Raymond James Financial, Inc.

Good morning and welcome to Raymond James Financial's fourth 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 THE 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 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, believes, estimates, or continue, or 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, 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 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. Now I'm happy to turn the call over to Chair and CEO Paul Riley. Paul?

Good morning, and thank you for joining us today. Before I discuss our fourth quarter and fiscal year earnings, I want to start by acknowledging the heartbreaking devastation our friends and neighbors, as well as over 200 associates on Florida's central Gulf Coast, experienced a month ago from Hurricane Ian. While it has been difficult to bear witness to their pain and loss, I also have been humbled by the resilience of our associates, advisors, and the community there. Fortunately, our Raymond James family impacted by the storm is safe. Just as notable, I can't adequately express my gratitude for our Tampa Bay Area associates, who despite facing an uncertain path from a Category 4 hurricane, worked diligently from remote locations to continue delivering our service first promise. Additionally, our associates at our corporate locations in Memphis and Southfield and Denver rose to the occasion, covering for their coworkers and pitching in where they could and working weekends to catch up. For those without power or other hardships, the home office was open to provide a comfortable and clean place to go. When the home office reopened, the camaraderie was obvious and uplifting. We provided emotional and mental health resources to associates, delivered a $500 relief check to all associates in impacted counties, and provided additional time off to help them manage their personal situations. Associates collected two semi-trucks of supplies which were sent to our Fort Myers branch system to be distributed by advisors and associates in their areas. We've heard several heartwarming stories from recipients in these essential supplies, which in itself shows how the collective efforts and generosity truly made a difference for those who needed it most. The firm also responded by raising more than a million dollars from corporate, executive leadership, and associate donations to assist the recovery and support of those in need through the Red Cross and our Friends of Raymond James Charity, who directly help associates with needed emergency funds for repairs and recovery. If I sound surprised, I'm not. The preparation, perseverance, and response to the storm reflected the long history of Raymond James service culture, and I'm especially proud to represent our team today. Now, moving to our results, I'm very pleased with the results for the fourth quarter and fiscal year, especially given the challenging market conditions. Despite the significant decline in equity markets during the year, we still generated record net revenues and record pre-tax income for the fourth quarter and fiscal year. Throughout the fiscal year, we remained focused on the long term and continued to invest in our businesses, our people, and our technology to help drive growth across our businesses. In the private client group, strong retention and recruiting of financial advisors contributed to industry-leading growth with domestic net new assets of 9% over the fiscal year. Furthermore, the Charles Stanley acquisition completed earlier in the year significantly expanded our presence in the UK, which is a very attractive market for wealth management. In capital markets, annual investment banking results were very strong, only 3% lower than the record results achieved in fiscal 2021. Record M&A revenues helped offset the very challenging underwriting environment. We continue to see strong pipelines for M&A, as the expertise we've added both organically and through niche acquisitions has been performing extremely well. We completed the acquisition of Sunridge Partners on July 1st, which has enhanced our fixed income platform with technology-driven capabilities and a fantastic team with extensive experience dealing with corporates. This business thrives on rate volatility, so some rich generated really fantastic results since we closed on the acquisition of July. However, after a record year last year, our legacy fixed income operations serving depositories has been challenged as the Fed intensifies its monetary tightening initiatives. In the bank segment, loans grew 73% year over year and 3% during the quarter. reflecting attractive growth across nearly all loan categories. The acquisition of Tri-State Capital Bank this year added a best-in-class third-party securities-based lending capability while also diversifying our funding sources. It is in uncertain conditions such as these that reminds us the importance of focusing on and making decisions for the long term. As evidenced this quarter with a sharp increase in net interest income and RJBDP fees, we are well positioned for the continued rise in short-term interest rates with diverse and ample funding sources, strong loan growth, high concentration of floating rate assets, and ample balance sheet flexibility given solid capital ratios, which are well in excess of regulatory requirements. While some of these attributes may be underappreciated in certain market cycles, the value of our long-term approach has really resonated in more volatile and uncertain market environment we've experienced since the onset of the COVID-19 pandemic. In the fiscal fourth quarter, the firm reported record net revenues of $2.83 billion record pre-tax income of $616 million, and net income available to common shareholders of $437 million, or earnings per diluted share of $1.98. Net income was negatively impacted by the elevated tax rates this quarter due primarily to non-deductible