Executive Summary / Key Takeaways

• Raymond James Financial ($RJF) demonstrates resilience and growth potential through its diversified financial services model spanning Private Client Group, Capital Markets, Asset Management, and Banking.
• The Private Client Group remains a core strength, driven by robust advisor recruiting momentum, significant net new asset inflows, and growth in fee-based accounts, supported by ongoing technology investments.
• Capital Markets shows signs of recovery with improving investment banking activity, particularly M&A, positioning the segment for potential margin expansion as market conditions become more conducive.
• The Bank segment is experiencing growth in securities-based loans and is strategically positioned with ample capital and liquidity to capitalize on eventual broader loan demand recovery while managing credit risk prudently.
• Disciplined capital management prioritizes organic growth and opportunistic M&A, complemented by share repurchases to manage capital levels effectively and enhance shareholder returns.

A Foundation Built on Client Focus and Diversification

Raymond James Financial, Inc. ($RJF), founded in 1962, has cultivated a enduring legacy rooted in a client-first culture and a strategically diversified business model. Spanning Private Client Group (PCG), Capital Markets, Asset Management, and Banking, the firm's structure is designed to provide resilience across varied economic and market cycles. This foundational approach, consistently guided by its leadership over decades, emphasizes supporting financial advisors and delivering comprehensive services to individuals, corporations, and municipalities.

A key pillar of RJF's strategy is its commitment to technological advancement, viewed not merely as support but as a core differentiator. The firm consistently invests in its technology platform, including back-office modernization and advisor-facing tools. A notable recent development is the launch of proprietary Generative AI Search technology in April 2025. This tool is designed to enhance service excellence by enabling financial advisors and associates to quickly access precise, tailored information from the firm's vast internal knowledge base using natural language queries. While specific quantifiable performance metrics for this new AI tool are not yet detailed, the strategic intent is clear: to improve advisor efficiency, free up time for client interaction, and ultimately enhance the client experience. This focus on leveraging technology to boost advisor productivity is a critical component of RJF's strategy to attract and retain high-quality talent, directly contributing to its competitive moat in the wealth management space.

In the competitive landscape, RJF operates alongside larger, more globally scaled institutions like Morgan Stanley (MS), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), as well as specialized firms and emerging fintech players. While RJF may not possess the sheer scale or global reach of some of these competitors, it strategically positions itself by emphasizing its client-centric culture, personalized service, and comprehensive multi-affiliation platform for financial advisors. This approach fosters strong advisor loyalty and client retention, which translates into more stable, recurring revenue streams compared to firms more heavily reliant on transactional or volatile capital markets activities. RJF's operational efficiency, particularly within its core PCG segment, allows it to compete effectively on service delivery, although larger competitors may benefit from economies of scale in certain back-office functions or lending operations. The firm's disciplined risk management and strong capital base also provide a competitive advantage, allowing it to invest and pursue opportunities even when competitors may be constrained.

Segment Performance and Strategic Drivers

RJF's performance is a direct reflection of the health and execution within its core segments:

The Private Client Group (PCG) remains the engine of the firm's growth. For the six months ended March 31, 2025, PCG generated $5,034 million in net revenues, a 10% increase year-over-year, contributing significantly to the firm's overall results. This growth was primarily fueled by a 19% increase in asset management and related administrative fees, driven by higher assets in fee-based accounts. This increase, in turn, resulted from favorable market appreciation and robust net new asset inflows, a testament to the firm's successful advisor recruiting and retention efforts. Management highlighted recruiting momentum, citing a healthy pipeline of large teams and significant recruited assets ($61 billion over the prior 12 months across all platforms). The RIA and Custody Services (RCS) division, part of PCG, also showed strong growth, with assets under administration up 28% year-over-year to $188 billion, benefiting from both external joins and internal advisor transfers. While account and service fees saw a slight decline due to lower RJBDP fees from third-party banks (influenced by interest rate dynamics), the underlying trend of increasing fee-based assets positions PCG for continued revenue tailwinds, despite near-term impacts from billing day variations.

The Capital Markets segment is showing signs of recovery after a challenging period. Net revenues for the six months ended March 31, 2025, increased a significant 33% year-over-year to $876 million, swinging from a pre-tax loss of $14 million in the prior year period to a pre-tax income of $110 million. This improvement was largely driven by a 54% surge in investment banking revenues, reflecting more favorable market conditions for M&A and underwriting activities. Brokerage revenues also increased, albeit more modestly, due to higher client activity. Management noted a healthy M&A pipeline and increased engagement levels, expressing optimism for a gradual recovery in activity over the coming quarters. While the fixed income business continues to face headwinds from depository clients' cautious investment behavior, the segment's overall performance indicates leverage to improving market sentiment. Compared to larger investment banks like Morgan Stanley or Citigroup, RJF's Capital Markets segment may have a more focused niche strategy, but its recent performance demonstrates its ability to capitalize on market upturns within its areas of strength.

The Asset Management segment's performance is closely tied to the success of PCG. Net revenues for the six months ended March 31, 2025, grew 20% year-over-year to $583 million, contributing to a 27% increase in pre-tax income to $246 million. This growth mirrors the increase in asset management and related administrative fees within PCG, driven by higher financial assets under management and assets in non-discretionary asset-based programs, benefiting from market appreciation and net inflows to PCG fee-based accounts. The segment's outlook remains positive, supported by the continued growth trajectory of PCG fee-based assets.

