Raymond James Q2 2025 Earnings Report

Raymond James EPS Results

• Actual EPS: $2.42
• Consensus EPS: $2.44
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $2.31

Raymond James Revenue Results

• Actual Revenue: $3.40 billion
• Expected Revenue: $3.46 billion
• Beat/Miss: Missed by -$61.68 million
• YoY Revenue Growth: +9.00%

Raymond James Announcement Details

• Quarter: Q2 2025
• Date: 4/23/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 5:00PM ET

Raymond James (NYSE:RJF) Financial, Inc., a financial holding company, through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products in the United States, Canada, Europe, and internationally. The company operates through Private Client Group, Capital Markets, Asset Management, RJ Bank, and Other segments. The Private Client Group segment provides securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance products to their individual clients; and borrowing and lending of securities to and from other broker-dealers, financial institutions, and other counterparties. The Capital Markets segment offers securities brokerage, trading, and research services to institutions with a focus on sale of the United States and Canadian equities and fixed income products; and manages and participates in underwritings, merger and acquisition services, and public finance activities. The Asset Management segment engages in the operations of Eagle, the Eagle Family of Funds, Cougar, the asset management operations of Raymond James & Associates, trust services of Raymond James Trust, and other fee-based asset management programs. The RJ Bank segment provides corporate loans, SBL, tax-exempt loans, and residential loans. The Other segment engages in private equity activities, including various direct and third party private equity investments; and private equity funds. Raymond James Financial, Inc. was founded in 1962 and is based in St. Petersburg, Florida.

Raymond James Q2 2025 Earnings Call Transcript

Presentation

[Kristie Waugh, SVP, IR at Raymond James Financial]

Fiscal twenty twenty five Second Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristy Wah, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shickry and Chief Financial Officer, Butch Orlov.

[Kristie Waugh, SVP, IR at Raymond James Financial]

The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide two. Please note that certain statements made during this call may constitute forward looking statements. These statements include, but are not limited to, information concerning futures, strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions or our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments and general economic conditions.

[Kristie Waugh, SVP, IR at Raymond James Financial]

In addition, such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts or future or conditional verbs such as may, will, could, should and would as well as any other statements that necessarily depend on future events are intended to identify forward looking statements. Please note that there could be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10 ks and subsequent Forms 10 Q and Forms eight ks, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shugri. Paul?

[Paul Shoukry, CEO at Raymond James Financial]

Thank you, Christy. Good evening, and thank you all for joining us on the call today. Last week, we had our Global Top Financial Advisor Conference in Montreal. It was wonderful to spend time with our top advisors across our affiliation options from The U. S, Canada and The UK.

[Paul Shoukry, CEO at Raymond James Financial]

They are extremely pleased with Raymond James, expressing a deep appreciation for our unique adviser and client focused culture along with our robust platform. Just a week prior, we hosted all of our investment banking managing directors in Tampa, and they also conveyed enthusiasm for our unique combination of values and capabilities that enable them to best serve clients. Since the CEO succession announcement last year, I have been spending a large portion of my time traveling to meet with as many advisers, bankers, associates, and clients as possible. I know I've shared this before, but what I continue to hear with passion from advisers, bankers, and associates is the best professional decision that they ever made was joining Raymond James. And the biggest regret they have is they didn't join several years earlier.

[Paul Shoukry, CEO at Raymond James Financial]

That statement is really a testament to our special culture and all the fantastic associates who provide excellent service each each day. Every now and then, we get external validation of this. For example, this quarter, our advisers earned the number one ranking in the 02/2025 J. D. Power survey for advice, investor satisfaction, and industry trust.

[Paul Shoukry, CEO at Raymond James Financial]

To all of our advisers and the associates who support those advisers, congratulations, and thank you for earning this well deserved recognition. My number one goal as CEO will be to reinforce and strengthen our unique culture that was established by Bob and Tom James and fortified by Paul Riley. And I am so fortunate to have a top notch leadership team who share the same commitment. Our values based client first approach has consistently led to strong results, and that was the case again in the fiscal second quarter. We generated quarterly net revenues of $3,400,000,000 and pretax income of $671,000,000 up 910% over the year ago quarter, respectively.

[Paul Shoukry, CEO at Raymond James Financial]

For the first six months of fiscal twenty twenty five, we generated record net revenues of $6,900,000,000 and record pretax income of $1,400,000,000 up 1315% over the first half of fiscal twenty twenty four. These solid results were attributable to our diverse and complementary businesses, anchored by the private client group and augmented with the capital markets, asset management and bank segments. Across all of our businesses, we have achieved consistent success retaining and recruiting financial professionals who provide high quality financial advice to their clients. In the Private Client Group, we ended the quarter with $1,540,000,000,000 of client assets under administration, representing year over year growth of 6%. Over the past twelve months, we recruited into our domestic independent contractor and employee channels financial advisors with approximately $316,000,000 of trailing twelve month production and 50,000,000,000 of client assets at their previous firms.

[Paul Shoukry, CEO at Raymond James Financial]

Including assets recruited into our RIA and custody services division, we recruited total client assets over the past twelve months of nearly $59,000,000,000 across all of our platforms. Quarterly domestic net new assets equaled $8,800,000,000 representing a 2.6% annualized growth rate on the beginning of the period domestic PCG asset. While NNA was lower this quarter, which was similar to what we experienced in the same quarter in fiscal twenty twenty four, we saw net new assets improve throughout the quarter and also had extremely strong months of new commits in March and April, which should help our net new assets in the second half of the fiscal year. So we are very optimistic about our momentum and growing pipelines across all of our affiliation options. Our best of both worlds value proposition, where we offer a unique combination of an advisor and client focused culture coupled with leading technology and solutions continues to resonate with advisers across all of our affiliation options.

