Raymond James Earnings: Record Annual Results Helped by Acquisitions and Business Mix

Raymond James RJF reported record annual results, helped by acquisitions done in 2022 and better business mix. The company reported net income available to common shareholders for the fiscal year of $1.7 billion, or $7.97 per diluted share, on $11.6 billion of net revenues. Net revenue for the fourth quarter increased 8% from the previous year and 5% sequentially, with the increase coming mainly from asset-management fees and interest-rate-related revenue. We don’t plan to make a material change to our $116 per share fair value estate for no-moat-rated Raymond James and assess the shares as being slightly undervalued.

Full-year capital markets segment revenue of $1.2 billion was 33% year over year, as investment banking industry revenue has generally declined as economic uncertainty and higher interest rates had led to less underwriting and advisory business. Raymond James also derives a material portion of its fixed-income trading revenue from depository institution clients, and with many small and midsize banks losing deposits this year, there’s been less need from those clients to trade fixed-income securities.

While the company’s capital markets segment was an underperformer, it has historically been only 10%-20% of total revenue, so its underperformance only has a moderate effect on the firm. Raymond James and other investment banks are cautiously optimistic about growth in capital markets revenue next year, given still relatively healthy economic indicators in the United States, offset somewhat by increasing global macroeconomic uncertainties.

Wealth management and interest-rate-related revenue should continue to be relatively steady performers. Interest-rate-related revenues were about flat sequentially at $711 million, with an increase in third-party bank deposit program revenue offsetting a decline in net interest income. Asset-management fees increased 5% sequentially, but the recent pullback in U.S. equity markets will pressure next quarter’s revenue.