Raymond James Q3 2021 Earnings Call Transcript

Participants

Corporate Executives

• Paul Shoukry, Chief Financial Officer
• Paul Reilly, Chairman and Chief Executive Officer

Analysts

• Manan Gosalia, Morgan Stanley
• Bill Katz, Smith Barney Citigroup
• Steven Chubak, Wolfe Research
• Gerry OHara, Jefferies Financial Group Inc.
• Devin Ryan, JMP Securities

Presentation

[Operator]

Good morning, everyone. And thank you for joining us. We appreciate your time and interest in Raymond James Financial.

With us on the call today are Paul Reilly, Chairman and Chief Executive Officer; and Paul Shoukry, Chief Financial Officer. The presentation being reviewed this morning is available on Raymond James Investor Relations website. Following the prepared remarks, the operator will open the line for questions.

Please note, certain statements made during today's call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses. Anticipated results of litigation and regulatory development, impacts of the COVID-19 pandemic or general economic conditions. In addition, words, such as belief, expects, could and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements.

Please note that there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent forms 10-Q, which are available on our Investor Relations website.

During today's call, we will also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedules accompanying our press release and presentation.

With that, I'm happy to turn it over to Chairman and CEO, Paul Reilly. Paul?

[Paul Shoukry, Chief Financial Officer at Raymond James]

Thanks, Paul. I ll begin with consolidated revenues on slide nine. Record quarterly net revenues of $2.47 billion, grew 35% year-over-year and 4% sequentially. Record asset management fees grew 8% sequentially, commensurate with a sequential increase of fee-based assets in the preceding quarter. Private Client Group assets and fee-based accounts were up 9% during the fiscal third quarter, providing a tailwind for this line item for the fourth quarter.

Consolidated brokerage revenue is $552 million, grew 14% over the prior year, but declined 7% from the record set and the preceding quarter. Institutional fixed income brokerage revenues remain solid, albeit down from the record set in the preceding quarter. Brokerage revenues and PCG were up 22% on a year-over-year basis, but down 6% sequentially due to lower trading volumes, as well as the large placement fee in the preceding quarter.

Account and service fees of $161 million increased 20% year-over-year and 1% sequentially, largely due to higher average mutual fund balances. Record consolidated investment banking revenues of $276 million, grew 99% year-over-year and 14% sequentially, driven by record M&A revenues, and strong debt and equity underwriting results. Our investment banking pipelines remain strong. So we would be pleased if fourth quarter revenues came in around the average of the quarterly revenues generated over the first three quarters of the fiscal year, that would have been about $260 million on average. But of course, this line item is inherently difficult to predict.

Other revenues of $55 million were up 25% sequentially, primarily due to $24 million of private equity valuation gains during the quarter, of which approximately $10 million were attributable to non-controlling interest, which are reflected in the other expenses.

Moving to slide 10. Clients domestic cash sweep balances ended the quarter at $62.9 billion, essentially flat compared to the preceding quarter and representing 6.1% of domestic PCG client assets. As we continue to experience growing cash balances and less demand from third-party banks during fiscal 2021, $8.6 billion of the client cash is being held in the client interest program at the broker dealer. Over time, that cash could be redeployed to our bank or third-party banks as capacity becomes available, which would hopefully earn a higher spread than we currently earn on short-term treasuries.

On slide 11, the top chart displays our firm-wide net interest income and RJBDP fees from third-party banks on a combined basis, as these two items are directly impacted by changes in short-term interest rates. The combined net interest income and BDPs from third-party banks of $183 million were up slightly compared to the preceding quarter, as modest NIM compression was offset by growth in client cash balances and higher asset balances in Raymond James Bank. However, it s still down significantly from the peak of $329 million in the second quarter of fiscal 2019, really highlighting the remarkable results we have been able to generate despite near zero short-term interest rates.