[Paul Shoukry, CEO at Raymond James Financial]

In the capital market segment, the investment banking pipeline is very strong, but the timing of closings has been negatively impacted with market uncertainty and heightened volatility associated with tariff negotiations. And while investment banking closings are expected to remain challenged across the industry until we get more certainty, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries we cover when the market becomes more conducive. In the asset management segment, net inflows into managed fee based programs in the private client group were very strong during the quarter, annualized annualizing at 8%. In the bank segment, loans ended the quarter at a record 48,300,000,000 primarily reflecting strong growth in securities based lending balances. Most importantly, the credit quality of the loan portfolio remains solid.

[Paul Shoukry, CEO at Raymond James Financial]

Turning to capital deployment. I want to reiterate that our long standing priorities have remained unchanged, and that starts with investing in growth versus organically and complemented with strategic acquisitions. On last quarter's call, we explained that we're evaluating a few M and A opportunities. We also explained that those opportunities are often part of competitive processes and that we would not stretch on valuation, especially if we do not have conviction that we could generate strong risk adjusted returns for our shareholders at those prices. At this point, we are no longer pursuing those aforementioned opportunities.

[Paul Shoukry, CEO at Raymond James Financial]

While we will continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and at valuations that would generate attractive returns for our shareholders. Given our strong capital and liquidity positions and what we believe are attractive long term returns from buying back our own stock at the current level, we have resumed share repurchases. During the quarter, we repurchased $250,000,000 of common stock at an average share price of $146 Additionally, so far in April, we repurchased another $190,000,000 of shares at an average price of $125 per share. Our current plan is to continue repurchasing shares on a more consistent basis, likely at an amount greater than the $250,000,000 we repurchased the fiscal second quarter. We believe this balanced and more consistent approach will still leave us with ample capital liquidity to support our strong organic growth initiatives as well as to continue pursuing attractive acquisition opportunities.

[Paul Shoukry, CEO at Raymond James Financial]

Now I'll provide a few comments on our outlook before turning it over to Butch to go over our quarterly financial results in more detail. It goes without saying, but I'll say it anyway, the heightened market volatility and potential economic impacts associated with tariffs have created a highly uncertain market environment. While client sentiment on the markets and economy has declined significantly over the past quarter, the silver lining is clients are still confident with their financial plans. And satisfaction with their advisers has actually increased to 97% at Raymond James. These trends highlight the fact that clients really value having a financial adviser help them navigate these uncertain times, a similar dynamic that we experienced during the COVID pandemic.

[Paul Shoukry, CEO at Raymond James Financial]

During these times, our vision will remain unchanged to be the absolute best firm for financial professionals and their clients. In addition to our unique culture and robust platform, our strong balance sheet becomes increasingly important to prospective advisers who are seeking strength and stability for their businesses and their clients during these periods of stress. As I explained earlier, our adviser recruiting pipelines are strong and building rapidly across our affiliation options. We are also making significant investments to further strengthen our capabilities. For example, during the quarter, we established and filled a new role for the Chief AI Officer.

[Paul Shoukry, CEO at Raymond James Financial]

Our leadership team has conviction that AI will be a game changer for our industry, but we also know that it's still too early to know exactly how that will play out over the coming years. So we established this dedicated function to monitor developments and use cases for AI with the goal of deploying it to help our financial professionals serve their clients more effectively and efficiently. We already use AI in many areas, primarily in the back office. And just last week, we rolled out an in house proprietary AI search tool, which has been very well received. As an industry, we're still in the early stages of utilizing AI, but we are excited and well prepared to expand AI utilization for financial professionals and their clients in the future.

[Paul Shoukry, CEO at Raymond James Financial]

During the quarter, we also announced a new leadership structure for our private capital business to help high net worth focused advisors better serve their clients with a wide variety of bespoke private investment alternatives. These are just a couple of examples of initiatives we are pursuing to continue investing in our platform for advisors and their clients. I look forward to our Analyst Investor Day in June, where we will discuss these initiatives and others in more detail. In summary, while there is significant macro uncertainty, our value strategy and approach will remain largely unchanged. And our strong balance sheet should position us relatively well in any market environment.

[Paul Shoukry, CEO at Raymond James Financial]

Now I'll turn the call over to Butch Orlaug to review our financial results in more detail. Butch?

[Butch Oorlog, CFO at Raymond James Financial]

Thank you, Paul. I'll begin on Slide six. The firm reported net revenues of 3,400,000,000 for the fiscal second quarter, pretax income of $671,000,000 resulting in a pretax margin of 19.7%.

[Butch Oorlog, CFO at Raymond James Financial]

Net income available to common shareholders was $493,000,000 and earnings per diluted share of $2.36 Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $5.00 $7,000,000 an adjusted pretax margin of 20.3% and adjusted earnings per diluted share of $2.42 We generated annualized return on common equity of 16.4% and annualized adjusted return on tangible common equity of 19.7%. Strong results for the quarter, particularly given our conservative capital base. Turning to Slide seven. Private Client Group generated pretax income of $431,000,000 on quarterly net revenues of $2,490,000,000 Results were driven by 6% higher PCG assets under administration compared to the previous year, the result of market appreciation and the consistent addition of net new assets. Fiscal year to date, PCG generated record revenues and pretax income.

