Raymond James Financial, Inc.

and welcome to Raymond James Financial's fiscal 2025 third 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. Thank you for joining us. With me on the call today are Chief Executive Officer Paul Shugary and Chief Financial Officer Butch Orlong. 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 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 Forms 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 CEO Paul Shugry. Paul?

Thank you, Christy.

Good evening. Thank you for joining us. We are holding this call from the firm's annual summer development conference in Orlando, Florida, where financial advisors in our employee channel, along with their families, come for education, networking, and activities, one of the great tradition of Raymond James and unique to our culture. I really enjoy being able to spend time and hear directly from such dedicated professionals. Our results this quarter mark the firm's 150th consecutive quarter of profitability. Since our inception, the firm has endured, thriving in good times, but also persevering through challenges, including recessions, financial crisis, and events such as a pandemic and other global threats. This long-term record of resilient profitability reflects the strength of our diverse and complementary businesses and our ongoing commitment to always putting clients first. As current market and macroeconomic conditions remain uncertain, we continue to adhere to strategies that have supported consistent success over the past 150 quarters, guided by our vision to be the absolute best firm for financial professionals and their clients. I'm also excited to share that Raymond James has topped the J.D. Power rankings in his annual U.S. Investor Satisfaction Study as the number one wealth management firm for advised investor satisfaction. The firm also ranked as the most trusted and highest in the study's individual metrics on people and products and services, as well as strong rankings in the J.D. Power Financial Advisor Satisfaction Rankings in each of the employee and independent advisor surveys. This recognition is purely a reflection of what all advisors, branch staff, and corporate associates do every day to serve clients so well. So thank you. These are well-deserved honors. Turning to our financial results for the quarter, the firm's values-based, client-focused approach continues to generate steady performance. Quarterly net revenues of $3.4 billion grew 5% over the prior year quarter. Pre-tax income of $563 million declined 13% compared to the year-ago quarter. Results this quarter included a $58 million reserve increase associated with the settlement of a legal matter related to bond underwritings for specific issuer, sold to institutional investors between 2013 to 2015. Although the firm maintains it had strong defenses and denied any liability, given the complexity of the case and the unpredictability of litigation outcomes, we determined to resolve the long-running dispute without admission of wrongdoing. The first nine months of fiscal 2025, We generated record net revenues of $10.3 billion and record pre-tax income of $1.98 billion, up 10% and 5% over the first nine months of fiscal 2024. These solid results were attributable to our diverse and complementary businesses, anchored by the private client group and augmented with the capital markets, asset management, and bank segments. Across our businesses, we have achieved consistent success retaining and recruiting financial professionals who provide high-quality advice to their clients. In the private client group, we ended the quarter with a record $1.57 trillion of client assets under administration, representing year-over-year growth of 11%. Over the past 12 months, we recruited into our domestic independent contractor and employee channels financial advisors with $336 million of toiling trail production and $52 billion of client assets at their previous firms. Including assets recruited into our RIA and custody services division, we recruited total client assets over the past 12 months of over $60 billion across all of our platforms. Quarterly domestic net new assets equal to $11.7 billion, representing a 3.4% annualized growth rate. We saw net new assets improve throughout the quarter, with June activity producing annualized growth in the high single-digit level. Based on our robust recruiting pipeline and strong level of commitments, we're even more optimistic about our momentum and growth over the coming quarters. Our best of both worlds value proposition, where we offer a unique combination of an advisor and client focus culture coupled with leading technology and solutions continues to resonate with advisors across all of our affiliation options. Additionally, our strong balance sheet and commitment to independence is increasingly becoming a differentiator as well. To continue retaining and attracting the best advisors, we are continuing to make investments in our platforms and offerings. In the private wealth space, we remain focused on providing education, training, accreditation, and enhanced capabilities and product solutions to allow advisors to meet the needs of their most sophisticated clients. About 370 advisors have completed or are enrolled in our private wealth advisor program, which continues to attract strong interest from advisors due to its client benefits and contribution to business growth. We also continue to invest in technology. including AI, to drive continued operational efficiencies and improve advisors' productive capacity. We are making investments to automate and streamline processes, which in turn frees up associates and advisors to do what they do best, which is to engage human to human and deepen relationships, add more value, and importantly, have more capacity to grow their businesses by attracting new clients. In the capital market segment, the investment banking pipeline is strong, and we are becoming more optimistic about macroeconomic conditions relative to the near term, although the environment remains uncertain. However, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries we cover whenever the market does become more conducive. We remain committed to enhancing the platform by broadening and deepening its capabilities, whether through strategic hiring or acquisitions. In the asset management segment, net inflows into managed fee-based programs in the private client group were strong during the quarter, annualizing at nearly 5% and reflecting the complementary impact of our successful recruiting efforts. In the bank segment, loans ended the quarter at a record $49.8 billion, primarily reflecting strong growth in securities-based lending balances. yet another synergistic impact from our growing private client group business as we are able to deploy our strong balance sheet in support of our clients. Importantly, the credit quality of the loan portfolio remains strong. Starting the capital deployment, our long-standing priorities have remained unchanged and that starts with investing in growth.