Raymond James Financial, Inc.

Good evening, 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 today 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 timing and benefits of our acquisitions, and our level of success integrating acquired businesses, divestitures, anticipated results of litigation and regulatory developments, or general economic conditions. In addition, words such as may, will, could, anticipates, expects, believes, 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 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 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 evening. Thank you for joining us today. Since our last earnings call, we hosted our two major advisor conferences for both the independent and employee affiliation channels, and also had our Chairman's Council recognition trip for our top employee advisors. I'm so proud of our advisors' unwavering dedication to serving their clients and helping them to navigate these volatile and uncertain times. Our advisors have also expressed their appreciation of our commitment to managing the firm for the long term and always striving to be a source of strength and stability for them and their clients. It's these shared values that have resulted in our success through multiple cycles since our founding. and what makes me confident about our continued success in the future. Now turning to our results. Despite the challenging environment and elevated market volatility since the Federal Reserve started raising interest rates, we generated record net revenues and earnings for the first nine months of the fiscal year. Reviewing third quarter results starting on slide four, The firm reported record quarterly net revenues of $2.9 billion and net income available to common shareholders of $369 million or $1.71 per diluted share. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $399 million or $1.85 per diluted share. The increase in interest-related revenues driven by higher short-term interest rates drove significant earnings growth over the prior year. Net revenues increased 7% and net income available to common shareholders grew 23%. Quarterly results were negatively impacted by elevated provisions for legal and regulatory matters of approximately $65 million. and bank loan provisions for credit losses of $54 million, which was predominantly driven by significantly weakened macroeconomic assumptions for the Moody's CRE price index utilized in our CECL models. Notwithstanding these items, we had a solid quarter in a tough market environment. We generated strong returns with annualized returns on common equity of 14.9%, and annualized adjusted returns on tangible common equity of 19.7%. We believe this is a leading result, especially considering our strong capital base. Moving to slide five, the strength of our PCG business really shined, driving record assets this quarter. We ended the quarter with record total client assets under administration, of $1.28 trillion, record PCG assets and fee-based accounts of $697 billion, and financial assets under management of $201 billion. With our continued focus on retaining, supporting, and attracting high-quality financial advisors, PCG consistently generates strong organic growth, which was evident again this quarter with domestic net new assets of $14.4 billion, representing a 5.4% annualized growth rate on the beginning of the period domestic PCG assets. However, I'll note net new assets in our advisor count were negatively impacted by an independent contractor relationship whose affiliation with the firm ended in the fiscal third quarter. This was a planned and mutual separation, and more than 60% of the assets and advisors stayed with Raymond James. The impact of the portion that moved off the platform this quarter was $4.6 billion in assets and 60 financial advisors. So our net new asset metric would have been even stronger after adjusting for this separation, which we do not believe will negatively impact our profitability. During the prior 12 months, we recruited to our domestic independent contractor and employee channels financial advisors with approximately $282 million of trailing 12-month production and nearly $38 billion of client assets at their previous firms. Total clients' domestic sweep and enhanced savings program balances into the quarter at $58 billion, up 11% from March of 2023. The enhanced savings program, with its competitive rate and robust FDIC insurance, continued to attract significant cash this quarter, offsetting a decline in client suite balances, largely due to quarterly fee billings and tax payments in April. Total bank loans decreased 1% from the preceding quarter to $43 billion, primarily reflecting a modest decline in corporate loans as new origination demand continues to be tepid in the market. Moving to slide six, private client group generated record results with quarterly net revenues of $2.18 billion and pre-tax income of $411 million. Year over year, Asset-based revenues declined due to market decline. However, PCT results were lifted by the benefit of higher interest rates and interest-related revenues and fees. The capital market segment generated quarterly net revenues of $276 million and a pre-tax loss of $34 million. Revenues declined 28% compared to the prior year quarter. mostly driven by lower investment banking revenues as well as lower fixed income brokerage revenues. The extremely challenging market environment, particularly for investment banking, has strained the near-term profitability of the segment's results. As we explained at Analyst and Investor Day, the segment's results are negatively impacted by amortization, share-based compensation for prior years, as well as growth investments. However, we are focused on managing controllable expenses as near-term revenues are depressed. The asset management segment generated pre-tax income of $89 million on net revenues of $226 million. The increase in net revenues and pre-tax income over the preceding quarter were largely the result of higher assets and fee-based accounts. The bank segment generated net revenues of $514 million and pre-tax income of $66 million. Third quarter NIM for the bank segment of 3.26% rose 85 basis points over the year-ago quarter, but as expected, decreased 37 basis points from the preceding quarter, primarily due to higher funding costs. We continue to add diverse, higher-cost funding sources, and shifted more of the lower-cost suite funding to third-party banks. While this negatively impacted the bank segment's NIM, Paul Schrucke will walk us through how this benefits both clients and the firm overall. Looking at the fiscal year-to-date results on slide seven, we generated record net revenues of $8.6 billion and record net income available to common shareholders of $1.3 billion, up 5% and 22% respectively over the prior year's records. We aren't seeing many other firms in our industry generate records so far this year. Additionally, we generated strong annualized return on common equity of 17.9% and annualized adjusted return on tangible common equity of 22.7%. for the nine-month period. On slide 8, the strength of the PCG and bank segments for the first nine months of the year primarily reflects the benefit of strong organic growth in the private client group, the successful integration of tri-state capital, and higher interest-related revenues. When compared to the record activity levels in the year-ago period, Weaker capital markets results reflect the challenging environment for investment banking and fixed income brokerage revenue, despite incremental revenues from the Sunridge acquisition. And now, I'll turn it over to Paul Shoukry for a more detailed review of our third quarter financial results. Paul?