[Butch Oorlog, CFO at Raymond James Financial]

Our Capital Markets segment generated quarterly net revenues of $396,000,000 and pretax income of $36,000,000 Net revenues grew 23% year over year, driven primarily by higher investment banking and fixed income brokerage revenues. However, sequential results declined 18%, largely due to the lower investment banking revenues. The Asset Management segment generated pretax income of $121,000,000 on net revenues of $289,000,000 Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the twelve month period and strong net inflows into PCG fee based accounts. Sequentially, although market values declined, we had strong net inflows of approximately $3,700,000,000 into managed programs on our platform. The Asset Management segment generated record revenues and pretax income fiscal year to date.

[Butch Oorlog, CFO at Raymond James Financial]

The Bank segment generated net revenues of four thirty four million dollars and pretax income of $117,000,000 On a sequential basis, bank segment net interest income grew 1%, driven by continued loan growth and a seven basis point expansion of net interest margin to 2.67%, resulting from a favorable shift in asset mix, along with a higher portion of lower cost deposits. Turning to consolidated revenues on Slide eight. Second quarter net revenues grew 9% over the prior year and declined 4% sequentially. Asset management and related administrative fees of $1,730,000,000 grew 14% over the prior year and decreased 1% compared to the preceding quarter. The sequential decline was primarily due to fewer billing days in the quarter.

[Butch Oorlog, CFO at Raymond James Financial]

PCG fee based assets equaled $873,000,000,000 at quarter end, up 9% year over year and slightly lower compared to the preceding quarter. As we look ahead, we expect third quarter asset management and related administrative fees to be relatively flat with the second quarter. Although PCG assets and fee based accounts are slightly lower sequentially at quarter end, the third quarter will benefit from one additional billing day in the quarter. Brokerage revenues of $580,000,000 grew 10% year over year, primarily due to higher fixed income brokerage revenues. Despite these strong results in our second quarter, the fixed income market at the start of the third quarter is challenging as market and interest rate uncertainty caused a significant headwind for the business near term.

[Butch Oorlog, CFO at Raymond James Financial]

Our revenues in this business could be unfavorably impacted while this uncertainty persists. Investment banking revenues of $216,000,000 increased 21% year over year but declined 34% sequentially. The sequential decline reflected lower investment banking activity broadly. As you may remember, the prior quarter reflected near record M and A results. Moving to Slide nine.

[Butch Oorlog, CFO at Raymond James Financial]

Clients' domestic cash sweep and enhanced savings programming balances ended the quarter at $57,800,000,000 down 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. Domestic cash sweep and enhanced savings program balances have decreased so far this fiscal quarter, not surprising given the timing of tax payments, with the current program balance aligning roughly with April's quarterly fee billings of approximately 1,500,000,000 Turning to Slide 10. Combined net interest income and RJBDP fees from third party banks was $651,000,000 a 3% sequential decline, primarily the result of two fewer billing days in the quarter. Net interest margin in the bank segment grew seven basis points to 2.67% for the quarter, the result of the factors I described earlier. The average yield on RJBDP balances with third party banks decreased 12 basis points to 3%, primarily due to the full quarter impact of rate cuts that occurred late in the preceding quarter.

[Butch Oorlog, CFO at Raymond James Financial]

Based on current interest rates and quarter end balances, net of third quarter fee billings, we would expect the aggregate of NII and RJBDP third party fees to be relatively unchanged in the fiscal third quarter as we expect the effect of slightly lower balances in the bank deposit program to be offset by one additional billing day. Keep in mind, there are many variables that will impact actual results, including any interest rate actions during the upcoming quarter and factors impacting our balance sheet, including changes in our loan and deposit balances. Turning to consolidated expenses on Slide 11. Compensation expense was $2,200,000,000 and the total compensation ratio for the quarter was 64.8%. Excluding acquisition related compensation expenses, the adjusted compensation ratio was 64.5%.

[Butch Oorlog, CFO at Raymond James Financial]

Non compensation expenses of $528,000,000 increased two percent sequentially, mostly due to our relatively modest bank loan provision for credit losses compared to the prior quarter where the provision was near zero and higher communications and information processing expenses. Through the first half of the fiscal year, we are on track for full year non compensation expenses of approximately $2,100,000,000 excluding the bank loan provision for credit losses, unexpected legal and regulatory items and non GAAP adjustments related presented in our non GAAP financial measures. Importantly, we remain committed to investing to support growth across the business while maintaining discipline over controllable expenses. On Slide 12, we provide key credit metrics for our bank segment. We grew loans during the quarter by 2%, primarily in support of our clients, with this loan growth continuing to be led by our securities based loans and to a lesser extent residential mortgage loans.

[Butch Oorlog, CFO at Raymond James Financial]

The credit quality of the loan portfolio remains strong. Criticized loans as a percentage of total loans held for investment decreased to 1.14% at quarter end and non performing assets remained low at 34 basis points of bank segment assets. The bank loan allowance for credit losses as a percentage of total loans for investment ended the quarter at 93 basis points, down two basis points from the prior quarter. The allowance percentage has trended lower largely due to the loan mix shift towards more securities based loans and residential mortgages, which carry lower allowance levels. These two loan categories represent well over half of our total loan book, reflecting 3620%, respectively.

[Butch Oorlog, CFO at Raymond James Financial]

With regard to the relatively smaller corporate loan book, the bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.94%. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios, including any potential impact of tariff negotiations on certain corporate borrowers, any effect of which will affect our third quarter provision. Slide 13 shows the pretax margin trend over the past five quarters, demonstrating the resilience of our diverse business mix to consistently deliver strong margins. On Slide 14, at quarter end, our total assets were $83,100,000,000 1 percent sequential increase, resulting primarily from loan growth. Liquidity and capital each remained very strong.

