Raymond James Financial, Inc.

Good evening, and welcome to Raymond James Financial's fiscal 2024 fourth quarter earnings call. This call is being recorded and will be available for replay on the company's investor relations website. I'm Christy Waugh, Senior Vice President of Investor Relations, and thank you for joining us. With me on the call today are Chair and Chief Executive Officer Paul Reilly, President Paul Shukri, and Chief Financial Officer Butch Orlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to slide two. Please note that 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, industry or market conditions, anticipated timing and benefits of our acquisitions, and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments, and general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts, and future or conditional verbs such as may, will, could, should, 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 these 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 website. Now, I'm happy to turn the call over to Chair and CEO, Paul Reilly. Paul.

Thank you, Christy. Good evening, 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 associates, advisors, friends, and neighbors experienced over the last several weeks. With hurricanes, Helene and Milton impacting communities throughout the southeast, including the St. Petersburg Tampa Bay area where Raymond James is headquartered, as well as the Carolinas and Georgias. Thousands across the region experienced unprecedented flooding, power outages, property damage, and devastation. We enacted our business continuity plans. And with our service workforce almost equally distributed across offices in St. Pete, Memphis, and Southfield, Michigan, colleagues outside impacted areas stepped in to ensure continuous service coverage. Even those affected associates and advisors continue to serve clients while facing storm and evacuations, often working remotely from safe locations. The storm left a long recovery road ahead of us for all in their path. And while it's been difficult to bear witness to the pain and loss, I have also been humbled by the resilience of our associates, advisors, and our community. Following the hurricane, the firm and leadership team have contributed almost $11 million to associate and community relief, including stipends to eligible associates and donations to Friends of Raymond James, the American Red Cross, United Way Suncoast, and other charitable organizations across impacted communities. In addition to granting associates the time needed to navigate recovery efforts, the firm continues to provide comprehensive resources and benefits, including information about financial support, immediate aid, relocation services, and wellness benefits. Challenging times like these highlight the importance of always putting people first, which has always been the foundation of Raymond James. The preparation, perseverance, and response to the storm reflect the long history of Raymond James service culture, and I'm especially proud to represent our team today. Now, moving to our quarterly performance, we achieved strong results once again, concluding another fiscal year with outstanding achievement. In fiscal 2024, we generated record net revenues and record net income, showcasing the strength of our diverse and complementary businesses. We ended the year with record client assets, healthy pipelines for growth across our business, and ample funding to support the balance sheet. We remain well positioned to continue to invest in our business, our people, and technology to help drive growth across all of our businesses. Beginning on slide four, the firm reported record fiscal fourth quarter net revenues of $3.46 billion, net income available to common shareholders of $601 million, and earnings per diluted share of $2.86. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $621 million, or $2.95 per diluted share. We generated strong returns for the quarter with annualized return on common equity of 21.2% and annualized adjusted return on tangible common equity of 25.8%. A great result, particularly given our strong capital base. During the fiscal quarter, we repurchased 2.6 million shares of common stock for $300 million, bringing our fiscal year total to 7.7 million shares for $900 million and an average price of $117 per share. In total, we returned nearly $1.3 billion of capital to shareholders through a combination of share repurchases and dividends in the fiscal year. Moving to slide five, client assets grew to record levels this quarter. driven by rising equity markets and solid advisor retention and recruiting in the private client group. Total assets under administration increased 6% sequentially to $1.57 trillion. Private client group assets and fee-based accounts grew to $875 billion, and financial assets under management to $245 billion. domestic net new assets during the quarter were $13 billion, representing a 4% annualized growth rate on beginning of the period domestic PCG assets. And for the fiscal year, domestic net new assets were $60.7 billion, representing a 5.5% growth rate on beginning of the period domestic private client group assets. A key contributor to the net new asset growth is our continued recruiting results, which were really strong this quarter. To our domestic independent contractor and employee channels, we recruited financial advisors with approximately $100 million of trailing 12-month production and a $17.5 billion of client assets at their previous firms. Including assets recruited into our growing RIA and custody services division, which we refer to as RCS, we recruited across all platforms, total client assets during the quarter of $22.3 billion, surpassing the previous best quarter, which occurred in 2021 in terms of recruited assets. For the fiscal year, we recruited financial advisors with approximately $335 million of trailing 12-month production, and $56.7 billion of client assets at their previous firms. Recruiting in the year production and assets equal to that of a pretty good-sized firm. RCS asset growth is bolstered by both external joins as well as from internal transfers. And RCS finished the quarter with $181 billion of client assets under administration, up 36% over the prior year level. This quarter, we reported financial advisors of 8,787. Overall, these fantastic recruiting results reflect the continuous focus of the entire firm to ensure Raymond James remains a destination of choice for advisors. As we had mentioned in previous quarters, there are a couple of OSJ relationships in our independent contractor division who had decided to leave the platform. It takes time to affect these movements, but a portion of those assets left the firm in the fiscal fourth quarter, totaling roughly $3 billion of AUA. We anticipate approximately $5 billion of assets associated with these firms to complete their transfers off the platform in early fiscal 2025. Adjusting for these transferred assets, net new assets growth in the quarter would have been approximately 5%. Overall, we remain focused on serving advisors across our multiple affiliation options. Our robust technology capabilities and client-first values continue to enable us to retain and attract high-quality advisors. Total client domestic cash sweep and enhanced savings program balances ended the quarter at $57.9 billion, up 3% over June of 2024. Bank loans grew at 2% over the preceding quarter to a record $46 billion, primarily due to higher securities-based loans, which grew 5% in the quarter, as well as continued residential mortgage growth. Moving to slide six, private client group generated record quarterly net revenues of $2.48 billion and pre-tax income of $461 million. Year over year, results were bolstered by higher PCG assets under administration due to a strong equity market and net new assets brought into the firm. Reflecting positive results from our long-term focus and patience to hold the course in our capital markets businesses generated quarterly net revenues of $483 million and a pre-tax income of $95 million. Net revenues grew 42% year-over-year and 46% sequentially, driven primarily by higher M&A revenues as the market environment became more supportive of transaction closings in the quarter. Market conditions seem to be improving, and we are optimistic about our healthy pipeline and new business activity in M&A. The asset management segment generated record pre-tax income of $116 million on record net revenues of $275 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation and net inflows in PCG fee-based accounts, as well as modest net inflows into Raymond James Investment Management. The bank segment generated net revenues of $433 million and pre-tax income of $98 million. Bank segment net interest income increased 1% due in part to higher loan balances. The net interest margin for the segment of 2.62% declined two basis points compared to the preceding quarter. Looking at the fiscal year 2024 results on slide seven, we generated record net revenues of $12.82 billion and record net income available to common shareholders of $2.06 billion, up 10% and 19% respectively, over the record set in the prior year. Additionally, we generated strong returns on common equity of 18.9%, and adjusted return on tangible common equity of 23.3% for the year. On slide eight, the record results in PCG and asset management segments for the fiscal year primarily reflected a strong organic growth in PCG along with robust equity markets. Now, I'll turn the call over to our new CFO, Butch Orlog, to review our financial results in detail.

