that we I appraisal can I lower extent said remarks, even that It's to the both in bit that's the the prepared have both, are a base. assume, little probably new on new factored appraisals -- think than But mean that it. into as valuations of I

those have for particularly So if But to we continues is conservatively. also the we but the reasonable -- underwrote real soften, some point to properties economy estate. be a there cushion challenges being expect still and

Paul Reilly

if idiosyncratic, loans, came And office REIT have for through then have of in have more pretty and just those you that watch. property 'XX mix and And portfolios in 'XX you experience commercial relatively our to total loans, are you any single you're we low that is percentage But expect diverse too, was you -- so when even well. our bank.

Operator

line comes of Mitchell And from Seaport Jim the the next question with Global.

James Mitchell

are required I do saying to? it back money, price? to I if dial those and you just now how understood you March, product? Just you're Paul. maybe savings a what on had restrictions case, off. restrictions if want that Program, saying Savings the Enhanced just that the circling And in Is maybe make new clarification, the net Or you Are that's back sure on enhanced want you

Paul Reilly

people up it money opened that is they we money cash, reason wanted where only the was from securities into markets of the certain sales for are restrictions spread. The to which markets back for move the

off we've opened we time it limits. or seek We more, do find we rate, have we choices. that And own up. So if let to can always can say it we If need cut we two we've that -- it can cut given with time level. the can its Or off, extend you want limits.

always So but to Raymond just We're we're comfortable actually We're we we seem capital having at accused options. And those comfortable balances. balances. and these all balances. the watching excess be lower, of have we're cash James excess

treasuries, it, need seeking you it, there's back things we to So really open have we'll or it if and CDs, just there's up dial securities stop if other stayed it or on there's yield. system that the type, other

a flexibility. how we lot of So depends It need. we just have much

James Mitchell

Okay.

a you it thinking with, current if -- levels? the sort strategy sounds is does the little see and start at stabilize, is of level do you're if that the level -- stop the outflows to So stabilize bit slow savings that levels slowing defending if all-in and about? this We'll from we are in balances you deposits like at that Is could sweep enhanced least if or would of sort stabilize, comfortable see when continues. the cash here this at you're that April. you a But of

Paul Reilly

the we we We environment. of it below XX%, we when in, fine. at level more were have dropped when rather the extra until while. a it But were flows this We'd we're think we'll at keep a in if we'll we even keep end -- for quarter

then, it again into You the it not flow for yes, much slowing instruments. is we'll sure. down. to somewhere XXs. think in the had level, but I trying we other But put no it. yielding to -- back can the rate, That's get always excess try cash would We to XXs start But place out there too we're lower it have

Operator

question line And the Brennan the next of UBS. comes Hawken from with

Brennan Hawken

you the environment comp probably -- substantial -- it a comp Shoukry a from inflects. that is Capital we that down do what we see and until order ratio one, Number probably some comp kind would pull ratio this that And Paul ratio? sounded One, is of change right? the about is feed see think just -- of kind of expect revenue, through the that magnitude comments in markets zone reasonable on if in unless like to that then recovery if Markets capital to

Paul Shoukry

mean Yes. matters mix mix so I ratio. it's our about a -- because is the revenue complicated you when it's talk comp

up PCG our accounts. then compensation has associated obviously. we So be higher expect But that revenues does, fees ratio net higher given fee-based assets and the with to it, -- NII a

extent but that levels, just and even levels of then not that to record Capital would couple that last the healthy comp the ratio. And healthier all result improvement years, were -- the to Markets would so but rebound -- they but be revenues else to again, enjoying levels, an being equal in the

XX% I going will the us by forward will think revenue interest the mix helped for producers. of So just the levels has revenue that dictate mix, be. and low, the the historically are directly compensable to think been again, and I fees roughly been given very what not it's result hard income high But BDP that's

guidance we're that little a a to can would been we or lower place that's just to. if to where ago, more a think, with saying bit to XX%. going year anywhere our I pleased pretty year Again, a anywhere we'd I'm historically close was attractive ago, have be. this to But range, than stay XX% be that. get and not close

