Raymond James is 'not your grandfather's brokerage' says BofA as it gives buy rating

By Steve Gelsi

Analyst says 'markets are underappreciating the net interest revenue potential' as a consequence of Raymond James's 'defensive nature'

BofA analyst Mark McLaughlin on Monday initiated coverage of Raymond James Financial with a buy rating and a $122 price target as an overlooked name in the financial services space.

In a research note titled, "Not your grandfather's brokerage," McLaughlin said markets underappreciate Raymond James (RJF), which offers a 15% return potential based on BofA's new price target.

"Capital markets and asset management segments are both well situated to benefit from a reverse in macro headwinds," McLaughlin said.

For brokers seeking more independence from traditional wire houses, Raymond James offers a track record of strong organic growth, as well as technology and support, while maintaining its high assets under custody target adviser base, he said.

"RJF has one of the most diversified gross-profit driven business models under our coverage and is positioned well to handle future macro scenarios versus many of its interest-rate dependent peers," McLaughlin said.

The firm's conservative interest-rate risk and liquidity-management strategies during zero rates have better positioned it to navigate the current interest rate backdrop, he said.

"RJF is well prepared with ample liquidity and a very short portfolio duration to provide any near-term liquidity needs with the ability to quickly roll-over and extend its portfolio duration at higher rates after sorting has minimized," McLaughlin said. "This should further widen RJF's net interest margin and lead to positive earnings revisions."

Raymond James's stock was up 1.5% on Monday, putting into positive territory for the year, with a 1% gain. By comparison, the KBW Nasdaq Bank Index BKX is down by 19.3% in 2023 and the Financial Select Sector SPDR ETF XLF is up by about 0.8% so far this year.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-11-23 1148ET

Copyright (c) 2023 Dow Jones & Company, Inc.