losses on corporate-owned life insurance that we utilized to fund non-qualified benefit plans. Excluding $30 million of expenses related to acquisitions, quarterly adjusted net income available to common shareholders was $459 million, or $2.08 per diluted share. Year-over-year and sequential revenue growth was driven primarily by 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 asset management and related administrative fees and total brokerage revenue, largely due to decline in equity markets. Quarterly net income available to common shareholders increased 2% compared to the prior year's fiscal fourth quarter, reflecting the aforementioned revenue growth, which was partially offset by higher non-compensation expenses and higher tax rates. Sequentially, quarterly net income grew 46%, driven primarily by the benefit from higher short-term interest rates to the net interest income and RJBDP fees from third-party banks, along with lower bank loan provision for credit losses, as the prior quarter included the $26 million initial provision for credit losses on loans arising from the acquisition of tri-state capital holdings. Annualized return on common equity for the quarter was 18.7%. And adjusted annualized return on tangible common equity was 24.1%. An impressive result, especially given the challenging market environment and our strong capital position. Moving to slide five, we entered the quarter with total client assets under administration of $1.09 trillion. PCG assets and fee-based accounts of $586 billion, and financial assets under management of $174 billion. Equity market declines in the quarter, including a 5% sequential decline in the S&P 500 index, negatively impacted client asset levels. We ended the quarter with 8,681 financial advisors in PCG, A NET INCREASE OF 199 OVER THE PRIOR YEAR PERIOD AND 65 OVER THE PROCEEDING QUARTER. AND REMEMBER, THE YEAR OVER YEAR INCREASE, THE ADVISOR COUNT WAS IMPACTED BY TRANSITION OF ADVISORS TO OUR RIA AND CUSTODY SERVICE DIVISION, WHERE WE TYPICALLY RETAIN THE ASSETS, BUT WE DON'T INCLUDE THE ADVISOR IN OUR COUNTS. IN THE FISCAL YEAR, We had 222 financial advisors moved to RCS, 166 of which came from one firm. Adjusting for these transfers, the numbers of financial advisors increased 421 year over year, a really strong result. Our focus on supporting advisors and their clients, especially during uncertain and volatile markets, led us to strong results in terms of advisor retention, as well as our recruiting of experienced advisors to the Raymond James platform through our multiple affiliation options. Over the trailing 12-month period ending September 30, 2022, we recruited to our domestic independent contractor and employee channels financial advisors with nearly $320 million of trailing 12 production and approximately $43 billion of client assets at their previous firms. And highlighting our industry-leading growth, we generated domestic PCG net new assets of nearly $95 billion over the fiscal year ending September 30, 2022, representing 9% of domestic client assets at the beginning of the period. Fourth quarter domestic PCG net new assets growth was 8.3% annualized. Total client domestic cash suite balances declined 12% to $67.1 billion, or 7% of domestic PCG assets under administration. Paul Shukri will discuss this more later, but I'd like to highlight that these are lower-cost deposits, as we have not yet utilized high-yield savings accounts to preserve balances. Total bank loans grew 3% sequentially to a record $43.2 billion. reflecting attractive broad-based growth at both Raymond James Bank and Tri-State Capital Bank. Moving to slide six, the private client group generated record results with quarterly net revenues of $1.99 billion and pre-tax income of $371 million. While asset-based revenues declined, the segment's results were lifted by the benefit from both higher short-term interest rates. The capital market segment generated quarterly net revenues of $399 million and pre-tax income of $66 million. Capital market revenues declined 28% compared to the prior year period, mostly driven by lower investment banking revenues and fixed income brokerage revenues, largely due to the volatile and uncertain markets. The asset management segment generated net revenues of $216 million and pre-tax income of $83 million. The declines in revenues and pre-tax income were largely attributable to lower financial assets under management, as net inflows into fee-based accounts and the private client group were offset by fixed income and equity market declines. The bank segment, which includes Raymond James Bank and Tri-State Capital Bank, generated quarterly net revenue of $428 million, which is a record result, and pre-tax income of $123 million. NET REVENUE GROWTH WAS MAINLY DUE TO HIGHER LOAN BALANCES AND SIGNIFICANT EXPANSION OF THE BANK'S NET INTEREST MARGIN TO 2.91% FOR THE QUARTER, UP 50 BASIS POINTS FROM THE PROCEEDING QUARTER, ONCE AGAIN REFLECTING THE FLEXIBILITY AND FLOATING RATE NATURE OF OUR BALANCE SHEET. THIS QUARTER ALSO INCLUDED A FULL QUARTER OF TRI-STATE CAPITAL RESULTS, WHICH HAVE CONTINUED TO BE SOLID. Looking at the full year fiscal 2022 results on slide 7, we generated record net revenues of $11 billion and record pre-tax income of $2 billion, both up 13% over fiscal 21. Record earnings per diluted share of $6.98 increased 5% compared to fiscal 2021. Additionally, we generated strong annualized return on common equity of 17%. AND ANNUALIZED ADJUSTED RETURN ON TANGIBLE COMMON EQUITY OF 21.1%. MOVING TO THE FISCAL YEAR SEGMENT RESULTS ON SLIDE 8, PRIVATE CLIENT GROUP, ASSET MANAGEMENT, AND BANK SEGMENTS GENERATED RECORD NET REVENUES AND THE PRIVATE CLIENT GROUP PRODUCED RECORD PRE-TAX INCOME DURING THE FISCAL YEAR. AGAIN, REINFORCING THE VALUE OF OUR DIVERSE AND COMPLEMENTARY BUSINESSES. And now, for more detailed review of the fiscal fourth quarter results, I'm going to turn the call over to Paul Shukri. Paul?