Paul Shoukry Thank you, Paul. Starting on slide 10. Consolidated net revenues were a record $2.91 billion in the third quarter, up 7% over the prior year and 1% sequentially. Being able to generate record quarterly revenues during a period when capital market revenues were so challenged across the industry reinforces the value of having diverse and complementary businesses anchored by the private client group business. which reached record client assets this quarter. Asset management and related administrative fees declined 4% compared to the prior year quarter and increased 5% sequentially due to the higher assets and fee-based accounts at the end of the preceding quarter, along with one additional billable day in the fiscal third quarter. This quarter, fee-based assets grew 5% to a new record, providing a tailwind for asset management and related administrative fees in the fiscal fourth quarter. Brokerage revenues of $461 million declined 10% year-over-year and 7% sequentially. This year-over-year decline was largely due to lower fixed income brokerage revenues in the capital market segment, as well as lower asset-based trail revenues in PCG. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $151 million declined 32% year-over-year and 2% sequentially. As experienced across the industry, both underwriting and M&A revenues continue to be challenged this quarter. We are optimistic that the environment is improving, and we continue to see a healthy investment banking pipeline and solid new business activity. However, there remains a lot of uncertainty in the pace and timings of deals launching and closing given the heightened market volatility. So while we may not see significant improvement in the fiscal fourth quarter, we expect better results over the next six to 12 months. Moving to slide 11, clients' domestic cash sweep and enhanced saving program balances ended the quarter at $58 billion. up 11% over the preceding quarter and representing 5.2% of domestic PCG client assets. Advisors continue to serve their clients effectively, leveraging our competitive cash offerings. The enhanced savings program attracted approximately $8.5 billion in new deposits this quarter. A large portion of the total cash coming in to ESP has been new cash brought to the firm by advisors, highlighting the attractiveness of this product and Raymond James being viewed as a source of strength and stability. The enhanced savings program balances exceeded $11.9 billion this week, continuing to grow modestly and partially offsetting the decline in sweep balances, largely due to the approximately $1.3 billion of quarterly fee billings in July. As I said on last quarter's call, it feels like we are closer to the end of the cash sorting dynamic than we are to the beginning. And we have certainly seen a deceleration of the activity over the past several months. However, we are not ready to declare the end of that dynamic. We will need more time with stable balances and interest rates. This quarter's sweep balances with third-party banks increased $7.5 billion to $16.9 billion, giving us a large funding cushion when attractive growth opportunities surface. These third-party balances grew faster than we expected last quarter as a strong growth of enhanced saving program balances at Raymond James Bank allowed for more balances to be deployed off balance sheet. While this dynamic has negatively impacted the bank segment's NIM because of the geography of the lower cost suite balances being swept off balance sheet, it ultimately provides clients with an attractive deposit solution while also optimizing the firm's funding flexibility. Looking forward, we have ample funding and capital to support attractive loan growth. Turning to slide 12, Combined net interest income in RJBDP fees from third-party banks was $708 million, up 91% over the prior year quarter and down 3% compared to the preceding quarter. The sequential decrease in firm-wide net interest income was partially offset by higher RJBDP fees from third-party banks. If you recall, on our last earnings call, we anticipated a 10% decline in these interest-related revenues. So we are pleased with a better-than-expected decline of just 3%, which was partly a function of higher-than-anticipated growth of enhanced saving program balances. The bank segment's net interest margin decreased 37 basis points sequentially to 3.26% for the quarter, and the average yield of RJBDP balances with third-party banks increased 12 basis points to 3.37%. While there are many variables that will impact the actual results, we currently expect combined net interest income in RJBDP fees from third-party banks to be around 5% lower in the fiscal fourth quarter compared to the fiscal third quarter, as we expect some further contraction of the bank segment net interest income to be partially offset by an increase in RJBDP fees from third-party banks. As we have always said, instead of concentrating on maximizing NIM over the near term, we are more focused on preserving flexibility and growing net interest income in RJBDP fees over the long term, which we believe we are well-positioned to do. Moving to consolidated expenses on slide 13, Compensation expense was $1.85 billion, and the total