[Butch Oorlog, CFO at Raymond James Financial]

RJF corporate cash at the parent ended the quarter at approximately $2,500,000,000 well above our $1,200,000,000 target. With a Tier one leverage ratio of 13.3% and total capital ratio of 24.8, we remain well above regulatory requirements. As Paul mentioned, our capital levels provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate for the quarter was 26.2%, an increase over the preceding quarter as the benefit from the excess share based compensation that vested in the preceding quarter did not recur this quarter. For the fiscal year 2025, we estimate our effective tax rate for the year to be approximately 25%.

[Butch Oorlog, CFO at Raymond James Financial]

Slide 15 provides a summary of our capital actions over the past five quarters. As Paul mentioned, we have been actively repurchasing shares. Over the past five quarters, we have returned to shareholders over $1,500,000,000 through common dividends and share repurchases, and we have been actively repurchasing shares in April. We remain committed over the long term to operate our businesses at capital levels in line with our stated targets. With our strong capital levels, we are well positioned to continue investing in organic growth, prudently pursue acquisitions that meet our criteria of being a good cultural and strategic fit, and we are well positioned to meet the needs of our clients and advisers in uncertain and challenging market conditions.

[Butch Oorlog, CFO at Raymond James Financial]

That concludes our prepared remarks. Operator, will you please open the line for questions?

[Operator]

Absolutely. Our first question comes from the line of Michael Cho with JPMorgan. Please go ahead.

[Michael Cho, Analyst at JP Morgan]

Hey, good evening, guys. Thanks for taking my question here. I just wanted to start on the wealth business, particularly NNA. Paul, you kind of called out nuances in NNA during the quarter and that improved sequentially throughout.

[Michael Cho, Analyst at JP Morgan]

I guess hoping you could

[Michael Cho, Analyst at JP Morgan]

just flush out some of those comments in terms of, you know, the magnitude of improvement into April and maybe, you know, any particular segments or channels that that you might call out. And and if if possible, if you could talk through, you know, the size or the magnitude of pipeline today, maybe versus last year this time, just to help us get a sense of direction here? Yes.

[Paul Shoukry, CEO at Raymond James Financial]

Thanks for that question, Michael. The pipeline, I mean, NNA is tough to measure month to month or even quarter to quarter. The sales cycle takes a long time from the initial conversations to the time that advisors affiliate with the firm. So what I would just tell you high level is that throughout the quarter, the actual NNA improved and as well as the new commits, particularly in the months of March, which was a very strong month, followed by another good month in April. These are new commits that will be affiliating with us at a future date.

[Paul Shoukry, CEO at Raymond James Financial]

So that's not reflected in the NNA number. And so and this is really from a variety of firms and across our affiliation options. So what I would tell you is that we're really optimistic about the pipelines and that our value proposition of the best of both worlds where we provide culture that's adviser and client focused with capabilities, technologies and solutions. And now increasingly important is the strong balance sheet that we have because advisers are looking for a source of strength and stability for their businesses. And a lot of these roll ups or even other strategics don't have tangible capital, for example.

[Paul Shoukry, CEO at Raymond James Financial]

And so they're looking for a source of strength and stability so they can grow their businesses, and provide good service for their clients through any market environment.

[Michael Cho, Analyst at JP Morgan]

Great. Thanks for that, Paul. If I could just switch gears quickly, Butch, you talked about some moving pieces in the balance sheet and some nuances across the segment. Was hoping you could just talk through what you're seeing in terms of loan demand. I mean, called out bank loans grew slightly this quarter, quarter to quarter.

[Michael Cho, Analyst at JP Morgan]

If anything notable considerations in terms of what you're seeing in terms of loan demand exiting the quarter and maybe into the third fiscal third quarter as well? Thanks.

[Butch Oorlog, CFO at Raymond James Financial]

Sure. With regard to loan demand during the quarter, I would say exiting the quarter, loan demand has been tepid on the corporate side, as you would expect, given the volatility. And so we remain poised and ready to opportunistically make investments when when the returns, you know, return to the a reasonable risk adjusted, target level for us. But that said, we continue to see significant demand for our SBL loans. During the the quarter, we had SBL loan growth, of over $600,000,000 and, total loan growth of over 2% in balances.

[Butch Oorlog, CFO at Raymond James Financial]

So strong loan growth on the balance sheet, overall during the quarter. And exiting the quarter, we've we've still, seen a strong demand in, in SBL loan growth during April so far in April, which is, you know, seasonally a a typically strong month a time for us and quarter for us with respect to SBL loan growth given clients' needs for liquidity around tax payments.

[Michael Cho, Analyst at JP Morgan]

Great. Thanks so much.

[Operator]

Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Great. Hey, Paul. Hey, Butch. How are you?

[Paul Shoukry, CEO at Raymond James Financial]

Good, Devin. How are doing?

[Butch Oorlog, CFO at Raymond James Financial]

Great.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

I'm doing well. I just wanna

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

come back

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

to the kind of recruiting backdrop. And and, obviously, you know, there's maybe more M and A of late than there has been in the market. And so just want to love to get a sense of how much of the recruiting backlog right now is coming from maybe some of the M and A affected firms or just maybe also just kind of the level of advisers in motion kind of whether it's much more elevated today than it has been in a while because of the M and A. So that's kind of one piece of it. But then the other side, market volatility can obviously affect pipelines as well.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

So just whether we're only maybe a few weeks into kind of post tariff world, but whether you're seeing kind of this volatility impact that pipeline at all or maybe change sentiment around advisers willingness to move. Maybe it has nothing to do with the M and A firms, but just more broadly advisers in motion.

