Raymond James Financial reported record fourth quarter profits, up 16% year-over-year, driven in part by strong performance in its private client group.
"It was a great quarter to close out a great year," CEO Paul Reilly told analysts during a conference call. "I am extremely grateful to all our associates and advisors for their hard work to produce these results. I think this validates our acquisition with Morgan Keegan a few years ago and with the foundation that [chairman] Tom James built."
The St. Petersburg, Fla.-based firm said the private client group's pre-tax income soared 55%, rising to $100.1 million for the quarter from $64.6 million for a year ago. Profits were boosted, in part, by a pause in new technology spending, the company said.
"We did take a bit of a hiatus as we completed some projects and decided not to launch into new ones for a few months," CFO Jeffrey Julien said during the call.
He added that the firm expects those costs to return to normal levels: "We certainly will not abandon our technology projects that are necessary for our financial advisors."
Companywide, communications and information processing costs fell 11%, dropping to $58 million for the quarter from $65 million from a year earlier. Equipment costs for the company increased only 3%, rising to $41 million from $39 million.
The private client group's total revenues hit a record high of $863 million, up from $742 million, a 16% increase.
The unit's total assets under administration rose to $450.6 billion from $402.6 billion for the same period a year ago, an 11.6% increase. But it was down by about $4 billion from the previous quarter.
Assets in fee-based accounts grew to $167.7 billion from $139.9 billion for the year-ago period, but dipped slightly from $168.0 billion for the prior quarter.
Raymond James has been on a strong recruiting push this year, particularly on the West Coast and Northeast for the firm's employee broker-dealer, Raymond James & Associates. Total employee channel advisors rose to 2,462 for the fourth quarter from 2,455 for the previous quarter. Raymond James Financial Services, the firm's independent side, expanded its advisor ranks to 3,329 for the quarter from 3,320.
"This past year was our second best [recruiting] year, only surpassed by '09 when there was some flight from some of our competitors," said Reilly.
He added the firm's recruiting momentum is from dissatisfaction among wirehouse advisors, policy shifts eliminating smaller accounts at rival firms and improvements in Raymond James' technology, which has made it more attractive to advisors.
"Our culture has been very steady and many advisors started in a regional culture and now find themselves in something different," said Reilly.
Morningstar analyst Michael Wong said that while recruiting is important, it's less impactful on the bottom line than many observers believe.
"If you look at their total advisors they have slightly more than 6,000. They added 68 [year-over-year] for their second best year ever. It's not as material as it would have been when Raymond James was smaller. Definitely they need to keep up the recruiting efforts and maintain their advisor base. What's definitely more impactful to the private client group is their assets under management," Wong said.
Companywide, Raymond James reported fourth quarter profits of $136 million, up 16% from $117 million for the same period a year earlier. For the fiscal year, profits were up 31%, rising to $480 million from $367 million.
Total fourth quarter revenues for the company rose to $1.3 billion from $1.15 billion, a 14% increase. At the same time, non-interest expenses climbed to $1.07 billion from $964 million, a 12% increase.
Earnings-per-share increased to $0.97 from $0.84.
"Overall, quite a year and quite a quarter," Reilly said.