Press Release

April 22, 2009
Printable version (PDF)

RAYMOND JAMES FINANCIAL, INC.
ANNOUNCES SECOND QUARTER RESULTS

ST. PETERSBURG, Fla. – Raymond James Financial, Inc. today reported a 90 percent decrease from the prior year’s quarterly net income to $6,093,000 or $0.05 per diluted share, for the second quarter ended March 31, 2009. In comparison, the firm earned $59,790,000, or $0.50 per diluted share, for the second quarter of fiscal year 2008. Net revenues decreased 15 percent to $589,667,000 while gross revenues decreased 26 percent to $596,411,000.

“As we have been forecasting for some time, the malaise in the financial sector, which has migrated to the general economy, has manifested itself in Raymond James Bank’s loan portfolio. For the past several quarters, we have been increasing the rate of additions to the provision for loan losses to reflect increasingly difficult conditions in both the real estate and corporate sectors,” stated Chairman and CEO Thomas A. James.

“During the March quarter, we recorded a $75 million provision for loan loss in a combination of charge-offs and reserves, reflecting both the dramatic decline in values in the office and retail real estate space, a $28 million charge-off on one specific loan to a commercial mortgage real estate investment trust and other smaller charge-offs, and specific additions to reserves. That $75 million contrasted to the $25 million provision in the prior quarter and $11 million in last year’s comparable quarter. Thus, the total allowance for loan losses on March 31 was $141 million, or 1.84 percent of outstanding loans. These reserves are primarily related to real estate. Non-performing loans grew $79 million during the quarter to $143 million, which includes $42 million to borrowers who are presently current, but who are deemed by bank management to be at risk in terms of meeting their obligations. Approximately $1.4 billion of Raymond James Bank’s commercial loan portfolio is real estate related. As a result, Raymond James Bank reported its first ever quarterly loss, a pre-tax amount of $12.4 million,” James continued.

“In an environment in which real estate asset values are expected to continue to decline for some period, it is difficult to project future results for the bank, but we expect to make additional provisions for loan losses for at least the remainder of calendar 2009. However, our internal stress tests, which certainly aren’t infallible, indicate that operating earnings should be more than sufficient to comprehend those expenses over the next 12 months, unless the economy becomes much worse or the net interest spread materially declines.

“As we have indicated in prior press releases, almost all of our segments in the securities business are being depressed by the market decline, which was 32 percent in the S&P 500 for the first six months of the 2009 fiscal year. The decline of 31 percent in Private Client Group revenues to $351 million compared to last year’s March quarter resulted in a 78 percent reduction in pre-tax income to $11.7 million. Since revenues vary proportionately with assets under management, the Asset Management Group’s revenues fell 24 percent to $46.2 million and pre-tax income dropped 67 percent to $4.9 million. Although Equity Capital Markets experienced a $1.5 million loss in the quarter, the Fixed Income department generated a 374 percent profit increase to $17.5 million on a robust 47 percent increase in revenues. Consequently, securities operations more than offset the loss in Raymond James Bank,” continued James.

“Although I expect conditions to be difficult in the securities sector for at least the remainder of 2009, the rally in March and April, as well as continuing vibrant financial advisor recruiting results, augur for somewhat improved revenue generation. Obviously, asset management fee revenues should stabilize, which in conjunction with expense reductions, should improve the outlook for the Asset Management Group. Moreover, underwriting activity has also increased recently as a result of the improvement in market conditions. Thus, I’m optimistic that we may be reaching an inflection point in revenue levels for securities operations.”

“The results for the first six months of our fiscal year are much better than the current quarter although net income was down 42 percent to $67.2 million on only a 9 percent decline in net revenues, which is remarkable under the circumstances. We have remained profitable during the worst period that we have experienced since 1973-75. More importantly, we have continued to grow our platform throughout the downturn, which presages new plateaus in revenues and profits when economic conditions improve.”

The company will conduct its quarterly conference call Thursday, April 23, at 8:15 a.m. EDT. Please logon to raymondjames.com/analystcall for a listen-only live audio stream of the call. The subjects to be covered may include forward-looking information. Questions may be posed to management by participants on the call, and in response the company may disclose additional material information.

Raymond James Financial (NYSE-RJF) is a Florida-based diversified holding company providing financial services to individuals, corporations and municipalities through its subsidiary companies. Its three wholly owned broker/dealers, (Raymond James & Associates, Raymond James Financial Services and Raymond James Ltd.) and Raymond James Investment Services Limited, a majority-owned independent contractor subsidiary in the United Kingdom, have a total of more than 5,000 financial advisors serving approximately 1.8 million accounts in approximately 2,200 locations throughout the United States, Canada and overseas. In addition, total client assets are approximately $172 billion, of which approximately $26 billion are managed by the firm’s asset management subsidiaries.

To the extent that Raymond James makes or publishes forward-looking statements (regarding economic conditions, management expectations, strategic objectives, business prospects, anticipated expense savings, financial results, anticipated results of litigation and regulatory proceedings, and other similar matters), a variety of factors, many of which are beyond Raymond James’ control, could cause actual results and experiences to differ materially from the expectations and objectives expressed in these statements. These factors are described in Raymond James’ 2008 annual report on Form 10-K and quarterly report for the quarter ended December 31, 2008 on Form 10-Q, which are available on raymondjames.com and sec.gov.

¹Net revenue equals gross revenue, which includes interest income and non-interest income, less interest expense. ²Data presents 9/30/08 total assets adjusted to exclude the $1.9 billion FHLB advance repaid on 10/1/08, and the $60 million return of capital to RJF on 10/2/08. See information in footnote 11 below for additional information.