[Paul Shoukry, CEO at Raymond James Financial]

Yes. Our recruiting momentum has been strong over the last several years with or without M and A. And that's really just the consistency of putting advisers, treating them like clients respecting the relationship advisers have with their clients and that best of both worlds value proposition that I discussed. So as you know, our recruiting success has been consistent over the past several years and certainly has been building up and our pipelines were looking good before even recent M and A was announced. Now with that being said, whenever there's a change of control, potentially change of leadership and culture and capabilities and service levels, that always creates a catalyst for advisors to take a look at other options.

[Paul Shoukry, CEO at Raymond James Financial]

And so to the extent those advisors are looking for the type of culture and capabilities that Raymond James provides, and that would absolutely increase the opportunities with advisers that are interested.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Okay, great. Thanks, Paul. And just a follow-up also on the loan book as well. So Butch, I heard the comment about provision in the third quarter or at least anything related to tariffs would be considered. Then I just wanted to to see if that's kind of a generic comment or if there's anything kind of in the loan book that would maybe warrant closer attention because of tariffs.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

I'm not not aware of anything that's maybe directly, but but obviously, there's there's always kind of second derivatives of volatility. But just figured I'd ask since since you had mentioned that. Thanks.

[Butch Oorlog, CFO at Raymond James Financial]

Sure. Thanks, Devin. The the the nature of the comment was was more to to make sure it's understood that the the volatility commenced on April 2. And and so the effects of of the volatility both on the on the economic forecast that underpins the provision at at as well as any anything specific to our loan book would not was not reflected in our second quarter results. So, that will be that will be, impact our third quarter.

[Butch Oorlog, CFO at Raymond James Financial]

That's really It's really more of

[Paul Shoukry, CEO at Raymond James Financial]

a comment around credit versus, I mean, a comment around accounting versus credit. It's just from an accounting perspective to the extent that we have new assumptions that are given to us that we put in the CECL models that hasn't been reflected in these results yet just because the timing of the macroeconomic changes that we anticipate will come to the new models would be following the end of this quarter that we're talking about today.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Right, exactly. Okay. That's what I assume, but appreciate the clarification. Thanks, guys.

[Operator]

Your next question comes from the line of Dan Tannon with Jefferies. Please go ahead.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Thanks. One more on NNA. Just for the quarter, I wanted to confirm just any change in attrition in the period to make the numbers lower? Or was it just timing of the onboarding? And then to follow-up on Devin's question, curious of how your view of adviser moving for the industry in a period of volatility like we've seen.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

So historically, if you look back after periods of this type of movement, does adviser movement for the industry slow, knowing that your competitive positioning is better today? But just curious about the overall industry trends.

[Paul Shoukry, CEO at Raymond James Financial]

Yeah. I mean, each period of volatility is different. So, one of our best recruiting years in history was during the financial crisis when advisers were looking for a source of strength and stability. And with all the industry disruption and M and A and firms exiting the business, we were huge beneficiaries of that because we had a strong balance sheet as we do today. We have a strong balance sheet and I think we are viewed by advisors in the industry as a source of strength and stability for their businesses and for their clients.

[Paul Shoukry, CEO at Raymond James Financial]

So we think that there's still movement, just based on the pipelines and the discussions that we're having and the home office visits that we're having. And I've been traveling across the country meeting with very high quality prospects, that are interested in moving. And so we're still optimistic about the pipelines and the recruiting activity going forward. And what I would tell you around the retention is this quarter didn't have any significant or notable adviser attrition like the prior quarters did with a super OSJ or two. So the retention looks good.

[Paul Shoukry, CEO at Raymond James Financial]

And so again, we're pretty optimistic about net new assets as we look in the second half of fiscal twenty twenty five and beyond.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Great. That's helpful. Then just to follow-up on the cash comments, just want to make sure I heard you correctly. The $1,000,000,000 from billing and another $1,000,000,000 I think is what you said for tax payments. And if that's correct, how does that compare to historical levels?

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

And is there any other change just given maybe some selling of derisking and cash build in this type of market backdrop?

[Butch Oorlog, CFO at Raymond James Financial]

Thanks, Dan. The the the indication, was that the balances are down, since quarter end, roughly equivalent to that $1,500,000,000 fee billings that came out of the account in April. So it's not in addition to or an increment of that. That basically, is is where our cash balances sit just net of those collection of those fees.

[Paul Shoukry, CEO at Raymond James Financial]

And overall, that's a

[Paul Shoukry, CEO at Raymond James Financial]

pretty good result considering the tax payments that we experienced in April as well. So to have the cash be down commensurate with the quarterly fee billings in April is a pretty good result.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Great. Thank you.

[Operator]

Next question comes from the line of Bill Katz with TD Cowen. Please go ahead.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Thank you very much. As you look ahead to well, of all, Paul, congrats again to you in the new role. So in terms of the earning asset interest earning asset dynamic, I'm sort of curious, loans grew nicely, but the earning assets were sort of down sequentially. As you think through maybe the funding mix and the loan demand commentary you mentioned, how do you see the intermediate term view for earning asset growth?

[William Katz, Senior Equity Analyst at TD Cowen]

Is it flattish here in a remix within the loan category? Or could you actually see some kind of incremental expansion? Thank you.

[Butch Oorlog, CFO at Raymond James Financial]

Yes. Thanks, Bill. We saw maturities in the, the, AFS portfolio of, $350,000,000 during the quarter two. That was, that was redeployed and and part of funding the the, loan balances. And and, you know, we with respect to to to that dynamic, we we we see more of that dynamic continuing, in our q three and as well as our q four, to continue to reprice from the securities book into the into the, into loans.

