Raymond James Financial said the pandemic cut into its wealth management revenues during the fiscal third quarter ended June 30, with net revenues in its private client group declining 8% year-over-year and 16% sequentially to $1.25 billion.
Advisor headcount reached an all-time high of 8,155, up 251 from a year ago and just seven from last quarter. Headcount would have been even higher at the end of the quarter, said CEO Paul Reilly, had the pandemic not put a damper on home office visits, an important aspect in recruiting. Nonetheless, he said, “recruiting activity has continued to recover and the pipeline remains solid across all affiliation options.”
Overall, the St. Petersburg, Fla.-based brokerage firm reported net income of $172 million, a drop of 34% year-over-year amid an $81 million loan loss provision taken by Raymond James Bank. But the firm managed to beat consensus expectations by 27 cents per share, due in part to a lower tax rate, according to Goldman Sachs analyst Alex Blostein, which boosted net income 2% over last quarter.
The company attributed the year-over-year revenue decline in the wealth management business to a 70% drop in deposit fee income from third-party banks in the Raymond James Bank Deposit Program to $20 million, a 45% decline in net interest income, and an 8% shortfall in brokerage fee income to $319 million, due to the low interest rate environment. These factors also contributed to the quarterly revenue drop, as well as lower asset management fee revenues of $715 million, down 14%, and a decline in the value of assets in fee-based accounts.
Meanwhile, Reilly noted that while low interest rates “continue to be a headwind for results in the private client group,” he is optimistic that, since asset levels in fee-based accounts have risen 16% since March 31 to $443 billion, asset management fee income should rise next quarter.
Shares of Raymond James reached a 52-week high of $102.45 in late February, but since then shares have traded substantially lower. On the earnings news Thursday, shares were down 2.5% as of 3:16 p.m. eastern time.
Goldman Sachs’ Blostein has a “sell” rating on the company and expects it to earn $1.09 per share next quarter, an improvement of 10 cents over his estimate for the last quarter.