Raymond James Financial, Inc. (RJF) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance, robust growth in key areas, and strategic investments in technology and recruitment. The company maintains a positive outlook on capital markets and adviser recruitment, despite competitive pressures. Their approach to M&A and AI adoption is cautious yet optimistic. While some uncertainties remain, such as deal closure timing and precise AI ROI, the overall sentiment is positive, with strong growth projections and strategic initiatives likely to support stock price appreciation.
Key Financial Performance
Net Revenues Record net revenues of $3.7 billion for the fiscal first quarter, representing strong performance.
Net Income Net income available to common shareholders was $562 million, with earnings per diluted share of $2.79. Adjusted net income was $577 million, with adjusted earnings per diluted share of $2.86.
Pretax Margin Pretax margin for the quarter was 19.5%, and adjusted pretax margin was 20%.
Return on Common Equity Annualized return on common equity was 18%, and annualized adjusted return on tangible common equity was 21.4%.
Private Client Group (PCG) Net Revenues Generated record quarterly net revenues of $2.77 billion, driven by higher PCG assets under administration due to market appreciation, retention, and net new assets.
Private Client Group (PCG) Pretax Income Pretax income declined 5% year-over-year due to the impact of interest rate reductions, which reduced noncompensable revenues.
Capital Markets Segment Net Revenues Quarterly net revenues of $380 million, declined year-over-year and sequentially due to lower M&A and advisory revenues, as well as lower debt underwriting and affordable housing investment revenues.
Asset Management Segment Net Revenues Generated record net revenues of $326 million, largely due to higher financial assets under management and strong net inflows in PCG fee-based accounts.
Bank Segment Net Revenues Net revenues of $487 million, with record pretax income of $173 million. Sequential growth in net interest income was driven by strong loan growth and lower funding costs.
Loans Loans ended the quarter at a record $53.4 billion, reflecting 28% annual growth in securities-based lending balances and 10% growth in the quarter.
Asset Management and Related Administrative Fees Nearly $2 billion, grew 15% year-over-year and 6% over the preceding quarter. Record PCG fee-based assets equaled $1.04 trillion, up 19% year-over-year.
Net Interest Income and RJBDP Fees Combined net interest income and RJBDP fees from third-party banks grew 2% over the prior quarter to $667 million.
Compensation Expense Compensation expense was $2.45 billion, with a total compensation ratio of 65.6%. Adjusted compensation ratio was 65.4%.
Non-Compensation Expenses Non-compensation expenses of $557 million increased 8% year-over-year but decreased 7% sequentially.
Share Repurchases Repurchased $400 million of common stock at an average share price of $162 during the quarter.
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Operating Highlights
Proprietary digital AI operations agent: Launched a new AI-based tool named Rai to enhance service models and streamline processes for financial advisers.
Financial adviser recruitment: Recruited advisers with $96 million in trailing 12-month production and $13 billion in client assets in Q1. Over the past 12 months, recruited advisers with $460 million in production and $69 billion in client assets.
Acquisition of Clark Capital Management: Acquired Clark Capital Management, a wealth-focused asset management firm with $46 billion in assets, to strengthen investment and wealth planning offerings.
Acquisition of GreensLedge: Announced acquisition of boutique investment bank GreensLedge to enhance capabilities in capital markets.
Loan growth: Achieved record loans of $53.4 billion, with 28% annual growth in securities-based lending and 10% growth in Q1.
Net inflows in asset management: Achieved nearly 10% annualized net inflows into managed fee-based programs in the Private Client Group.
Capital deployment: Repurchased $400 million of common stock and maintained a Tier 1 leverage ratio of 12.7%.
Focus on long-term growth: Continued investments in technology, platform enhancements, and acquisitions to support sustainable growth.
Commitment to independence: Maintained a focus on independence to attract and retain financial advisers.
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Risk or Challenges
Capital Markets Results: Decline in M&A and advisory revenues, as well as lower debt underwriting and affordable housing investment revenues, indicating challenges in maintaining revenue growth in this segment.
Interest Rate Reductions: Interest rates have declined 125 basis points since November 2024, negatively impacting noncompensable revenues in the Private Client Group segment.
Seasonal Impacts: Fewer billing days and payroll tax resets in the second fiscal quarter are expected to create seasonal headwinds.
Recruiting and Retention Costs: Increased recruiting and retention-related compensation expenses, which could pressure margins despite being tied to growth initiatives.