[Butch Oorlog, CFO at Raymond James Financial]

At q three, we approximate that to be about $275,000,000 and in q four, about $325,000,000

[Paul Shoukry, CEO at Raymond James Financial]

I would say on the loan side of the equation, securities based loans, as Butch mentioned, have continued to grow in April. And so, we and this is that's through the volatility, in the month of April as well. And some of that's related to the tax payments and liquidity needs around that. But we would expect those to continue to grow. And then the corporate loans, as we've always said, there's that's going to be market dependent.

[Paul Shoukry, CEO at Raymond James Financial]

And right now, the demand for corporate loans still very tepid certainly during this period of market volatility in April. And so we wouldn't expect those to grow meaningfully until there's more clarity and certainty in the market and then there's more loan demand and loan demand at prices that generate good risk adjusted returns.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Just as a follow-up, I'm sort of curious, a little bit of a nested question, so I apologize in advance. You mentioned that you were looking at a couple of transactions. I was wondering if could give us maybe the nature of the kind of transactions you were looking at. And then as you look ahead, is a 10% Tier one leverage ratio still the appropriate bogey to which you are looking to manage the platform on?

[William Katz, Senior Equity Analyst at TD Cowen]

Thank you.

[Paul Shoukry, CEO at Raymond James Financial]

Yes. The 10% target is still a good target for us. We're obviously above that now, which is why we are going to be more consistent going forward with buybacks because even that $400 to $500,000,000 of buybacks a quarter going forward, if that's the target now, which could change based on all set of circumstances, but that's kind of the target is to look to 400 to $500,000,000 per quarter. That really just keeps our capital ratios where they are, which gives us plenty of capacity for our top priority, which is growth, both organic growth and to pursue acquisitions. So but of course, we don't talk about the acquisitions unless we're announcing them for ourselves.

[Paul Shoukry, CEO at Raymond James Financial]

So not going to get into the details around that.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Thank you.

[Paul Shoukry, CEO at Raymond James Financial]

Thanks.

[Operator]

Your next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Hi. Thanks so much for taking my questions. Paul, I I was implying to ask you on buyback, but you just, I guess, opened the kimono, so to speak. You know, it's certainly encouraging to see you guys so active in April. I think when you mentioned the 250,000,000 buyback floor, my initial concern was that you would continue to accrete more capital and that ratio would continue to build.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Essentially, it wouldn't be sufficient, buyback to at least maintain the ratio and even drive it towards that target. You mentioned 4 to 500,000,000 as a run rate. So I'm just trying to understand. I mean, or at least my interpretation of your remarks is don't underwrite $2.50 or the floor, underwrite something closer to 400 to 500,000,000 a quarter, which will ensure that your capital ratios are at least stable, but not necessarily building from here. Is that correct?

[Paul Shoukry, CEO at Raymond James Financial]

Yeah. That's a good that's a good interpretation of it. And, of course, you know, if loan growth accelerates, then that may cause us to slow down buybacks or if there's acquisition opportunities like we saw last quarter when we stopped when we slowed down buybacks as we're evaluating live acquisition opportunities. So there's always different factors to consider. But absent those, the 400 to $500,000,000 that you're talking about to keep the capital ratios really from growing much further from here is a good assumption and something you can underwrite in the models.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Alright. That's great. And then for a follow-up, just on the outlook for NII and NIM, you had noted that the spread revenues were expected to be flat sequentially, which is certainly encouraging. The one trend that we did notice would surprise positively with the deposit beta, which came in, I believe, around 90%. I just wanna understand how you're managing deposit costs, what assumptions you're making once as we get further cuts.

[Steven Chubak, Managing Director at Wolfe Research LLC]

And if you can just unpack some of the component pieces that support that flattish spread revenue guide, which maybe came in a little bit better than we had been anticipating, given some of the quarterly trends.

[Paul Shoukry, CEO at Raymond James Financial]

And that's based on spot balances. So, if we can grow loan balances more throughout the quarter, there might be some upside to that and vice versa if loan balances decline for, during the quarter. So that's just our sort of conservative estimate for the quarter as to for BDP fees and NII to remain relatively flat sequentially. The deposit beta assumption, mean, really, it's two different, primarily two different buckets. There's a higher yielding, buckets, that enhanced savings program, for example, which have, you know, nearly a % deposit beta because they're they're tracking with Fed funds target.

[Paul Shoukry, CEO at Raymond James Financial]

And then there's the cash sweep bucket where the rate of the cost of those deposits is much lower and therefore the deposit betas are much lower as well. So it's a little hard to calculate that deposit beta quarter over quarter just given the timing of the rate cuts last quarter. But that's what we're using to forecast for the upcoming quarter.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Very helpful color, Paul. Thanks for taking my questions.

[Paul Shoukry, CEO at Raymond James Financial]

Thanks, Steve.

[Operator]

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

[Alex Blostein, Managing Director at Goldman Sachs]

Hey, guys. Thank you for the question. A

[Alex Blostein, Managing Director at Goldman Sachs]

little

[Alex Blostein, Managing Director at Goldman Sachs]

bit of a bigger picture question and then in a so less sort of related to the quarterly or the monthly trends that we've seen. But as you sort of zoom out, Rayju used to do kind of 5% plus NNA. And I get it. It's really not a perfect metric, and there's a lot that kinda goes into it. But it just feels like you've been at kind of a 3% run rate over the last few quarters.

[Alex Blostein, Managing Director at Goldman Sachs]

So as you look forward, what's been, I guess, the problem in the last year or so? What do you think could change to get you guys back to this 5% plus? Or is the 5% plus still a realistic target?

[Paul Shoukry, CEO at Raymond James Financial]

Yeah. Well, just last quarter, we were above 3%. I mean, we're 4% last quarter. And if you excluded that kind of OSJ departure, we're kind of in the mid fives last quarter. So I would just I would this is really just between this quarter and then a year ago quarter where it was sub 3% or 4% range.

