Shares of Raymond James Financial rise 2.6% Thursday morning after the company reports quarterly earnings results late Wednesday, aligning with Wall Street’s estimates. The focus of the company’s earnings call, however, is primarily on how the company handles customers’ uninvested cash.
This issue has become central for financial-services companies. Rivals such as Morgan Stanley and Wells Fargo recently disclose they are increasing interest rates on client cash held in sweep accounts amid competitive, regulatory, and legal pressures. These moves sparked a selloff in some financial stocks as Wall Street assessed the negative impact on companies’ net interest income.
Raymond James CEO Paul Reilly states the company is “monitoring” industry developments but has no plans to change its policies. He highlights that sweep cash balances are relatively small at Raymond James: just $15 billion, or about 2% of advisory assets. “I don’t know what’s happening in some of the other [firms’] programs,” Reilly said. “I can tell you ours are well-thought-through and very compliant.”
Steven Chubak, an analyst at Wolfe Research, notes that updates and commentary on customer cash from Raymond James and Stifel Financial, another brokerage firm reporting earnings this week, were better than expected. “Actual EPS results mattered less as most investors and analysts were focused on commentary relating to advisory sweep pricing developments,” Chubak writes Thursday morning. “Both Stifel Financial and Raymond James Financial noted no current plans to reprice sweep deposits which should ease some concerns.”
During the earnings call, Reilly and CFO Paul Shoukry respond to multiple questions from analysts about Raymond James’ approach to customers’ uninvested cash. They mention the average balance in the company’s sweep accounts is less than $9,000. Raymond James pays interest of 0.25% to 3% on sweep cash, higher than the competition, according to the executives. They also indicate that Raymond James’ sweep cash programs are “regulatorily compliant.”
Solid Results. Raymond James reports fiscal third-quarter results that match analyst estimates. Adjusted earnings per share of $2.39 beat estimates of $2.31, excluding one-time costs related to acquisitions. Considering those costs, Raymond James reports earnings of $2.31. The wealth management company reports revenue of $3.23 billion, aligning with analysts’ estimates.
Raymond James announces client assets under administration hit a record of $1.48 trillion, up 15% year over year. Assets were boosted partly by higher market valuations and clients investing more money in the market.
The company states its wealth management unit brings in net new assets of $16.5 billion for the quarter. Assets in fee-based accounts rise 18% to a record $820.6 billion.
Revenue is up 11% year over year, according to Raymond James. Adjusted net income rises 27% to $508 million.
Like other wealth managers, Raymond James reports clients continue to move uninvested cash to higher-paying options from lower-paying bank sweep accounts. The company states balances in its domestic cash sweep and Enhanced Savings Program stand at $56.4 billion as of the end of the quarter, down 3% compared to both June 2023 and March 2024.
Raymond James has been an aggressive recruiter of financial advisors, increasing headcount again during the quarter. The company reports having 8,782 independent and employee advisors as of June 30, up 1% from the same period a year ago.