Economic and Market Conditions: Lower interest rates and client reinvestment activity have led to a decline in domestic cash sweep and enhanced savings program balances.
Regulatory and Legal Risks: Potential risks from unexpected legal and regulatory items, as highlighted in the financial projections.
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Guidance & Outlook
Future growth expectations: Optimism about future growth is fueled by a robust adviser recruiting pipeline and strong levels of commitments to join in the coming quarters.
Investments in technology and platform: Continued investments in technology and platform to retain and attract the best advisers, including the private wealth adviser program and expanded alternative investments platform.
AI-based tools and technologies: Launch of proprietary digital AI operations agent named Rai to enhance service models and streamline processes for financial advisers.
Capital Markets outlook: Entered the second quarter with a robust pipeline in Capital Markets, reflecting potential from strategic investments made in recent years. Anticipate closing the acquisition of boutique Investment Bank GreensLedge later in the year.
Asset Management segment: Net inflows into managed fee-based programs in the Private Client Group annualized at nearly 10%. Acquisition of Clark Capital Management expected to strengthen investment and wealth planning offerings.
Bank segment growth: Loans ended the quarter at a record $53.4 billion, with 28% annual growth in securities-based lending balances. Credit quality of the loan portfolio remains strong.
Capital deployment: Continued focus on long-term capital deployment through organic growth, technology investments, acquisitions, and share repurchases. Announced acquisition of Clark Capital Management and GreensLedge.
Fiscal second quarter 2026 asset management fees: Expected to be higher by approximately 1% over the first quarter level, driven by a 3% increase in PCG assets and fee-based accounts at quarter end.
Net interest income and RJBDP fees: Expected to decline in the second quarter due to fewer interest-earning days and the impact of recent Fed rate cuts, partially offset by higher interest-earning asset balances.
Non-compensation expenses: Projected to grow approximately 8% for the fiscal year, driven by investments in technology, recruiting-related costs, and growth in businesses.
Effective tax rate: Estimated effective tax rate for fiscal 2026 to be approximately 24% to 25%.
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Shareholder Return Plan
Dividend Deployment: The company consistently deploys capital through dividends as part of its long-term focus.
Capital Return to Shareholders: Over the past 12 months, the company has returned nearly $1.87 billion to common shareholders through dividends and share repurchases, reflecting a combined return of 89% of earnings.
Share Repurchase Program: The company repurchased $400 million of common stock during the quarter at an average share price of $162.
Future Share Repurchase Plans: The company plans to target approximately $400 million of common share repurchases again in the fiscal second quarter.
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Key Q&A
Q:What areas saw particular strength in net new assets this quarter, and what has supported the acceleration over the last four quarters?
A:The quarter saw $31 billion in net new assets, the second-best quarter ever. Strength was broad-based across affiliation options, with a tilt towards the independent contractor side in the last six months. Key drivers include strong adviser retention, high adviser satisfaction (highest since 2014), and significant investments in technology ($1.1 billion this year) and AI to enhance efficiency and decision-making. The firm's focus on personal relationships and adviser independence has also been a differentiator.
Q:Was there anything notable in terms of compensation expenses or comp ratio during the quarter?
A:The comp ratio target is 65% or better. This quarter, it was slightly above at 65.4%, impacted by revenue mix. The Private Client Group business, with a higher payout, contributed to this, while the capital markets business had a weaker quarter due to timing of the investment banking pipeline. Lower short-term interest rates also played a role.
Q:How is the company responding to increasing competitive intensity in the industry?
A:The company views the competitive environment as short-term noise, particularly from private equity roll-ups. They focus on long-term stability, personal relationships, and significant technology investments ($1 billion annually). Their differentiation lies in being a stable, independent platform for advisers and clients, avoiding disruptions from liquidity events or short-term destinations.
Q:What is the near-term outlook for the capital markets side?
A:The pipeline remains strong with pent-up demand from buyers and sellers, particularly financial sponsors. However, timing of deal closures is unpredictable and depends on market conditions and agreement on price and terms. The company is optimistic about meaningful revenue improvement in the capital markets segment for the rest of the year.
Q:What is the sustainability of the 8% net new asset growth rate?
A:The 8% growth rate benefited from strong retention, recruiting results, and year-end dynamics like dividends and interest payments. While confident in leading growth in wealth management, the company focuses on quality over quantity, targeting higher-quality teams and higher net worth clients to sustain growth.
