Raymond James Financial, Inc.

Good morning and welcome to Raymond James Financial's Fiscal First Quarter 2020 Earnings Call. My name is Myra and I'll be your conference facilitator today. This call is being recorded and will be available for replay on the company's investor relations website. Now I will turn it over to Christy Wong, Head of Investor Relations at Raymond James Financial.

Thank you, Myra. Good morning, everyone, and thank you for joining us on this call. We appreciate your time and interest in Raymond James Financial. With us on the call today are Paul Riley, Chairman and Chief Executive Officer, and Paul Shugary, Chief Financial Officer. The presentation they will review this morning is available on Raymond James' Investor Relations website. Following their prepared remarks, the operator will open the line for questions. Please note, certain statements made during this call may constitute forward-looking statements. Forward-looking statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated results of litigation and regulatory developments, or general economic conditions. In addition, words such as believes, expects, could, and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, which are also available on our IR website. During today's call, we also used certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedules accompanying our press release and presentation. With that, I would like to turn the call over to Paul Riley, Chairman and CEO of Raymond James Financial. Paul?

Thanks, Christine. Good morning, everyone. Thanks for joining us. During this call, if you hear me refer to Paul, I'm not referring to myself in third person. because Paul Shukri is now taking over the CFO reins and we'll be going over that part of the call. As usual, I'll give an overview and then I'm going to turn it over to Paul who will cover more of the details and update our guidance. As we indicated on our last call, before the interest rate changes, we were going to hold off on guidance until those rate cuts were announced and we knew how deep they would be. After that, Paul will then turn it over to me to discuss the outlook. So overall, I'm really pleased with our results for the first quarter, especially given the significant headwind from the three recent interest rate cuts, which will have an estimated negative impact on our pre-tax earnings of approximately $140 million annually. As outlined on slide three, we generated quarterly net revenues of $2 billion, which were up 4% from the prior year's fiscal first quarter and down 1% from the record set in the preceding quarter. We generated record quarterly net income of $268 million or $1.89 per diluted share. On an annualized basis, our return on equity for the quarter was 16%. And while, as you know, we've been reluctant to disclose this metric because we believe return on total equity is the most relevant and we do not have any preferred equity, we are now disclosing return on tangible common equity, or ROTCE, as that has become a common metric in our industry. On an annualized basis, we generated a 17.5% return on tangible common equity during the quarter, which we believe is very attractive, especially given our strong capital position. On slide four, you can see that in addition in addition to the strong financial results this quarter we also achieved records for most of our key business metrics including client assets under administration of 896 billion pcg assets and fee-based accounts of 444.2 billion financial assets under management of 151.7 billion total PCG financial advisors of 8,060, and net loans at RJ Bank of 21.3 billion. While equity market appreciation certainly contributed to the growth of client asset metrics, we also believe that the substantial growth, for example, 31% year-over-year and 9% sequential increases in PCG assets and fee-based accounts, reflect significant increases in market share, that have been driven by our consistent industry-leading strong retention and recruiting of private client group financial advisors. For example, for the firms that have already reported, the year-over-year increases in fee-based assets have ranged 18% to 23%, well below our year-over-year growth. Clients' domestic cash balances, which ended the quarter at $39.5 billion, were down 16%, year over year from the high water mark reached in the following quarter a year ago because of the surge in market volatility in December of 2018. But we're up 5% sequentially, partially due to year-end tax planning positioning. Client cash balances appeared to stabilize over the last several months. But remember, at the beginning of each quarter, we have the impact of quarterly fee billings And in the first calendar quarter, we typically see seasonal declines in cash balances due to income tax payments. Now let's turn to the segment results starting on slide five. The private client group generated record quarterly net revenues of $1.4 billion, primarily driven by the aforementioned growth of assets and fee-based accounts, which was partially offset by the negative impact of lower short-term interest rates and net interest income. and RJBDP fees from third-party banks. Quarterly net income for the segment was 153 million, down 7% on a year-over-year basis, but up 7% sequentially. The year-over-year declines in pre-tax income was largely due to the decrease in net interest income and RJBDP fees from third-party banks, which was due to the lower short-term interest rates, as Paul Shukri will discuss in much more detail. The sequential improvement in the segment's pre-tax income was driven by higher revenues and lower non-comp expenses. And again, Paul will discuss these after I finish this part. Most importantly, on the bottom of the slide, you can see very positive trends for client assets and the number of advisors, which grew to 8,060, despite the elevated number of planned retirements that are typical each December quarter. For example, in that quarter alone, there were 69 advisors who retired or left the business during the quarter, where in most cases we retained substantially all of the client assets. Our net additions of financial advisors during the quarter was particularly impressive compared to other firms in our industry who have reported so far, as most all have reported, decreases in net advisors year over year and sequentially. But even more impressive than that addition of advisors is the quality of the advisors joining Raymond James. We are attracting very large, high quality practices, including some in the $5 to $10 million range. Over the past four quarters, financial advisors with over $300 million of trailing 12 production and over $40 billion of assets at their prior firms have affiliated with Raymond James, which is a spectacular result. And our recruiting pipeline continues to be robust across all of our affiliation options. Moving to slide six, the capital market segment had mixed results during the quarter. as revenue and pre-tax income were up year-over-year basis, but down sequentially compared to the fiscal fourth quarter. Fixed income brokerage revenue and both equity and debt underwriting revenues were strong during the quarter. On the other hand, M&A revenues and equity brokerage revenues were down from the year-ago quarter. On the next slide, asset management segment generated record quarterly net revenues and pre-tax income, and financial assets under management reached a record of $151.7 billion, increases of 20% on a year-over-year basis and 6% sequentially. These record results were driven by equity market appreciation, the net addition of financial advisors and PCG, and increased utilization of fee-based accounts, which more than offset the modest net outflows for Carillon Tower advisors during the quarter. On slide eight, Raymond James Bank eked out record quarterly net revenues of $216 million, a slightly higher than the preceding quarter as loan growth helped offset the seven basis points sequential decline in the bank's net interest income margin, caused again by lower short-term interest rates. Pre-tax income was up 23% on a year-over-year basis and 3% sequentially held by the loan loss benefit of $2 million for the quarter. Despite loan growth in an uptick in criticized loans during the quarter, a higher concentration of residential mortgage, which carries lower allowance than C&I loans on average, and payoffs of certain lower-rated corporate loans resulted in the loan loss benefit. Net loans ended the quarter at a record $21.3 billion, which was up 7% over December of 2018 and 2% over September 2019. Now I'll turn over to the call to Paul, Paul Shugre, who will provide more detail on the financial results. Paul? Thanks.