In the lower left portion of the slide, we show net interest margin or NIM for both RJ Bank and the firm overall. We continue to expect the bank s NIM to decline to just around or just below 1.9% over the next quarter or two. The average yield on RJBDP balances with third-party banks declined 1 basis point to 29 basis points in the quarter. We believe this average yield will remain around this level for the rest of the fiscal year, but there will likely be downward pressure in this yield in fiscal 2022, especially in the back half of the fiscal year if banks demand for deposits, don t improve from current levels.

Moving to consolidated expenses on slide 12. First, our largest expense compensation; the compensation ratio decreased sequentially from 69.5% to 67.2% largely due to record revenues in the capital markets segment, which had a 57% comp ratio during the quarter. And the benefit from the private equity valuation gains, which do not have direct compensation associated with them.

Given our current revenue mix and disciplined manage of expenses, we remain confident, we can maintain a compensation ratio lower than 70% in this near zero short-term interest rate environment. And as I ve said over the past few quarters, we could outperform that just as we did in the fiscal third quarter with capital markets revenues at or near these levels.

Non-compensation expenses of $425 million, increased 18% compared to last year s third quarter and 53% sequentially, primarily driven by the $98 million loss on extinguishment of debt, acquisition-related expenses, the non-controlling interest of $10 million and other expenses related to our private equity valuation gains and higher business development expenses.

As we discussed last quarter, we successfully executed a debt offering in the fiscal third quarter to take advantage of the low rate environment and significantly extend the maturities of our existing balances. We raised $750 million of 30-year senior note at 3.75% and utilize the proceeds and cash on hand to early redeem our next two senior notes that we re maturing in 2024 and 2026, effectively, resulting in the same amount of senior notes outstanding.

This resulted in $98 million in losses associated with the early extinguishment of those nodes, but in doing so locked in very low rates for 30 years, while significantly extending the duration and stability of our funding profile. Overall, our results show, we have remained focused on managing controllable expenses, while still investing in growth across all of our businesses and ensuring high service levels for advisors and their clients.

Excluding the debt extinguishment expense, we do expect non-compensation expense to continue picking up over the next few quarters as hopefully, travel, recognition trips and conferences continue to resume, and we continue to increase our investments in technology and high quality service levels for our growing business. We would eventually expect loan loss provisions associated with net loan growth as well.

Slide 13 shows the pretax margin trend over the past five quarters. Pretax margin was 15.6% in fiscal third quarter of 2021 and adjusted pretax margin was 19.8%, which was boosted by record revenues, the loan loss reserve release and still relatively subdued business development expenses. At our Analyst and Investor Day in June, we outlined a pretax margin target of 15% to 16% in this near zero interest rate environment.

But as we experienced during the first nine months of the fiscal year, there s meaningful upside to our margins, when capital markets results are strong and improving macroeconomic trends lead to releases of our allowances for credit losses.

On slide 14, at the end of the quarter, total assets were approximately $57.2 billion, a 2% sequential increasing increase, reflecting solid growth of securities-based loans at Raymond James Bank.

Liquidity and capital levels are very strong, with cash at the parent of approximately $1.56 billion, a total capital ratio of 25.5% and a Tier 1 leverage ratio of 12.6%. We have substantial amount of flexibility to be both defensive and opportunistic. The third quarter effective tax rate of 20.3% benefited from non-taxable gains in the corporate life insurance portfolio, we would expect that tax rate to be around 21% in the fiscal fourth quarter, assuming a flat equity market.

Slide 15 provides a summary of our capital actions over the past five quarters. In the third quarter, we repurchased 375,000 shares for $48 million. As of July 28, $632 million remains available under the current share repurchase authorization. But as Paul Reilly will discuss our priority continues to be deploying capital to grow our businesses.

Lastly, on slide 16, we provide key credit metrics for Raymond James Bank. The credit quality of the bank s loan portfolio remains healthy with most trends continuing to improve. Non-performing assets remained low at just 12 basis points of total assets and criticized loans declined sequentially. The bank loan loss benefit of $19 million reflects an improved outlook for economic conditions and higher credit ratings on average within the corporate loan portfolio.

