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Raymond James (RJF) Q2 Earnings Beat as Revenues Rise

Raymond James Financial Inc.RJF announced second-quarter fiscal 2016 (ended Mar 31) adjusted earnings per share of 90 cents, which surpassed the Zacks Consensus Estimate of 77 cents. Also, the bottom line was 17% up on a year-over-year basis.

Raymond James Financial Inc. (RJF) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

Results benefited from revenue growth, though a challenging environment for equity investment banking and trading activity during the quarter weighed on the top line. Also, growth in assets acted as a tailwind. However, a modest rise in expenses was an undermining factor.

Net income totaled $125.8 million, up 11% from the year-ago quarter.

Performance Details

Net revenues amounted to $1.31 billion, improving 2% year over year. The rise was attributable to a rise in all revenue components except investment banking, securities commissions and fees, and net trading profit. However, the reported figure lagged the Zacks Consensus Estimate of $1.39 billion.

Segment-wise, for the reported quarter, RJ Bank recorded the highest total revenue increase of 25%. Further, Asset Management witnessed revenue growth of 3%, while Private Client Group and Capital Markets depicted a top line improvement of 1% each. On the other hand, Others reported declines of 45%.

Non-interest expenses inched up 1% year over year to $1.12 billion. The rise was mainly triggered by a drastic increase in bank loan loss provision.

As of Mar 31, 2016, client assets under administration grew 4% on a year-over-year basis to $513.7 billion, while financial AUM fell 1% to $68.8 billion.

Balance Sheet & Ratios

As of Mar 31, 2016, Raymond James reported total assets of $27.8 billion, up 11% year over year. Further, shareholders' equity rose 6% year over year to $4.6 billion.

Book value per share stood at $32.88, up from $30.69 as of Mar 31, 2015.

As of Mar 31, 2016, total capital ratio came in at 21.9%, up from 20.1% as of Mar 31, 2015. Also, Tier 1 capital ratio stood at 20.9%, increasing from 19.2% in the year-ago corresponding period.

However, return on equity (on an annualized basis) came in at 10.8% as of Mar 31, 2016, up from 10.5% a year ago.

Our Take

Raymond James' consistent efforts to enhance segmental performance, supported by its robust balance sheet, are expected to yield positive results, going forward. Also, the company's asset strength and synergies from acquisitions are likely to be accretive to earnings.

However, we remain apprehensive about the impact of mounting expenses and heightening regulatory pressure on the company's financials.

Currently, Raymond James carries a Zacks Rank #4 (Sell).

Performance of Other Investment Brokerage Firms

The Charles Schwab Corp.'s SCHW first-quarter 2016 earnings of 29 cents per share were in line with the Zacks Consensus Estimate. Revenue growth and benefit from provisions acted as the tailwinds.

Interactive Brokers Group, Inc. IBKR reported first-quarter 2016 adjusted earnings per share of 51 cents, which beat the Zacks Consensus Estimate of 45 cents. Results primarily benefited from strong growth in commissions and execution fees and net interest income.

TD Ameritrade Holding Corporation AMTD reported first-quarter 2016 earnings per share of 38 cents, in line with the Zacks Consensus Estimate. Higher revenues and reduced expenses acted as tailwinds.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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