compensation ratio for the quarter was 63.7%. The adjusted compensation ratio was 62.7% during the quarter, which we are very pleased with, especially given the challenging environment for capital markets. Non-compensation expenses of $570 million increased 15% sequentially. As Paul mentioned earlier, the quarter included elevated provisions for legal and regulatory matters of approximately $65 million and a bank loan provision for credit losses of $54 million. The $65 million of provisions for legal and regulatory matters was made up of several items that all hit this quarter. Some of those items were closed out and publicly disclosed, and some of the other items are still in process. and we therefore will not be able to provide much more detail on those in this call. Additionally, this quarter included seasonally higher conference and event-related expenses. The bank loan provision for credit losses for the quarter of $54 million increased $26 million over the preceding quarter, largely reflecting weaker assumptions for commercial real estate valuations in the Moody's CRE Price Index. and in particular, the office price index, which resulted in higher allowances. I'll discuss more related to the credit quality in the bank segment shortly. In summary, while there has been some noise with elevated legal and regulatory matters over the past two quarters, none of the other non-compensation expenses are coming in too much differently than we expected when we last provided guidance for the fiscal year. But as you all know, legal and regulatory expenses and provisions for loan losses using the CECL methodology are inherently difficult to predict. Importantly, we remain focused on managing expenses while continuing to invest in growth and ensuring high service levels for advisors and their clients. Slide 14 shows a pre-tax margin trend over the past five quarters. In the current quarter, we generated a pre-tax margin of 16.7% and an adjusted pre-tax margin of 18.1%, a strong result given the industry-wide challenges impacting capital markets and the aforementioned provisions. On slide 15, at quarter end, total assets were $78 billion. a 2% sequential decrease largely reflecting lower client cash balances in CIP during the quarter. Liquidity and capital remain very strong. RJF corporate cash at the parent ended the quarter at $1.7 billion, well above our $1.2 billion target. The Tier 1 leverage ratio of 11.4% and total capital ratio of 22% are both more than double the regulatory requirements to be well capitalized. The 11.4% Tier 1 leverage ratio reflects over $1 billion of excess capital above our conservative 10% target, which would still be two times the regulatory requirement to be well capitalized. Our capital levels continue to provide significant flexibility to continue being opportunistic and invest in growth. We also have significant sources of contingent funding. We have a $750 million revolving credit facility, which was recently renewed and upsized in April, and nearly $10 billion of FHLB capacity in the bank segment. Slide 16 provides a summary of our capital actions over the past five quarters. During the fiscal third quarter, the firm repurchased 3.31 million shares of common stock for $300 million at an average price of nearly $91 per share. As of July 26, 2023, approximately $750 million remained available under the Board's approved common stock repurchase authorization. And we currently intend on continuing our planned repurchases as we have discussed previously. Lastly, on slide 17, we provide key credit metrics for our bank segment, which includes Raymond James Bank and Tri-State Capital Bank. The credit quality of the loan portfolio is solid. Criticized loans as a percentage of total loans held for investment ended the quarter at just 0.94%. The bank loan allowance for credit losses as a percentage of total loans held for investment into the quarter at just 1.04%. The bank loan allowance for credit losses on corporate loans as a percentage of corporate loans held for investment was 1.9% at the quarter end. We believe this represents an appropriate reserve, but we are continuing to closely monitor any impacts of inflation, supply chain constraints, higher interest rates, and the potential recession on the corporate loan portfolio. As we have done from time to time when we believe there's an attractive risk-reward, during the quarter we proactively sold approximately $450 million of corporate loans at an average price of around 98% of par value. There continues to be a lot of attention on the commercial real estate across the industry given the challenge with property values and interest rates. So let me briefly cover our portfolio. Across the bank segment, we have CRE and REIT loans of approximately $8.8 billion, which represents 20% of total loans. Our office portfolio is $1.4 billion, only representing approximately 3% of the bank segment's total loans. Overall, we have deliberately limited the exposure to office real estate and we underwrote office loans with what we believed were conservative criteria. But we will continue to monitor each loan closely given the industry-wide challenges. Now, I will turn the call back over to Paul Reilly to discuss our outlook. Paul?