Due to reserve releases and loan growth during the quarter, the bank loan allowance for credit losses as a percent of total loans declined from 1.5% to 1.34% of the quarter end. For the corporate portfolio, these allowances are higher at around 2.4%. We believe, we re adequately reserved, but that could change if economic conditions deteriorate.

Now I ll turn the call back over to Paul Reilly to discuss our outlook. Paul?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Thank you, Paul. So overall I m very pleased with our strong results for this quarter, which top many records, and did so in spite of the persistent challenges of the global health pandemic and near zero short-term rates. As for the outlook, we remain well positioned entering the fourth fiscal quarter with records of many of our key business metrics, strong pipelines for financial advisor recruiting and investment banking.

In the Private Client Group results will benefit by starting the fourth quarter with 9% increase of assets and fee-based accounts. With the strong recruiting pipeline, we are on track for record fiscal year recruiting as prospective advisers across all of the affiliation options have continued to be attracted to our platform, including the leading technology solution, our advisor and client centric culture. These recruiting results are primarily strong given the very competitive market for experienced advisors.

In Capital Markets segment, the investment banking pipeline remains strong and we expect solid fixed income brokerage results, driven by demand from depository client segment. However, keep in mind, these there is still an economic uncertainty due to the ongoing pandemic that could impact these results.

In the Asset Management segment, if equity markets remain resilient, we expect results to be positively impacted by higher financial assets under management. Active asset managers continue to face structural headwinds. However, we are pleased to see positive net flows on a fiscal year to date basis for Carillon Tower Associates. We hope that the one benefit of increased market volatility is that it reinforces the value of our high quality asset active managers.

And Raymond James bank should continue to grow as we have ample funding and capital to grow the balance sheet. We ll continue to focus on lending to PCG clients through securities-based loans and mortgages. And we will continue to be selective and deliberate in growing our corporate loan and agency backed securities portfolio.

As we look further ahead, we remain focused on the long-term growth. And as we ve outlined at our recent Analyst and Investor Day, those key growth initiatives, include driving organic growth across all of our core businesses, continue to expand our investments in technology and sharpening our focus on strategic M&A.

Today s announcement of our firm s intention to make an offer for Charles Stanley Group demonstrates our focus on these initiatives in our commitment to deploy excess capital over time. We believe this acquisition stays true to our longstanding criteria for acquisitions. So first, being a good cultural fit, a good strategic fit, it makes financial sense for shareholders and something we can integrate.

I also want to once again take a moment to thank our advisors and associates. They ve been amazing at being able to provide excellent service to their clients, to these difficult times. I m very proud to be a part of this special Raymond James family. Thank you all for attending.

With that, operator, Tommy, I m going to turn it over to you for questions.

Questions and Answers

[Operator]

Thank you very much. [Operator Instructions] We ll get with our first question on the line from Manan Gosalia from Morgan Stanley. Please go ahead with your question.

[Manan Gosalia, Analyst at Morgan Stanley]

Hi, good morning. I was wondering if you can dig in a little bit into the Charles Stanley Group acquisition. Can you just talk us through maybe the rationale for the acquisition? Why expand in the UK versus the U.S. and maybe what the synergies are with your current business there?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Again, there s not a lot, we can say right now, except the strategic rationale is that we believe we can grow in all of our markets. And we certainly have the capital to grow in the U.S., Canada and UK and believe in all three of those private wealth markets. We ve been in the UK market at the Raymond James, RJIS for 20 years, and we ve had very good growth, but we are I d say undersized and our employee channel is really nascent.

Charles Stanley brings first culture identical to us. It s stewarded by the Howard family for generations. I think the fourth generations in the business has the very same value of client centric, advisers centric culture, and has multichannel. So the combination gives us at 40 billion and really gives us the mask to utilize a lot of the things they ve done well and to continue to grow that business and really give us the base to make a difference.

