Raymond James Financial Inc. (RJF) announced fiscal first-quarter 2015 earnings results yesterday after the market closed. The company reported earnings per share of 87 cents, in line with the Zacks Consensus Estimate. However, earnings came in 7% higher than the prior-year quarter figure.
Improvement in overall revenues along with consistent growth in assets were the favorable factors during the quarter, while elevated expenses and weak performance of the Capital Markets segment weighed on the results.
Net income for the fiscal first quarter totaled $126.3 million, up 8% from the year-ago quarter.
Performance Details
Total revenue amounted to $1.28 billion, improving 6% year over year. The rise was mainly driven by higher account and service fees, interest income, investment advisory fees as well as securities commissions and fees. However, this was partly offset by a reduction in other income and net trading profit. Further, the reported figure surpassed the Zacks Consensus Estimate of $1.27 billion.
Segment-wise for the reported quarter, RJ Bank recorded highest growth with total revenue increasing 23%. This was followed by Private Client Group and Asset Management witnessing revenue growth of 8% and 4%, respectively. However, Capital Markets and Others reported a 3% and 51% decline in total revenues, respectively.
Non-interest expenses rose 5% year over year to $1.05 billion. The increase was largely owing to a substantial rise in bank loan loss provision, further aggravated by higher investment sub-advisory fees, business development and other expenses. These were, however, partially mitigated by a fall in communications and information processing as well as clearance and floor brokerage expenses.
As of Dec 31, 2014, client assets under administration grew 8% to $483.0 billion while financial AUM rose 10% to $66.7 billion, both on a year-over-year basis.
Balance Sheet
As of Dec 31, 2014, Raymond James reported total assets of $24.3 billion, up 11% from the prior-year figure. Further, shareholders’ equity came in at $4.27 billion, rising 13% year over year.
Book value per share as of Dec 31, 2014 stood at $30.09, up from $27.07 as of Dec 31, 2013.
Capital and Profitability Ratios
Capital ratios continued to demonstrate progress. As of Dec 31, 2014, total capital ratio came in at 20.9%, up from 20.4% as of Dec 31, 2013. Additionally, Tier 1 capital ratio stood at 16.6%, increasing from 15.2% in the year-ago corresponding period.
However, return on equity (on an annualized basis) came in at 12.0% as of Dec 31, 2014, down from 12.5% as of Dec 31, 2013.
Our Take
Raymond James’ persistent efforts to enhance segmental performance, further 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, the company’s continuously increasing costs call for better expense management to ease the pressure on financials. Further, rising regulatory issues, a prevalent low interest-rate environment and sluggish economy remain matters of concern.
At present, Raymond James carries a Zacks Rank #4 (Sell).
Performance of Other Investment Brokerage Firms
Interactive Brokers Group, Inc.’s (IBKR) fourth-quarter 2014 adjusted earnings per share outpaced the Zacks Consensus Estimate. Substantial decline in operating expenses along with sustainable performance of the Electronic Brokerage segment resulted in an overall better performance. Lower revenues, however, weighed on the results.
Moreover, The Charles Schwab Corp’s (SCHW) fourth-quarter 2014 earnings per share surpassed the Zacks Consensus Estimate on revenue growth and a benefit from provision. However, this was partially offset by higher operating expenses.
FBR & Co. (FBRC) is scheduled to report its fourth-quarter 2014 earnings results on Feb 3.
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