The Bank segment provides stability and a source of funding. Net revenues for the six months ended March 31, 2025, saw a slight decrease of 1% year-over-year to $859 million, primarily due to the impact of lower short-term interest rates on net interest income, which offset the benefit of higher average interest-earning assets. However, pre-tax income saw a substantial 41% increase to $235 million, largely due to a significant 52% decrease in the bank loan provision for credit losses. This lower provision reflects an improved economic forecast and strong credit metrics, despite a slight increase in criticized loans. Bank loans grew to $48.3 billion as of March 31, 2025, driven by continued growth in securities-based loans (SBL) and residential mortgages. Management noted increasing demand for SBLs as clients adjust to current rates and expressed readiness to increase lending across loan segments as activity rebounds, supported by ample client cash balances and capital. The bank's net interest margin saw a modest decline, influenced by the mix of deposits, but the strategic focus remains on prudent growth and balance sheet fortification. Compared to large banks like Bank of America or Wells Fargo, RJF's bank operates with a more focused lending strategy, often leveraging relationships within the PCG segment.

The Other segment, which includes corporate activities and investments, reported a pre-tax loss of $64 million for the six months ended March 31, 2025, compared to a $10 million income in the prior year period. This was primarily due to lower interest income and higher non-compensation expenses, including the absence of a prior-year legal and regulatory net reserve release and increased costs related to growth investments.

Financial Strength and Capital Deployment

RJF maintains a robust financial position, underscored by strong profitability and a conservative capital structure. For the six months ended March 31, 2025, the firm reported net income available to common shareholders of $1,092 million, a 12% increase year-over-year. This translated to diluted earnings per share of $5.22, up 15%. The firm's pre-tax margin stood at 20.5% for the six-month period, demonstrating solid operational efficiency.

Liquidity and capital remain significant strengths. As of March 31, 2025, total assets were $83.13 billion. The firm held substantial corporate cash ($2.5 billion) well above its target, providing significant financial flexibility. Regulatory capital ratios were strong, with a Tier 1 leverage ratio of 13.3% and a total capital ratio of 24.8%, both comfortably exceeding regulatory requirements and internal targets. The company has elected the AOCI opt-out, excluding unrealized gains/losses on available-for-sale securities from regulatory capital, which helps maintain stability.

RJF's capital deployment strategy is disciplined and clear: prioritize organic growth investments, pursue opportunistic M&A that meets cultural, strategic, and financial criteria, and return capital to shareholders through dividends and share repurchases. The Board authorized up to $1.5 billion in common stock repurchases in December 2024, replacing the previous authorization. During the six months ended March 31, 2025, the firm repurchased 2.0 million shares for $300 million. While the pace of buybacks may vary based on capital generation and opportunities, the commitment to offsetting dilution and being opportunistic remains. The quarterly common stock dividend was increased by 11% to $0.50 per share, reflecting confidence in future earnings and a commitment to shareholder returns.

Outlook, Risks, and Competitive Dynamics

Management's outlook for the remainder of fiscal 2025 is cautiously optimistic, grounded in the firm's strong positioning. They anticipate continued long-term growth driven by PCG's momentum, potential recovery in Capital Markets, and prudent expansion in the Bank segment. Specific guidance for fiscal Q2 2025 included an expected ~2% decrease in asset management fees (due to fewer billing days) and a 2-3% decrease in combined NII/RJBDP fees (also impacted by billing days). Non-compensation expenses for the full fiscal year are projected to grow by approximately 10% (excluding certain items), reflecting ongoing investments in technology and growth initiatives. The effective tax rate is estimated at 24-25% for the year.

However, the outlook is not without risks. Market volatility, changes in interest rates, and economic uncertainty remain key concerns that could impact asset values, client activity, and loan demand. Credit risk in the bank loan portfolio, particularly within CRE and CI segments, requires ongoing monitoring, although current metrics are solid and the provision for credit losses has decreased. Regulatory risks, including the SEC inquiry into cash sweep programs and new rules regarding Treasury clearing and broker-dealer reserves, could potentially impact business practices and profitability. Competition for financial advisors remains robust, with private equity-backed firms adding a new dynamic, although RJF believes its platform and culture provide a competitive edge. Advisor attrition, while generally managed, can impact net new assets.

In the broader competitive landscape, RJF differentiates itself from larger, more commoditized players through its high-touch service model and focus on building deep relationships with advisors and clients. While competitors like MS or BAC may leverage scale for cost advantages or dominate certain institutional markets, RJF's strength lies in its ability to attract and retain advisors who value independence, robust support, and a client-first ethos. The firm's investments in technology, including AI, are aimed at enhancing this core value proposition, providing tools that improve advisor efficiency and client service, which is critical for competing effectively against rivals who are also investing heavily in digital capabilities. The competitive environment for loan growth, particularly in corporate lending, remains challenging with tight spreads, requiring RJF to maintain lending discipline.

Conclusion

Raymond James Financial's investment thesis is fundamentally underpinned by its resilient, diversified business model and its unwavering focus on supporting financial advisors to serve their clients. The firm's PCG segment continues to be a powerful growth engine, fueled by successful recruiting and increasing fee-based assets. While Capital Markets and Banking face cyclical headwinds, they are strategically positioned to benefit from improving market conditions and eventual loan growth recovery, respectively. RJF's strong capital and liquidity provide the flexibility to invest in organic growth, pursue opportunistic acquisitions, and return capital to shareholders, even amidst economic uncertainty. Key factors for investors to monitor include the pace of advisor recruiting and net new asset growth, the trajectory of recovery in Capital Markets activity, the timing and extent of a rebound in corporate loan demand, and the firm's ability to leverage technology, particularly AI, to enhance advisor productivity and maintain its competitive edge in a dynamic industry landscape.