So it s not saying, we re not choosing it over the U.S., Canada or the UK. We believe in all three of those markets. And when we find these rare opportunities to acquire 200-year old firm as a great brand, name and matches our culture, we re going to act. So we believe very strongly in it, and I think it ll really help our business.

[Manan Gosalia, Analyst at Morgan Stanley]

Great. Anything I know you ve can t say, that much given regulations, but anything you can say on the financial details, revenues, pretax margin, maybe how much capital you re utilizing from the acquisition. I can sort of see from their disclosure that it s about $240 million or so in revenues and 10% profit margin. But I m also assuming that there are synergies and additional investments that you were thinking about. So is there any more color you can give on that?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

I would just say that not a lot. I mean, you can see the public information on their current revenues and base. And we do plan to invest in the technology of that business. And we think combined, it will be we ll be able to be at a much better place to do that. And they ve got a very good back office and strong technology. But outside of the details, we really can t get into any more details right now. But we will make them available as soon as we can.

[Manan Gosalia, Analyst at Morgan Stanley]

Got it. And anything on the capital that you re utilizing for the acquisition?

[Paul Shoukry, Chief Financial Officer at Raymond James]

Yes, I would tell you in our regulatory filing, we basically said that we have sufficient cash on hand to fund the acquisition. The regulatory filing also discusses a loan note offering that would be possible. That s fairly common in the UK as discussed, the filing has a nominal interest rate of about 10 basis points, which can change over time with short-term rates. But obviously with the overall cash overall consideration of less than $400 million, we have $1.6 billion almost of cash at the parent company as we discussed earlier on the call. We have a $1 billion target, so we have sufficient cash at the parent company to fund the acquisition without kind of any capital actions beyond that.

[Manan Gosalia, Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

Thank you very much. We ll go to our next question from the line of Bill Katz with Citigroup. Please go ahead.

[Bill Katz, Analyst at Smith Barney Citigroup]

Okay. Thank you very much for taking the questions. So I guess, maybe start with, Paul as you think about maybe both of you guys, just in terms of getting to that Tier 1 leverage ratio, how does this acquisition sort of fit in against that? And maybe stepping away from that as you sort of commented on the primary focus area is growth. Should we assume that the bank growth will be the primary driver to driving down that Tier 1 leverage ratio over time? Thank you.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

I think you re going to see it all sorts of ways that you saw the announcement today. We are looking at other opportunities to expand the business, and again, we can never predict these, so many of these we ve known people for years before they re interested in selling. So we our strategic M&A is really sharpened and our opportunities are really sharpened. I don t know if deals will happen yet, but if we can find opportunities that expand our business, we ve said that s our priority. We also plan to grow the bank to the extent we can. Within that we ve used share purchases when we can. So I think we re still going to focus on opportunities to grow our business, which includes strategic M&A and also continue to grow the bank. And the level of the bank growth than our aggressiveness probably depends first on economic opportunities, but also how much capital we re able to deploy through other opportunities. So we ll balance that out.

[Bill Katz, Analyst at Smith Barney Citigroup]

Okay. That s helpful. And then maybe just a follow-up question. If you could unpack Paul your comments on the NIM about sort of maybe a little bit under the 190 over the next couple quarters? And maybe on the sweep side where you sort of called out, sort of the second half of next year, can you maybe ring fence, like what might be expiring or coming up for contract renewal as we sort of think about the timing next year? Thank you.

[Paul Shoukry, Chief Financial Officer at Raymond James]

Yes, Bill, we kind of just essentially reaffirming our guidance on the NIM at right around 1.9% that we provided last quarter. So over the next quarter or two obviously depends somewhat on asset mix and the growth of the agency MBS portfolio, which we ve essentially decelerated over the last quarter, just given where rates are. We would expect to come in right around that 1.9% give or take a couple of basis points over the next quarter or two. As far as the yield on the BDP balances with third-party banks, there s a significant portion of our deposits that mature contractually over the next, I would say six to 12 months. Right now the sort of market rate for new deposits, if you can even get capacity as much lower than the 30 basis points or the 29 basis points that we re currently earning on average.

