Raymond James Financial, Inc.

Good morning, everyone, and thank you for joining us. 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 Shukri, Chief Financial Officer. The presentation being reviewed this morning is available on Raymond James Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to slide two, please note certain statements made during the call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions, including our acquisition of Charles Stanley Group PLC completed on January 21, 2022, and our proposed acquisition of Tri-State Capital Holdings, as well as our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments, impacts of the COVID-19 pandemic, or general economic conditions. In addition, words such as may, will, should, could, scheduled, plans, intends, anticipates, expects, believes, estimates, potential, or continue, or a negative of such terms or other comparable terminology, 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 risk described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our Investor Relations website. During today's call, we will use 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'm happy to turn the call over to Chairman and CEO, Paul Ryland. Paul?

Good morning, and thanks for joining us today. Although our beloved Buccaneers were slow out of the gate last Sunday against some very strong competition, not so for Raymond James, as we are off to a fantastic start. It's hard to believe the pandemic started in the U.S. nearly two years ago, When I think back on all that has been accomplished since then, I'm so proud of the way our associates and advisors have continued to serve their clients with great care and compassion, living out our values each and every day. Beginning on slide four, our steadfast commitment to serving clients resulted in fantastic financial results during the quarter, starting off fiscal 2022 with record quarterly revenues and earnings. that were propelled by record investment banking revenues and record asset management and related administrative fees in the private client group. In the fiscal first quarter, the firm reported record net revenues of $2.8 billion and record net income of $446 million or earnings per diluted share of $2.10, a 42% increase over diluted EPS in the fiscal first quarter of 2021. excluding $6 million of acquisition-related expenses. Quarterly adjusted net income was $451 million, or earnings per diluted share of $2.12. Annualized return on equity for the quarter was 21.2%, and adjusted annualized return on tangible common equity was 23.7%, a very impressive result, especially in this near-zero rate environment. and given our strong capital positions. Moving to slide five, we entered the quarter with record total client assets under administration of $1.26 trillion, up 23% year-over-year and 7% sequentially. We also achieved record PCG assets and fee-based accounts of $678 billion, up 8% sequentially. record clients' domestic cash suite balances of $73.5 billion, and record financial assets under management of $203 billion. Through our client-focused culture in leading technology solutions, we maintain our focus on supporting advisors and their clients. As a result, we continue to see strong results in terms of advisor retention, as well as record results in recruiting new advisors to the Raymond James platform through our multiple affiliation options. Over the trailing 12-month period ending in December 31, 2021, we recruited financial advisors with nearly $350 million of trailing 12 production and approximately $56 billion of client assets to our domestic independent contractor and employee channels. Additionally, we generated domestic PCG net new assets of approximately $104 billion over the four quarters, ending in December 31, 2021, representing more than 11% of domestic PCG assets at the beginning of the period. First quarter domestic PCG net new asset growth was even stronger, generating a nearly 14% annualized rate. The highest level we have experienced that's starting to closely track this metric. These results really highlight our industry-leading organic growth. We ended the quarter with 8,464 financial advisors, a net increase of 231 over the prior year period, and a net decrease of 18 compared to the preceding quarter. As many of you know, in the last calendar quarter, we generally see an elevated number of retirements and advisors choosing to leave the business, and it was no different this year with approximately 90 advisors falling into that category. However, when advisors retire, they typically have succession plans and assets are usually retained by the firm, so there is minimal impact to the production or asset levels. Clients' domestic cash suite balances grew 10% sequentially to a record $73.5 billion As Paul will detail later in the call, we should have significant upside to our pre-tax earnings in a rising interest rate environment. Also worth noting on this slide is the impressive loan growth at the Raymond James Bank during the quarter, up 5% sequentially to a record $26 billion. This growth was driven by securities-based loans to PCG clients, as well as the strong corporate loan growth. Moving to the segment results on slide six, The private client group generated record quarterly net revenues of $1.84 billion in pre-tax income of $195 million. Given the timing of certain expenses, we think it is most appropriate to compare the year-over-year results, where the segment's revenues increased 25 percent and the pre-tax income increased 39 percent over the first fiscal quarter of 2021. Truly fantastic growth. The capital market segment generated record quarterly net revenues of $614 million and record pre-tax income of $201 million, representing an impressive 33% pre-tax margin to net revenues. These record results were driven by record investment banking revenues, including records for both M&A and equity underwriting. Fixed income also generated solid results for the quarter. The asset management segment generated net revenues of $236 million and pre-tax income of $107 million. On a year-over-year basis, the revenues grew 21% and pre-tax income grew 29% over the first fiscal quarter of 2021, primarily driven by higher assets under management. Paul will discuss some of the sequential variances in the segment later on the call. Raymond James Bank generated quarterly net revenues of $183 million and pre-tax income of $102 million, representing solid sequential and year-over-year growth. Net revenue growth was largely due to higher asset balances, as the bank generated attractive growth in its securities-based lending portfolio, up an astonishing 44% over December of 2020, in addition to the growth in the residential mortgages and corporate loans. Pre-tax income growth was due to the aforementioned revenue growth and a bank loan loss release in the current quarter compared to a provision for credit losses in the comparative periods as macroeconomic conditions continue to improve. These record results reinforce the value of our diverse and complementary businesses. Before I hand the call over to Paul, I'll take a moment to highlight the completion of the acquisition of the UK-based Charles Stanley Group earlier this month. Charles Stanley adds approximately $36 billion of client assets, bringing Raymond James' total client assets to the UK to approximately $57 billion. We have long admired this firm, and we are pleased to welcome Charles Stanley to the Raymond James family. And now for a more detailed review of our first quarter financial results, I'll turn the call over to Paul Shoukry. Paul?