Thank you, Paul. Turning to slide 10, consolidated net revenues were a record $3.46 billion in the fourth quarter, up 13% over the prior year and up 7% sequentially. Asset management and related administrative fees grew to $1.66 billion, representing 15% growth over the prior year and 3% over the preceding quarter. This quarter, PCG domestic fee-based assets increased 7%, which will be an approximate 6% tailwind for asset management and related administrative fees in the fiscal first quarter. Brokerage revenues of $561 million grew 17% year over year, primarily due to higher brokerage revenues in PCG and fixed income capital markets. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $315 million increased 56% year over year and 72% sequentially. Fourth quarter results benefited from a significant increase in M&A revenues. Moving to slide 11, client domestic cash sweep and enhanced savings program balances ended the quarter at $57.9 billion, up 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. So far in the fiscal first quarter, domestic cash suite balances have declined about $1.3 billion attributable to record quarterly fee billings. Turning to slide 12, combined net interest income and RJBDP fees from third-party banks with $678 million, up 1% over the preceding quarter. The bank segment net interest margin was down 2 basis points to 2.62% for the quarter, while the average yield on RJBDP balances with third-party banks decreased 7 basis points to 3.34%. primarily due to the Fed rate cut. Based on current rates and balances, which reflects the September rate cut and the impact of quarterly fee billings, we would expect the aggregate of NII and RJBDP third-party fees to be down approximately 5% in the fiscal first quarter. Keep in mind, there are a lot of variables that could impact that estimate, including further rate actions which are not assumed. Turning to consolidated expenses on slide 13. Compensation expense was $2.16 billion and the total compensation ratio for the quarter was 62.4%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 62.1%. Non-compensation expenses of $543 million increased 10% sequentially, largely due to the bank loan provision for credit losses, which was a benefit in the preceding quarter. For the fiscal year, non-compensation expenses excluding the bank loan provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments presented in our non-GAAP financial measures came in just under our expectation of $1.9 billion. While we maintain discipline in controlling our expenses, we continue to invest to support growth across the business. Slide 14 shows the pre-tax margin trend over the past five quarters. This quarter, we generated a pre-tax margin of 22%, an adjusted pre-tax margin of 22.7%, an increase over the prior quarter arising in part from the improved capital markets results. On slide 15, at quarter end, our total assets were $83 billion, a 3% sequential increase, largely due to loan growth and higher cash balances primarily held in our bank segment. Liquidity and capital each remained very strong. RJF corporate cash at the parent ended the quarter at $2.2 billion, well above our $1.2 billion target. With a Tier 1 leverage ratio of 12.8% and total capital ratio of 24.1%, we remain well capitalized. Our capital levels provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate was 20.8% for the quarter, primarily reflecting the favorable impact of non-taxable valuation gains associated with the corporate-owned life insurance portfolio. Slide 16 provides a summary of our capital actions over the past five quarters. During the quarter, the firm repurchased 2.6 million shares of common stock for $300 million at an average price of $115 per share. For the fiscal year, we repurchased 7.7 million shares for $900 million. As Paul noted earlier, in total, we returned capital to shareholders of approximately $1.3 billion during the fiscal year through dividends and share repurchases. As of October 19th, approximately $645 million remained under the Board's approved common stock repurchase authorization. Going forward, we expect to continue to offset share-based compensation dilution and to be opportunistic with incremental share repurchases. Given our present capital and liquidity levels, we currently expect to keep a similar pace of buyback activity as we did during this quarter, or possibly more, as we remain committed to maintaining capital levels in line with our stated targets. 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 remained solid. Non-performing assets remained low and relatively unchanged from the prior quarter level at 28 basis points of bank assets. Criticized loans as a percentage of total loans held for investment ended the quarter at 1.47% up from 1.15% in the preceding quarter, primarily due to a small number of idiosyncratic loan downgrades. The bank allowance for credit losses as a percentage of total loans held for investment ended the quarter roughly unchanged from the prior quarter level at just under 1%. The allowance percentage has trended lower largely due to a loan mix shift toward more securities-based loans and residential mortgages, which carry lower allowance levels. and now account for 35% and 20% of the total loan portfolio balances, respectively. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was largely unchanged from the preceding quarter at approximately 2% at quarter end. We believe this represents an appropriate reserve but we continue to closely monitor economic factors that may impact our loan portfolios. Now I'll turn the call over to Paul Shukri to discuss our outlook. Paul.