But remember, if the yields on those deposits aren t attractive with those third-party banks, we have the capital flexibility going back to Paul s comments earlier to bring those cash balances on the balance sheet and invest in other assets. So I don t think it s as easy as a formula of just assuming that those balances reset at a lower yield off balance sheet, because depending on what we can or not balance sheet, it may be more compelling to bring it on balance sheet and invest in other assets at the bank securities and/or loans.

[Bill Katz, Analyst at Smith Barney Citigroup]

Okay. Thank you both.

[Operator]

Thank you very much. [Operator Instructions] And we ll go to our next question on the line from Steven Chubak from Wolfe Research. Go ahead.

[Steven Chubak, Analyst at Wolfe Research]

Hey, good morning. So I had a follow up to Bill s earlier question. You cited the continued pressure on the bank NIM, consistent with the trend we ve seen in recent quarters. Just given the very strong loan growth, particularly in the SBL channel and already low security yields, I was hoping Paul that you can unpack what the primary driver of the name compression from here? And relating to the third-party sweeps, what s the breakeven level or spread where you might look to sweep third-party cash more aggressively to the bank as you face that repricing or that price from headwind in the back half of next year?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Yes, I would tell you Steve, that the primary driver of the NIM compression, because most of the short term rates are reflected in sort of the yields of the various asset categories. Most of our asset categories are floating in nature. So they reflect the kind of rate environment that we re in. So most of the NIM dynamic going forward is really going to be driven by asset mix, so for example, this quarter we grew securities based loans on a net basis $700 million, which is just truly fantastic growth, 14% sequentially and over 50% year-over-year and those have those are fully secured with marketable securities and help strengthen the relationships between advisors and their clients and the private client group. So we love that asset. But that yield is 2.2% on average in the quarter, whereas the corporate loans are in the 2.5% to 2.6% and they have been growing we ve can resume growth there, but not to the same extent as the SBL. So just by the change in mix to sort of the lower risk categories, like securities based loans that s going to put downward pressure on your NIM, all else being equal.

As far as the breakeven analysis, I wish it was that simple. There s a lot of variables that go into that to bring it on balance sheet obviously uses capital and then you have to essentially take either duration and/or credit risks to earn a higher yield and so in that higher yield changes week to week, depending on the latest fed announcement. So one thing is certain, if we don t have the capacity up balance sheet or the capacity is that very low rates, then the bringing in on balance sheets certainly looks more attractive on a relative basis. And that s something that we have the capital and the appetite to do if necessary.

[Steven Chubak, Analyst at Wolfe Research]

Understood. Okay. And then for my follow-up Paul, just on kind of the non-comp commentary that you provided, you noted that non-comp expenses should grow as T&E picks up a ultimately a good problem to have. If I look at the non-comp this quarter and I back out the non-controlling interest piece, the reserve release, the clean numbers of about $330 million, it s slightly above that $1.3 billion annualized run rate you had spoken to in the past, just given some of the drivers of non-comp growth view side of that. How should we be thinking about the pace of growth from here? And maybe can you give us an updated run rate or jumping off point as we think about the non-comp trajectory for the next couple of quarters?

[Paul Shoukry, Chief Financial Officer at Raymond James]

Yes, Steve, unfortunately still a lot of uncertainty there, business development being one prime example of that, I would say the $1.3 billion jumping off rate, I want to say that our quarterly revenues at that time were somewhere around $1.7 billion to $1.8 billion. I don t remember exactly when that was. But yes, we re at $2.5 billion now. So just the business is a lot bigger now and there s a lot of expenses directly associated with the size of our business, whether it be some advisory fees that support the asset management business, whether it be FDIC insurance expense, which supports the bank branch expenses, we continue to recruit more advisors. We ve done a couple acquisitions. We just announced another one.