Brennan Hawken

it. Got

Enhanced a XX. more peers going the trends horse that decline XX% here. in are some levers of and you price pulling happening? really you're Or prevent you in it's been dynamics. to to in in how real and moving the quarter-to-date one the on And -- the sense. see Paul be Program to would beat if like be XX and out a wouldn't the makes we're that Yes, at Shoukry, into I'm to Okay. of trends those a quarter-to-date? to also sorry, the is speak then and which you But of you fund So enhanced direction we Could gave the on dead deposit commented cash times overall that you're seeing that Does think program, program, helpful. then what cash you peers. level? from mean money other deposit you at in referenced converge before I on few purchased that selling

Paul Reilly

protecting the So business #X thing last over deposits. liquidity banking and forgot people I stable the maybe decade, in think the

So that's number one.

compete on target will happen. the on -- to that that's extent grow to deposit you levels, the -- of and market the them conditions we to a you So deposit general just change, with rate it have level. unless we've kind depends given know and to And really you when don't

up If lot deposits be trend will to reprice to need for up institution to So go will that and idiosyncratic a XX industry-wide. repricing going that, is my theirs keeps guess It because they over over ours the yes, more, XX that's if get the more, go will everybody. market it's doing reasons, going up a higher. one for go be for it's some and

lot a dynamic. So market that's of

upped kind I then it. think limited into the XX%. the many years we we biggest TriState joined, thing for we money of people put at And when forget, when banks

banks. have our to roughly We of XX% deposits less go About leverage. our

be We you're you're it's competitors there, criticism up aggressive got at XX, to more for XX. And a if but if you at funding. and have not

We buffer. have of a more

we and higher to make not it we have, have and and that have of doing to to going be we raise closely we it ear only will maintain need watch how sure much by do do to we'll if do but it deposits we're and cost liquidity play outcome to just So the what it. costs. watch it just We're

Paul Shoukry

market clients thing have the market of or have the add only of funds that purchased platform. money $XX other funds And money over is purchase I'll over billion our $XX to we billion on

really we those firm. and on the funds very that purchased little extent to So within cash earn the money a stayed all system the market as --

willing extent we we be the for are be the it's relative to cash, clients the to the economics to that attractive to cost So the firm than fund. because that rate staying even at can offer have the give and though now really win-win would that our purchase could client to a more prefer that FDIC higher insurance offering for suits that funding our market money generate us -- in today

look of it's determine as you to clients, have for So said look always opportunities or win-win. for a those not to both earlier, we picture the at firm. and strive And holistic the kind to win-win really whether Paul advisors

Paul Reilly

the it at we the premium, about at we ago years Raymond it and is of out to make just XX% for nature when stable. we when insured. flushed. range okay, of be our We a down I they had sources uninsured say, clients matter for Bank funding deposits a deposits more deposits looked worried But worried as we've sure us, part you James of history of typical in and the -- weren't keeps just worth think it's about and were to have to protected, look for programs way few our about went take way just And course, our money insured comfort were weren't

Brennan Hawken

added the Enhanced? quarter-to-date point trends your the the you on cash Okay. beyond overall about That's And Could touch also helpful. points for just on philosophy.

Paul Shoukry

Yes.

we and As I quarter. right ended we $XX sweep are Saving of We're around today where Enhanced the said, balances. Program right around billion

forward. portends the the I with well billings, is billion. going for quarterly over the hopefully be a again, and Enhanced tax flat month And result Saving balances to think fee dynamic think we of April the are and the payments good $X.X in Program

Operator

presentation And to there at questions the back I this no are time. will further now the turn speakers.

Paul Reilly

for the all you us. Thank in all dynamics all joining you're busy, Good. the Yes. market. I know given

an way shape. firm us the So really think obviously, uncertain good puts conservative I run market. again, we the in But

advisors X,XXX here We our with are at conference excited. there and pretty

soon. it's joining here. we'll So you all talk for be nice us, to and Thanks to

Operator

disconnect you conclude you ask and participation lines. that does today's for We That your please your conference. thank

Raymond James Financial (RJF) 26 Apr 232023 Q2 Earnings call transcript