Thanks, Paul. I'll begin with consolidated revenues on slide eight. Record quarterly net revenues of $2.78 billion grew 25% year-over-year and 3% sequentially. Record asset management fees grew 1% over the preceding quarter. I do want to touch on the 1% sequential decline of asset management fees in the asset management segment during the quarter, primarily due to a larger portion of certain client fees allocated to the private client group segment starting at the beginning of the fiscal year. which effectively resulted in nearly $9 million of managed account fees that shifted from the asset management segment to the private client group segment during the quarter. This change is the primary driver of the asset management segment's revenues and pre-tax income declining sequentially. Private client group assets and fee-based accounts were up 8% during the first fiscal quarter, providing a nice tailwind for this line item for the second quarter of fiscal 2022. But there are fewer days in the fiscal second quarter, so I expect somewhere around 5% to 6% sequential growth in this line item in the second quarter. Consolidated brokerage revenues of $558 million grew 6% over the prior year and 3% sequentially, with 12% year-over-year growth in the private client group segment and sequential growth in the private client group segment and the capital market segment. Account and service fees of $177 million increased 22% year-over-year and 4% sequentially, largely due to higher mutual fund and annuity services fees, as well as client account fees in the private client group segment. Paul already discussed our record investment banking results this quarter, so I'll touch on other revenues. Other revenues of $51 million were down 31% compared to the preceding quarter, primarily due to lower tax credit funds revenues, which are typically highest in the fiscal fourth quarter. Gains on private equity investments also declined on a year-over-year and sequential basis. Moving to slide nine, client domestic cash suite balances ended the quarter at a record $73.5 billion, up 10 percent over the preceding quarter and representing 6.5 percent of domestic PCG client assets. This growth in client cash balances should bode well for us in a rising interest rate environment, which I will describe in more detail on the next slide. Turning to slide 10, combined net interest income and BDP fees from third-party banks was $205 million, up 3.5 percent from the preceding quarter. This growth is largely attributable to strong asset growth and a resilient net interest margin at Raymond James Bank. which held flat at 1.92% for the quarter. Average yields on the bank loan portfolio actually increased slightly this quarter, which was fantastic to see. However, an increase in lower yielding cash balances kept the bank's net interest margin flat. We expect the bank's NIM to remain relatively stable at current interest rates, and we expect a nice tailwind for net interest income going into the next quarter, given the strong growth of loans at Raymond James Bank. but net interest income will also be impacted by fewer days in the fiscal second quarter. Related to loans, based on your feedback, we have added ending period loan balances by category in our supplemental earnings schedule. We hope you find this update helpful, and as always, thank you for your suggestions to continue enhancing our disclosures. The average yield of RJBDP balances with third-party banks ticked lower to 28 basis points in the quarter, reflecting the low interest rate environment and the limited demand for cash from third-party banks. I want to provide an update to the interest rate sensitivity from what we provided last May during our Analyst and Investor Day. As of December 31st, clients' domestic cash suite balances were $73.5 billion. GIVEN OUR HIGH CONCENTRATION OF FLOATING RATE ASSETS THAT ARE FUNDED WITH THESE CASH BALANCES, WE SHOULD HAVE SIGNIFICANT UPSIDE FROM INCREASES IN SHORT-TERM INTEREST RATES. USING THESE STATIC BALANCES AND AN INSTANTANEOUS 100 BASIS POINT INCREASE IN SHORT-TERM INTEREST RATES, WE WOULD EXPECT INCREMENTAL PRE-TAX INCOME OF APPROXIMATELY $570 MILLION PER YEAR, WITH APPROXIMATELY 65% OF THAT REFLECTED AS NET INTEREST INCOME and 35% reflected as account and service fees. This scenario assumes a blended deposit beta of around 15% for the first 100 basis point increase, commensurate with what we experienced in the last rate cycle. Moving to consolidated expenses on slide 11. First, our largest expense, compensation. The compensation ratio for the quarter of 67.7% was well below our 70% target and close to the