So a lot has changed since we provided that $1.3 billion metric which begs the question, when are we going to provide more new guidance and the new threshold? And I would say, we want to do that as soon as there s more clarity kind of on the go forward path particularly for things like business development expense. In fiscal 19, before the pandemic that was running at around $200 million for the year, $50 million a quarter, so even this quarters number of $31 million is well below that as an example and then loan loss provisions as well, obviously that is something that s going to be volatile until there s more kind of economic certainty or clarity going forward. So as soon as there is more certainty around what these expenses will look like, we will certainly be transparent as we always are and try to provide you better guidance.

[Steven Chubak, Analyst at Wolfe Research]

Thanks. Is it okay if I squeeze in one more, I just wanted to get a view on the organic growth sustainability, obviously the 9% that you cited is just a very impressive statistic. It looks like both you and your peers are running well above long-term averages, which show me you could just speak to the sustainability of the organic growth as well as what you re seeing across all the different affiliation options.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Yes. So, part of that depends, the markets been robust and people have been growing and client engagements been really good. So, that can all change with the downturn were clients get fearful and assets often don t grow the same in those environments, but if you look at any outlook we see in the short to mid-term, it all looks still very, very positive. And I as I set up here at a meeting with our advisors, and they re all very positive experiencing our top advisors not just record growth for their businesses, but I can tell you by the questions over two days and watching what they re doing with their practices, they have no thoughts of slowing down either.

So, again, a short to mid-term, I think it s sustainable. The recruiting has been good across all the ops, which is ironic too sometimes. We got slowed down a little bit, a few quarters ago when the private client, when their employee channel, the offices were closed and we were adjusting, but that s really taken off. And it s going to hit a record probably it s on a page that hit record this year, even after that very slow start. So, we re seeing it all across the affiliation options. So the pipeline is very strong. And so I d say for the short to mid-term, it looks very, very good. Longer term it depends on the economic viability, the numbers for the economy growth for good this quarter. And in fact, continues and people stay positive. I think it can continue for awhile.

[Steven Chubak, Analyst at Wolfe Research]

That s great colorful, Paul. Thanks so much for taking my questions.

[Operator]

Thank you very much. We ll proceed to our next question on the line from Gerry O Hara with Jefferies. Go ahead.

[Gerry OHara, Analyst at Jefferies Financial Group]

Great. Thanks for taking my questions this morning. Perhaps just kind of stepping back a little bit as it relates to the acquisition, could you give us a little bit more sense as to your ex-U.S. kind of I suppose M&A strategy and where you think maybe some of the markets that you re most under-penetrated in, or perhaps where those where your offerings specifically would resonate best. Thank you.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

So the focus is it depends on the business unit, the focus and the private client group that s been in the U.S., Canada and the UK. We have unique offerings, like think, more or less in all those markets with the multi affiliation options, again unique in Canada and in the UK. So Charles family was a perfect fit because, there weren t many people, not just the cultural heritage, but the multi-channel options. So, we are focused on the private client group of any type of opportunity in those three markets. We re not really looking to expand in other markets in the private wealth business right now. And we just want to focus on growing and competing well in those three markets it s broader in the M&A category. It s the one business that we do look at global opportunities both from a capital deployment. I mean, the capital for most places, just an office and people versus capitals heavier than the other businesses and it is a global business.

So, we will continue to look for opportunities, but again, we ve been focused in North America, the UK and Europe, but we have looked at things in other places. And then the rest of the businesses that continued to be kind of a North American and UK focus. So, we re not we don t we have plenty of capital to grow. We think we re in strong positions in the UK. We had a very good practice, but it was small. We think this acquisition would put us in a very competitive position where we can we think accelerate the growth. So that s been, our focus continues to be our focus and we re not looking at other kind of global markets.

