Raymond James Financial Inc. RJF announced fiscal second-quarter 2015 (ended Mar 31) earnings per share of 77 cents, missing the Zacks Consensus Estimate of 82 cents. However, earnings came in 7% higher than the prior-year quarter figure.
Lower-than-expected results were due to a rise in operating expenses, partially offset by growth in net revenue. Nevertheless, all segments performed impressively and growth in assets was a tailwind.
Net income totaled $113.5 million, up 7% from the year-ago quarter.
Performance Details
Net revenue amounted to $1.29 billion, improving 9% year over year. The increase was attributable to a rise in all revenue components, partially offset by higher interest expenses. Further, the reported figure surpassed the Zacks Consensus Estimate of $1.27 billion.
Segment-wise for the reported quarter, Others recorded the highest total revenue increase of 347%, followed by RJ Bank that witnessed a 21% rise. Further, Private Client Group and Asset Management experienced revenue growth of 7% each, while Capital Markets reported a 6% increase in total revenue.
Non-interest expenses rose 8% year over year to $1.11 billion. The rise was triggered by an increase in all expense components, partly mitigated by a fall in communications and information processing costs.
As of Mar 31, 2015, client assets under administration grew 8% to $495.8 billion, while financial AUM rose 11% to $69.4 billion, both on a year-over-year basis.
Balance Sheet & Ratios
As of Mar 31, 2015, Raymond James reported total assets of $25.0 billion, up 9% from the prior-year figure. Further, shareholders’ equity came in at $4.38 billion, rising 13% year over year.
Book value per share stood at $30.69, up from $27.75 as of Mar 31, 2014.
As of Mar 31, 2015, total capital ratio came in at 20.1%, up from 20.0% as of Mar 31, 2014. Also, Tier 1 capital ratio stood at 19.2%, increasing from 19.1% in the year-ago corresponding period.
However, return on equity (on an annualized basis) came in at 11.3% as of Mar 31, 2015, down from 11.7% a year ago.
Our Take
Raymond James’ persistent 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, Raymond James’ mounting costs call for better expense-management to ease the pressure on financials. Further, rising regulatory issues and a prevalent low interest-rate environment remain matters of concern.
Currently, Raymond James carries a Zacks Rank #3 (Hold).
Performance of Other Investment Brokerage Firms
The Charles Schwab Corp.’s SCHW first-quarter 2015 earnings of 22 cents per share missed the Zacks Consensus Estimate of 24 cents. Further, the bottom line was down 8% from the year-ago quarter.
Interactive Brokers Group, Inc. IBKR reported first-quarter 2015 adjusted loss per share of 22 cents, which was worse than the Zacks Consensus Estimate of loss of 11 cents. Also, the figure compared unfavorably with the year-ago quarter earnings of 34 cents.
TD Ameritrade Holding Corporation AMTD reported its fiscal 2015 second-quarter (ending Mar 31) earnings per share of 35 cents, missing the Zacks Consensus Estimate by a penny. However, the bottom line remained stable with the prior-year quarter figure.
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