compensation ratio we achieved in fiscal 2021, helped by record investment banking revenues. As explained on our prior calls, while our compensation ratio target is 70% or lower in this near-zero short-term interest rate environment, we have demonstrated we can manage below that target, closer to 67% to 68%, when the capital market segment generates at or near these record levels of revenues. And of course, we'll likely have to revisit this target if interest rates start increasing. Non-compensation expenses of $339 million decrease 6% sequentially, primarily driven by the bank loan loss reserve release this quarter, as well as lower professional fees. As you can see in these results, we have been very focused on the discipline management of all compensation and non-compensation related expenses, while still investing in growth and ensuring very high service levels for advisors and their clients. However, as we discussed last quarter, we expect expenses to increase throughout this fiscal year as we continue investing in people and technology to support our tremendous growth. As business development expenses increase with travel and conferences resuming, and as net loan growth drives higher associated bank loan loss provisions for credit losses. For example, you can see our communications and information processing expenses increase 13% year-over-year as we continue to make critical investments in technology. We would expect the year-over-year growth for this line item to be right around this level for the full year in fiscal 2022. Slide 12 shows the pre-tax margin trend over the past five quarters. While our pre-tax margin target in this near-zero short-term interest rate environment is around 16 percent, we generated a pre-tax margin of 20.1 percent in the fiscal first quarter, or 20.3 percent on an adjusted basis. Boosted by record revenues, particularly for investment banking, still relatively subdued business development expenses and a loan loss release during the quarter. We will probably have to revisit our pre-tax margin and compensation ratio targets at our Analyst and Investor Day scheduled in May if we start seeing increases in short-term interest rates. Hopefully by then, we will also have more clarity on other important variables, such as the outlook for investment banking revenues, the level of business development expense as travel and conferences resume more fully, and the impact of recently closed and pending acquisition. On slide 13, at the end of the quarter, total assets were approximately $68.5 billion, an 11% sequential increase, reflecting solid growth of loans at Raymond James Bank, as well as a substantial increase in client cash balances that were accommodating on the balance sheet. Liquidity and capital remain very strong. RGF corporate cash at the parent ended the quarter at $1.4 billion, increasing 21% during the quarter. The total capital ratio of 26.9% and a Tier 1 leverage ratio of 12.1% are both more than double the regulatory requirements to be well capitalized, providing significant flexibility to continue being opportunistic and grow the business. Slide 14 provides a summary of our capital actions over the past five quarters. In December, the Board of Directors increased the quarterly dividend 31 percent to 34 cents per share per quarter, which is not reflected on this chart until next quarter. The Board also authorized share repurchases of up to $1 billion, which replaced the previous authorization. As of January 25th, 2022, all $1 billion remained available under this authorization. Due to regulatory restrictions following our pending acquisition of Tri-State Capital Holdings, we do not expect to repurchase common shares until after closing, but we believe this authorization signals our intention to repurchase the associated shares soon after closing. In the meantime, we expect our capital and our share count to continue growing between now and closing. Lastly, on slide 15, we provide key credit metrics for Raymond James Bank. The credit quality of the bank's loan portfolio remains healthy, with most trends continuing to improve. Criticized loans declined and non-performing assets remained low at just 19 basis points. The bank loan loss reserve release of $11 million was primarily driven by improving macroeconomic assumptions used in the CECL models. The bank loan allowance for credit losses as a percentage of loans held for investment declined from 1.27% in the preceding quarter to 1.18% at quarter end. For corporate portfolios, these allowances are higher at around 2.13%. Now, I'll turn the call back over to Paul Reilly to discuss our outlook.