[Gerry OHara, Analyst at Jefferies Financial Group]

Okay. That s helpful. And then perhaps one for Paul Shoukry and forgive me as I m still new to this story, but I think you said at 21% around the tax rate into the fiscal 4Q assuming a flat equity market. Can you perhaps just remind me a little bit about, what some of the puts and takes that could kind of move that rate higher or lower as you know, depending on, I suppose, backdrop? Thank you.

[Paul Shoukry, Chief Financial Officer at Raymond James]

And welcome to the story. Glad to have you a part of the coverage universe. Yes one of the biggest drivers and we can get into more detail offline for the, that impacts the tax rate quarter-to-quarter is we have a corporate owned life insurance portfolio, which we use to sort of fund the, some of our non-qualified benefits that we offer our associates.

And so the, the way that a corporate owned life insurance portfolio those balances work is that when the equity market appreciates that typically results and non-taxable gains and that portfolio, which means that, our effective tax rate, all else being equal is lower and vice versa when the equity market goes in the other direction it results in non-deductible losses, which means our effective tax rate all else being equal goes higher. So typically the trend is when the equity markets are up, our effective tax rate is lower and vice versa. Again, there s a lot of other factors, but that is the, the factor that seems to be the most sort of volatile or impactful from quarter-to-quarter.

[Gerry OHara, Analyst at Jefferies Financial Group]

Okay. Helpful. Thanks for taking my questions this morning.

[Operator]

Thank you very much. We ll get to our next question on the line from Devin Ryan with JMP securities. Go ahead.

[Devin Ryan, Analyst at JMP Securities]

Hey, good morning, everyone. How are you?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Hey, Devin?

[Devin Ryan, Analyst at JMP Securities]

Hey, sorry, I hopped on a minute late here. So apologies if I m being a bit redundant, but on the recruiting outlook, appreciate that, it remains robust, but we ve been hearing in the market that, on the employee side there, there s been kind of another, maybe ratcheting up a competition and packages, are you guys seeing that? And I know you had spoken about a few quarters ago kind of increases, and then you took your offer routes. So, I m curious, like is a week you re hitting another level where, competition s intensifying even more, so it would makes you more, pricing, pressure or just higher packages, kind of curious, what you re seeing in market there?

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

I can t really say that. I think that, we ve been so active in recruiting that we probably get a good feel of what everyone s doing. So we set a few quarters ago that, where people have been ramping up for a year. We hadn t, and we had to make some adjustments, but I can t, it s competitive. There are always, it seems like an outlier offer. There s always seems to be an outlying offer here or there every time we recruit, but again, that s not how we recruit. We give a competitive package, but often not the highest and stick to it. And again, the results have been tremendous. So I can t say, it picked up a while ago and I can t say, I ve seen any difference in the last couple of quarters.

[Devin Ryan, Analyst at JMP Securities]

Okay, terrific. And then just a follow-up on acquisitions, I know a fair amount of color here this morning, but if you think about some of the other types of acquisitions in wealth management that maybe aren t as traditional just buying financial advisor franchise, are there other areas that, could be interesting that you guys are looking at, whether it be technology that accelerates growth, in a new way or additional product capabilities or, there other types of things that you guys are looking at that I know or maybe a bit non-traditional for Raymond James, but just to kind of also strategically aligned with the M&A with the M&A opportunity, it feels like there s maybe even more to do than historically. There has been some I m curious what you guys are seeing on that front as well.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Yes, I would say a Devin there s absolutely. We re looking at a lot of things. And one of the categories is firms, that are offer new services or products that are extensions of what we do within that EPS is probably an example of that, but also looking at technology, firms that utilize technologies that really, kind of propel the businesses we re in. And we ve been very active in that too.

So it s, it takes a lot of time because you have to find them and then really understand how that technology works sets and how it will really benefit our businesses, whether it be complimentary or may be great to find something that s automated or revolutionized part of the business, but those are harder to find, but we re looking a lot at, what I call technology backed or technology firms in our spaces that we think we could utilize the technology to be a strategic client advantage and to make us more efficient and more electronics. So the answer is yes, we ve been looking very hard at a number of opportunities. And again, we ve been on the M&A focused much more focused over the last year or two on those types of opportunities.