Q:Could the PCG comp ratio increase in 2026 due to elevated competition and strong recruiting?
A:The company invests heavily in recruiting, which includes retention and transition assistance expenses. While these investments support growth, they are confident in their ability to manage expenses and maintain operating margins over the long term.
Q:What is the outlook for capital markets revenue growth and operating leverage?
A:The company is optimistic about capital markets revenue growth, expecting improvement above the $380 million level achieved this quarter. Higher levels of revenue in capital markets provide significant operating leverage, as seen in the previous quarter's 17.5% pretax margin in the segment.
Q:Did the company capitalize on adviser movement due to industry M&A or transactions?
A:The company did not attribute success to any specific M&A or transactions but highlighted broad-based strength in recruiting advisers from various firms. Their value proposition, cultural fit, and platform appeal to advisers from wires, regionals, and independents.
Q:What is the company's approach to M&A and inorganic growth opportunities?
A:The company prioritizes cultural fit, strategic alignment, and financial sense in M&A opportunities. The Clark Capital acquisition exemplifies this approach, focusing on high-growth, client-focused firms. They remain active in corporate development but will not force deals that do not align with long-term shareholder value.
Q:What is the outlook for interest-earning asset growth and deposit mix?
A:The company sees strong growth in securities-based loans, which grew close to $2 billion this quarter. They will fund growth through diversified funding sources, including sweep cash, third-party cash, and deposit gathering at TriState Capital Bank. The mix of deposits is shifting as clients reinvest in markets due to lower rates.
Q:Why did net new asset growth not translate into stronger AUM growth?
A:Fee-based assets, which were up 19%, better reflect the relationship between net new asset growth and AUM. Overall firm-wide AUA growth may not fully capture the dynamics of fee-based asset growth.
Q:What is the company's approach to alternative investments and private equity?
A:The company focuses on quality over quantity, ensuring products are well-diligenced and supported. They emphasize education for advisers and clients on liquidity impacts and appropriate allocations. The approach prioritizes client needs over profit drivers or creating friction for adviser movement.
Q:What are the company's aspirations and current usage of AI?
A:The company is in the early stages of AI adoption, with over 10,000 associates using AI regularly. They have launched tools like Rai, a generative AI model for advisers, and are exploring efficiencies in cost structure and operations. Long-term opportunities in AI are significant but still developing.
Q:What is the outlook for adviser movement and recruiting in 2026?
A:The company is optimistic about adviser movement to Raymond James, driven by their unique culture, long-term focus, and investments in technology and support. They prioritize sustainable, long-term recruiting over short-term incentives.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timing of capital markets deal closures, the exact impact of competitive pressures on future recruiting expenses, and the precise trajectory of deposit mix changes. Additionally, they did not quantify the expected ROI or timeline for AI investments and efficiencies.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Clark Capital
Fed
GreensLedge
Shoukry
Tier capital
adviser client
adviser recruiting
alternative
bank segment
capital deployment
capital focus
client culture
collection
culture technology
day
decline
expertise
fit
focus term
funding
income record
independence
investment platform
investment technology
liquidity capital
model
month production
production client
professional
pursuit acquisition
quarter combination
rate cut
record income
retention
solution
support client
technology adviser
technology platform
term investment
wealth
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Raymond James Financial, Inc. (RJF) Q1 2026 Earnings Call Transcript
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The earnings call indicates strong financial performance, robust growth in key areas, and strategic investments in technology and recruitment. The company maintains a positive outlook on capital markets and adviser recruitment, despite competitive pressures. Their approach to M&A and AI adoption is cautious yet optimistic. While some uncertainties remain, such as deal closure timing and precise AI ROI, the overall sentiment is positive, with strong growth projections and strategic initiatives likely to support stock price appreciation.
Raymond James Financial, Inc. (RJF) Q4 2025 Earnings Call Transcript
Positive10-22
The earnings call summary indicates positive financial performance with an 8% increase in fee-based assets and 3% growth in net loans. The Q&A section highlights robust recruiting, sustainable loan growth, and strategic investments in AI and recruiting. Despite uncertainty in investment banking, the outlook is optimistic, supported by strong demand for securities-based loans and a disciplined spending approach. The GreensLedge acquisition, though not immediately accretive, adds long-term value. Overall, the sentiment is positive, suggesting a potential stock price increase in the near term.
RJF Slides
RJF Report
Frequently Asked Questions
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