[Paul Shoukry, CEO at Raymond James Financial]

But listen, we are optimistic. Again, it's hard to look at it quarter to quarter. Big picture, we're optimistic about our recruiting pipelines and we're optimistic that we can continue to be best in class NNA growers just as we have been year after year after year. And so there's nothing in our calculus or in our expectations that's changing around that. We're very optimistic about the recruiting pipeline.

[Paul Shoukry, CEO at Raymond James Financial]

So the months of March and April were very strong for us in terms of new commits, and that's just continuing to accelerate. In terms of the interest in Raymond James, we are certainly a destination of choice for high quality financial advisers across the industry, across all of our channels. And so we're really excited about the recruiting momentum and the retention of our existing advisers and the NNA trajectory going forward.

[Alex Blostein, Managing Director at Goldman Sachs]

Great. That's helpful. For my follow-up, I wanted to dig a little more into the comment you made around the private investment alts platform. Maybe spend a minute on kind of what does that look like today at Ray J. And I'm curious both in terms of sort of manufacturing capabilities and if there's anything you're looking to add there from an asset management side And more importantly, on the distribution side, as you sort of look at the footprint you have in the wealth channel and how you can monetize that with alternative managers?

[Paul Shoukry, CEO at Raymond James Financial]

Yes. We have a

[Paul Shoukry, CEO at Raymond James Financial]

lot of upside in that business. We've made a lot of progress over the last five years in building out the platform, the capabilities, the resources, the expertise, the internal research around it. And so and we have a lot of high network focused advisers with clients that are interested in in the products. And it's a wide range. It's kinda it it captures a a wide range of products.

[Paul Shoukry, CEO at Raymond James Financial]

Everything from, you know, the alternative private equity mutual fund type products all the way to we have a private a pick desk that we call it private investments for clients with $50,000,000 and above of investable assets and everything in between. This is an open architecture platform for us, just like most of the rest of our wealth platform is really an open architecture platform. So we bring in the best providers across all of the product types. To the extent that we provide our own products, for example, we hired a new head of private placements to kind of work with our capital market clients to the extent that they want to raise capital from our private client group business. So we've that's an example of collaboration and synergy between the businesses that could be win win for clients in the private client group and in capital markets business alike.

[Paul Shoukry, CEO at Raymond James Financial]

But we're excited about the opportunity. The penetration is still relatively low. It's not for every client, even very high net worth clients, a lot of them like having liquidity. And these are by definition less liquid. But certainly, there's a growing appetite amongst clients for and our advisors for these type of products.

[Alex Blostein, Managing Director at Goldman Sachs]

That's great. Thanks so much.

[Operator]

Your next question comes from the line of Jim Mitchell with Seaport Global Securities. Please go ahead.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Hey, good evening. Paul, just maybe a follow-up on capital return. Appreciate the quarterly comments. But when we think about keeping ratios flat, capital levels flat, you're at 13.3% tier one leverage. You've had you've had a target out there of 10%.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Doesn't sound like a deal is in the near term. So is it we just don't expect to get to 10 without deals? Or can you kind of push that ratio down from here? Because when you look at just the math of 13.3 versus 10, that's a couple of billion of excess capital versus your target.

[Paul Shoukry, CEO at Raymond James Financial]

Yes, certainly, I mean, we would like to deploy that through growth investments both organically and through acquisitions. But we before the first thing we have to do is ensure that it doesn't continue growing And that's why we're significantly increasing the amount and also the consistency of the buybacks, which again, to your point, still gives us plenty of capacity for growth, which is our top priority as far as deploying capital goes. And so that's that would be the plan going forward is to continue looking for growth opportunities. We have not given up on M and A. And in fact, M and A opportunities sometimes present themselves in periods of volatility and uncertainty like we're in today.

[Paul Shoukry, CEO at Raymond James Financial]

And so we're still very actively pursuing acquisition opportunities across our businesses as well.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

So is it the 10% more of a target with assuming growth, but you're not gonna get to that target with buybacks? You just need to have some investments to get there?

[Paul Shoukry, CEO at Raymond James Financial]

Yeah. I mean, that's really the the way we're getting it get down to 10 is hopefully through growth investments. That would be the ideal way to get down to 10 is investing in top line growth.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay, great. And then maybe just thinking through on the NII side with three to four cuts in the forward curve, it's bouncing around. But can you just update your NII sensitivity? You highlighted some asset turnover in the low yielding AFS book and being reinvested in higher yielding assets. Does that help offset maybe pressures from a few rate cuts?

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

How do we think about that bigger I

[Paul Shoukry, CEO at Raymond James Financial]

think the bigger picture is that rate cuts can actually result in increased loan balances, both for securities based loans and corporate loans alike. And so we don't think that rate cuts would necessarily be bad for NII over the long term. We actually think it would potentially be beneficial to NII as it helps loan balances grow at lower rates. So there's static analyses you can do and we can share that with you. It's just the deposit beta assumption based on the static balances.

[Paul Shoukry, CEO at Raymond James Financial]

But I think what's more interesting and realistic is what would happen dynamically to balances if rates were to be lower over a longer period of time.

[James Mitchell, Senior Equity Analyst at Seaport Global Securities]

Okay, fair enough. Thanks.

[Paul Shoukry, CEO at Raymond James Financial]

Thank you.

[Operator]

Your next question comes from the line of Kyle Voigt with KBW. Please go ahead.

[Kyle Voigt, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Hi, good evening, everyone. Maybe just one for me, just on non comp expenses. I heard in the prepared remarks that you're on track for the $2,100,000,000 for the full year. I think first half annualized is coming in a bit under that. So just wondering if you could speak to some of the push and pull factors in the back half of the year.