[Devin Ryan, Analyst at JMP Securities]

Okay, great. If I can just squeeze one more in here, on the fixed income brokerage business and the capital market segment, obviously, it s been a very good environment for that business. Is there any way to give us any more context around kind of the growth of that franchise? So revenues have been expanding very good fiscal 2020, a good start to fiscal 2021. And I think we get questions around the sustainability or kind of what normalize looks like. And I know that s not necessarily easy to answer, but is there any frameworks around kind of how that business has scaled? So the pie is expanding or the bars moved higher, because it s just a bigger business today than it was two or three years ago.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

There is been an unusual environment where both fixed income and equities produce records. So it s even going back in history, you can t find many windows like that, but they ve expanded both in products in the debt capital markets business over the last two years and other areas. And we still continue to look in areas in fixed income and our sales and trading business, where we have strong client bases, but not offering certain products and services. And I really don t want to go in to what those are, but we ve continued to look and round those out. And that s been part of the growth too besides the robust markets.

And they didn t have a record quarter, but they had a very strong quarter in chasing. When you re chasing records all the time, you don t always set a record, but we re really pleased with what they ve done and the franchise has continued to grow and prosper. So yes, we think in all of our businesses there investment opportunities and some are harder to find than others, but we continue to look. And I think there is room to growth.

[Devin Ryan, Analyst at JMP Securities]

Terrific. Thanks very much.

[Operator]

Thank you. And we ll proceed with our final question for today, it is another follow-up question from the line of Bill Katz from Citigroup. Please go ahead.

[Bill Katz, Analyst at Smith Barney Citigroup]

Okay. Thank you so much for taking the extra question. I guess, circling back to the investment bank. So momentum seems very strong, I think your commentary on qualitatively around the also is very strong. If you unpack that a little bit more, just in terms of just like the environment versus some of the added capabilities that you ve had. Also I think at your Investor Day recently, you mentioned sort of getting to an aspirational goal of $1 billion on the equity centric side, it seems like you might already be there, just given the pace in here. But how to think about maybe the incremental opportunity from here versus maybe some of the cyclical benefit we re getting from the robust market backdrop? Thank you.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Yes. So it s been a very strong market, certainly both for us and our competitors and the environment of low debt costs and high EPS multiples, and a lot of privately held firms or invested firms that and their portfolios are trade, so the backdrop has been very, very strong. But in addition to that as Jim Bunn said, well, we re doing well, but the market is well, but I said you re not giving yourself enough credit for positioning for that growth. So not only has been great at recruiting and building the teams, but we continue to do that. So you see Financo just joined us, which has already scored a few deals of good sides in a very short period of time with us. And so they re not their run rates really not online, we re very excited about - and think that s the great growth business.

And there are a few other verticals that we re not well positioned in, that we re looking to do the same things. And so, it s partly a market story, but giving that team credit, it s also been a market positioning and share game, which they have made and some could argue are under size for our size, that may be true, but they re certainly building and doing a great job. And I think continue to plan to do that, the market is just been a big added bonus to their plan.

[Bill Katz, Analyst at Smith Barney Citigroup]

Thank you very much for the extra time.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Okay. Thank you.

[Operator]

Thank you very much. Actually we have no further questions on the line. Mr. Reilly, I will turn it back to you for the closing remarks.

[Paul Reilly, Chairman and Chief Executive Officer at Raymond James]

Great. So thank you all for joining us, obviously a strong quarter, good markets, and I think, given if there is not any shock to the system, we feel good about this quarter and we ll give you more information as we can on Charles Stanley, but again, very strict anti-takeover provision, rules and disclosures and public companies in the UK. So once we can, and we ll give you more information, but we re very excited about the opportunity. Thanks for joining us, and we ll talk to you soon.