Raymond James Financial, Inc.

Good morning, and welcome to the Raymond James Financial's third quarter fiscal 2022 earnings call. 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 Waugh, Senior Vice President of Investor Relations at Raymond James Financial.

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, CHAIR 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 A LINE FOR QUESTIONS. CALLING YOUR ATTENTION TO SLIDE TWO. PLEASE NOTE CERTAIN STATEMENTS MADE DURING THIS 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, our level of success in integrating acquired businesses, divestitures, 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, plans, intends anticipates expects or believes or negatives 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 risks described in our most recent Form 10K and subsequent Forms 10Q and Forms 8K, which are available on our Investor Relations website. During today's call, we will also 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. Now I'm happy to turn the call over to Chair and CEO Paul Reilly. Paul?

Good morning, and thank you for joining us today. I know with our recent acquisitions the numbers are a little more complicated, but I am pleased with our results for the fiscal third quarter and the first nine months of the fiscal year. Despite challenging market conditions, we have continued to invest in our business, our people, and technology to help drive growth across all of our businesses. In the private client group, excellent retention and recruiting of financial advisors contributed to industry-leading growth with domestic net new assets of 9.4% over the trailing 12-month period. In the capital markets business, while investment banking revenues were negatively impacted by continued market volatility during the quarter, we continue to see strong pipelines, as the expertise we have added both organically and through niche acquisitions has performed very well. In fixed income, we completed the acquisition of Sumridge Partners just after the quarter on July 1, which will enhance our platform with technology-driven capabilities and a fantastic team with extensive experience in dealing with corporates. In June, we completed the acquisition of Tri-State Capital Holdings, including Tri-State Capital Bank and Chartwell Investment Partners, adding $11.8 billion of loans and $9.4 billion in financial assets under management. In addition to Tri-State's contribution to our loan portfolio, Raymond James Bank grew loans at an impressive 8% during the quarter, reflecting attractive growth across almost all loan categories. As we always do in any market cycle, we continue to invest for the long term, always putting the client first. And while the decrease in fee-based assets from the equity market declines during the quarter will negatively impact asset management and related administrative fees in the fourth quarter, we are well positioned for increases in short-term rate, given our attractive growth of earning assets, the majority which float with the short end of the curve. Furthermore, we have maintained a flexible balance sheet with solid capital ratios, well in excess of regulatory requirements. Turning to results on slide four, I fully appreciate there were a lot of moving parts this quarter, which Paul Shookery will explain in more detail. In the fiscal third quarter, the firm reported net revenues of $2.72 billion and net income available to common shareholders of $299 million. or earnings per diluted share of $1.38. Year-over-year and sequential revenue growth reflects primarily the benefit of higher short-term interest rates on both RJBDP fees from third-party banks and net interest income, which more than offset the declines in total brokerage revenues and investment banking revenues, resulting from the challenging market environment. The decline in net income available to common shareholders was primarily attributable to increased business development expenses and a higher bank loan provision for credit losses during the current quarter, which reflects the strong growth at Raymond James Bank, a weaker macroeconomic outlook, and the $26 million initial provision for the credit losses on loans acquired from Tri-State Capital Bank, as Paul will discuss in more detail. Excluding $65 million of expenses related to acquisitions, quarterly adjusted income available to common shareholders was $348 million, or $1.61 per diluted share. Annualized return on equity for the quarter was 13.3%. An adjusted annualized return on tangible common equity was 18.1%, an impressive result, especially given the challenging market environment and our strong capital position. Moving to slide five, sharp equity market declines in the quarter, including a 16% sequential decline in the S&P 500 index, negatively impacted client asset levels. We entered the quarter with a total client assets under administration of $1.13 trillion and PCG assets and fee-based accounts of $607 billion. Financial assets under management of $182 billion, which includes Chartwell Investment Partners, decreased 6% sequentially as a decline in equity markets more than offset net inflows in the acquired assets during the quarter. We enter the quarter with 8,616 financial advisors, a net increase of 203 over the prior year period, and a decrease of 114 compared to the preceding quarter. Results this quarter reflect the transfer of 188 advisors, primarily from one firm, to our RIA and custody services division, or RCS, during the quarter. While transfers to RCS impact the advisor count, The client assets typically remain custodied at the firm. Excluding these transfers, the number of financial advisors increased 74 from the preceding quarter, reflecting our continued low regrettable retrition and strong recruiting. Our focus on supporting advisors and their clients, especially during volatile markets, has led to strong results in terms of advisor retention, as well as our recruiting of experienced advisors to the Raymond James platforms through our multiple affiliation options. Over the trailing 12-month period ending June 30, 2022, we recruited to our domestic independent contract and employee channels financial advisors with approximately $300 million of trailing 12 production and approximately $47 billion of client assets at their previous firms. And highlighting our industry-leading growth, we generated domestic PCG net new assets of nearly $98 billion over the four quarters ending June 30, 2022, representing 9.4% of domestic PCG assets at the beginning of the period. Third quarter domestic PCG net new asset growth was 5.4% annualized, a strong result given the impact of client tax payments in the quarter. Bank loan growth continues to be strong. Raymond James Bank generated impressive loan growth of 26 percent year-over-year and 8 percent sequentially to a record $30.1 billion. Additionally, Tri-State Capital Bank brought over $11.8 billion of loans this quarter, which represents a record for them as they have continued to generate very attractive loan growth across their portfolios. Moving on to segment results on slide six, the private client group generated record results with quarterly net revenues of $1.96 billion and pre-tax income of $251 million. While asset-based revenues declined, the segment results were lifted by the benefit from higher short-term interest rates. The capital market segment generated quarterly net revenues of $383 million and pre-tax income of $61 million. Capital markets revenues declined 14 percent over the prior year period and 7 percent sequentially, mostly driven by lower fixed income brokerage revenues and equity underwriting revenues due to the volatile and uncertain markets. The asset management segment generated net revenues of $228 million and pre-tax income of $93 million. The sequential decline in revenues and pre-tax income in the asset management segment were primarily attributable to the negative impact on financial assets under management from the decline in equity markets. The bank segment, which now includes Raymond James Bank and Tri-State Capital Bank, generated quarterly net revenues of $276 million, which is a record result, and pre-tax income of $74 million. We closed on tri-state capital on June 1st, so this quarter only reflects one month of their results. Net revenue growth was mainly due to higher loan balances and significant expansion of the bank's net interest margin to 2.41% for the quarter, up 40 basis points from the preceding quarter. Despite revenue growth, the bank's segment's pre-tax income declined primarily due to the aforementioned higher bank loan loss provisions in the quarter. Looking at the fiscal year to date results on slide seven, we generated record net revenues of $8.17 billion during the first nine months of fiscal 2022, up 16% over the same period a year ago. Record earnings per diluted share of $4.99 increased 8% compared to the first nine months of fiscal 2021. Additionally, we generated strong annualized return on common equity of 16.3% and annualized adjusted return on tangible common equity of 20.1% for the nine-month period. Moving to the fiscal year-to-date segment results on slide eight, all four core operating segments generated record net revenues, and the private client group, capital markets, and asset management segments generated record pre-tax income. during the first nine months of the fiscal year. Again, reinforcing the value of our diverse and complementary businesses. And now for a more detailed view of the third quarter and year-to-date results, I will turn the call over to Paul Shoukri.