[Kyle Voigt, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

And if markets stay near current levels, you know, down quarter to date, pretty meaningfully, will that lead to non comps coming in lower, than the 2.1 guide, just given some of the offsets on advisory fees?

[Butch Oorlog, CFO at Raymond James Financial]

Yeah. Thanks, Kyle. With with respect to our noncomp expenses, it's not unusual for us to have a ramp up as as we move deeper into our fiscal year. And so, you know, we we we've we we believe that ramp up will occur in in certain of the line items, especially in our communications and IT expense lines. And and and therefore, we believe that that the it would be too early to to make a call to to adjust that non comp, expectation or that guidance.

[Butch Oorlog, CFO at Raymond James Financial]

You know, we we remain committed to invest long term, especially in our, leading technology. So, you know, any impacts from this, the current volatility would would not would not likely impact our long term thinking with with respect to that. And then, also keep in mind that a significant portion of those non comp expenses, are variable and and move with with revenues, things like FDIC insurance and sub advisory fees. So, that aspect is something that, you know, that we'll keep an eye on, but, definitely not not the time for, to us in in in our thinking to to provide any any revised, expectation on on that level.

[Kyle Voigt, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Thanks. If I could just ask one modeling follow-up as well. Just on administrative comp within PCG, It was down quarter on quarter and year on year, looked a bit off trend. Just wondering if there's anything to call out, for that administrative compensation line within the PCG segment in the quarter.

[Butch Oorlog, CFO at Raymond James Financial]

Yeah. Kyle, the one thing to to think about that is is it's hard hard with respect to comp, that there there are different elements that would affect subcomponents within the comp from quarter to quarter. So although although the the percentage change was as you noted for the quarter, you know, we we would we would advise you to think about it long term. And if you look at year to date, at the six month year to date, relative to the prior year year to date, it's up, up 5%, which is consistent, for that six month period, which is consistent with with what we'd expect given the given growth in the business and the growth in the elements of those types of expense components.

[Kyle Voigt, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Okay. Thank you.

[Operator]

Your last question for today comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thank you for taking the question. I just wanted to ask about the new Chief AI Officer role. I was hoping you could talk about the responsibilities for this new function, what resources will be at their disposal, what sort of conditions do you have here? And how will you go about measuring success?

[Michael Cyprys, Managing Director at Morgan Stanley]

Thank you.

[Paul Shoukry, CEO at Raymond James Financial]

I'm really glad you asked that question. And it's something that we plan on talking more about at the Analyst Investor Day in June. But the the new chief AI officer, Stuart Feld, who was who was an internal promotion. So one of our senior leaders in technology is really and he will have a dedicated team really focused on evaluating, I kinda call it a lookout function, function, which is somewhat unique in that usually we outsource lookout functions to consulting firms. But we think the leadership team has conviction that AI will be such a game changer for our industry and occur relatively, rapidly, that we need to have that function internally.

[Paul Shoukry, CEO at Raymond James Financial]

Also because the way we use AI will be very different than how many of our competitors we anticipate will use AI. Whereas we're we're really wanting to use AI to help our financial professionals and our financial advisers better serve their clients, where, many of our competitors have used technology and are are planning on using AI to essentially try to get around their financial advisers to go direct to their clients. And that is not our goal. Our goal is to use AI to better empower our advisers and financial professionals so they could provide even better service to their clients. And so this function will be monitoring changes in model developments, third party providers and vendors who are coming up with new AI solutions, what competitors are doing, and essentially use cases for for Raymond James, given our unique approach of really betting on the financial professional to provide, great advice to their clients.

[Paul Shoukry, CEO at Raymond James Financial]

And so it it, they've already made pretty good progress, and there'll be a lot more to talk about over the coming years. And certainly, we'll talk about it more at Analyst Investor Day in terms of how they're structuring their work and thinking around AI.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. And just a quick follow-up on that. Just curious around use cases that you've identified. Just curious how many you've identified, how many you have in production, and any sort of lessons learned from, your your initial foray into it so far.

[Paul Shoukry, CEO at Raymond James Financial]

Yeah. I think I would defer the specifics to the experts at our Analyst Investor Day in terms of the number of actual use cases and what we've learned from it. So better discussion for Analyst Investor Day.

[Michael Cyprys, Managing Director at Morgan Stanley]

Fair enough. Look forward to it. Thank you.

[Operator]

There are no further questions at this time. I would like to turn the call back over to Paul Shukri.

[Paul Shoukry, CEO at Raymond James Financial]

Great. Well, I want to thank everyone for your time, this evening. And, also just thank again our financial advisers for the excellent service and advice they're providing to their clients through these volatile periods of time. And you see with client survey showing 97% satisfaction with their advisers through this turbulent period and the J. D.

[Paul Shoukry, CEO at Raymond James Financial]

Power award number one for client satisfaction for any advice firm and most importantly, number one in being the most trusted firm. And so just want to thank all of our advisers and associates and thank all of our clients as well for entrusting Raymond James. Thank you very much, and have a great evening.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Kristie Waugh, SVP, IR
• Paul Shoukry, CEO
• Butch Oorlog, CFO

Analysts

• Michael Cho, Analyst at JP Morgan
• Devin Ryan, Director of Financial Technology Research at Citizen JMP
• Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc
• William Katz, Senior Equity Analyst at TD Cowen
• Steven Chubak, Managing Director at Wolfe Research LLC
• Alex Blostein, Managing Director at Goldman Sachs
• James Mitchell, Senior Equity Analyst at Seaport Global Securities
• Kyle Voigt, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Michael Cyprys, Managing Director at Morgan Stanley