Net Interest Income Remains a Near-Term Bright Spot for Raymond James; Shares Fairly Valued

Net interest income should remain a bright spot for Raymond James in the near term, as capital markets revenue remains challenged. The company reported record net income to common shareholders of $507 million, or $2.30 per diluted share, on $2.8 billion of net revenue. Net revenue was close to flat from a year ago, while net income increased 14%. Most of the improvement on net income is from a $398-million, or 212% increase, in the company’s net interest income; and a $120-million, or about 700% increase, in third-party bank fees that come with high operating margins. We maintain our $111 fair value estimate for no-moat Raymond James and assess shares are fairly valued.