Raymond James (RJF) Q4 Earnings Lag Estimates on Higher Costs
Raymond James’ RJF fourth-quarter fiscal 2023 (ended Sep 30) adjusted earnings of $2.13 per share missed the Zacks Consensus Estimate of $2.28. The bottom line, however, was up 2% from the prior-year quarter.
A muted investment banking (IB) performance hurt the Capital Markets segment’s results. Also, RJF recorded bank loan provision for credit losses during the quarter on the deteriorating macroeconomic outlook. Further, expenses increased during the quarter.
Yet, higher interest rates and a rise in loan demand acted as tailwinds, which led to a substantial jump in net interest income (NII). The performance of the Private Client Group was robust. The acquisitions over the past years supported the company’s financials to some extent.
Net income available to common shareholders (GAAP basis) was $432 million or $2.02 per share compared with $437 million or $1.98 per share in the prior-year quarter.
In fiscal 2023, adjusted earnings of $8.30 per share grew 11% year over year but lagged the consensus estimate of $8.48. Net income available to common shareholders (GAAP basis) was $1.73 billion or $7.97 per share, up from $1.51 billion or $6.98 per share in fiscal 2022.
Revenues & Costs Rise
Quarterly net revenues were $3.05 billion, up 8% year over year. The top line also beat the Zacks Consensus Estimate of $2.99 billion.
In fiscal 2023, net revenues increased 6% to $11.62 billion. The top line also beat the consensus estimate of $11.56 billion.
Segment-wise, in the reported quarter, RJ Bank registered a rise of 5% from the prior year in net revenues. Also, the Private Client Group recorded 14% growth in net revenues, Asset Management’s net revenues grew 9%, while Capital Markets’ top line declined 15%. Others recorded revenues of $25 million compared with revenues of $4 million in the prior-year quarter.
Non-interest expenses rose 11% to $2.47 billion. Our estimate for non-interest expenses was $2.40 billion. Also, RJF recorded a bank loan provision for credit losses of $36 million.
As of Sep 30, 2023, client assets under administration were $1.57 trillion, up 15% from the end of the prior-year quarter. Financial assets under management of $196.4 billion grew 13%. Our estimates for client assets under administration and financial assets under management were $1.25 trillion and $205.5 million, respectively.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2023, Raymond James has total assets of $78.36 billion, up 1% from the prior quarter. Total equity rose 3% to $10.14 billion.
Book value per share was $48.54, up from $43.41 as of Sep 30, 2022.
As of Sep 30, 2023, total capital ratio was 22.8% compared with 20.4% as of Sep 30, 2022. Tier 1 capital ratio was 21.4% compared with 19.2% as of September 2022-end.
Return on common equity (annualized basis) was 17.3% at the end of the reported quarter compared with 18.7% a year ago.
Share Repurchase Update
During fiscal 2023, RJF repurchased 8.35 million shares for $788 million.
As of Oct 25, 2023, nearly $750 million remained under the buyback authorization.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to support top-line growth. However, elevated operating expenses, worsening operating backdrop and the volatile nature of capital markets businesses are near-term concerns.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Raymond James Financial, Inc. price-consensus-eps-surprise-chart | Raymond James Financial, Inc. Quote
Currently, Raymond James carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Earnings Date of Other Investment Banks
Jefferies Financial Group Inc.’s JEF third-quarter fiscal 2023 (ended Aug 31) adjusted earnings per share of 32 cents lagged the Zacks Consensus Estimate of 34 cents. The bottom line also compared unfavorably with $1.10 earned in the prior-year quarter.
JEF’s results were adversely impacted by lower revenues on dismal asset management and advisory businesses. However, a decline in expenses and better-than-expected capital markets performance acted as tailwinds.
Moelis & Company MC is slated to report third-quarter 2023 results on Nov 2.
Over the past 30 days, the Zacks Consensus Estimate for MC’s quarterly earnings has moved 66.7% north to 0.05. This indicates an 86.5% plunge from the prior-year quarter.
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