Raymond James reported record revenue and assets under management while profits were tight as the firm began to streamline its unified operations following the Morgan Keegan integration.
After moving all legacy Morgan Keegan accounts over to the Raymond James platform in February, the firm was able to reach a record revenue of $1.14 billion, up 3% from last quarter and 31% from a year earlier. Net income was $80 million, down 8% from the previous quarter and up 8% from the year-ago quarter as expenses related to the acquisition cut into profit margins.
Although the near term outlook is uncertain, I am proud of our Associates. We have nearly completed a difficult integration with minimal disruption to our financial advisors," Raymond James' chief executive Paul Reilly said in the company's earnings release. "We have begun to reduce our costs while maintaining high levels of customer service. With the combined professionals of Raymond James and Morgan Keegan, we are well positioned to compete in the future and drive growth in market share and in earnings."
Results in the Private Client Group segment were reflective of firm-wide numbers. Over the year, revenue in the employee and independent advisory divisions rose 28% to $726 million, a 2% increase from last quarter. Assets under management rose significantly from $39.3 billion a year ago to a record $51.0 billion. "Both the Private Client and Asset Management segments should benefit from the significant increase in client assets during the second fiscal quarter," the firm said in the release.
The private client group's quarter-over-quarter profitability was virtually unchanged, however. After a 14% year-over-year rise, net income sat at around $52.7 million thanks to expenses related to the merger, the firm said. Raymond James has increased its technology expenditures by 30% over the last 2 years as it put more than $200 million into updating the platform for Morgan Keegan advisors and existing personnel.
The firm indicated it was now focused on growth and streamlining those operations following the integration. On April 11th, the firm laid off 160 employees, mostly in the information and technology area, a move that Raymond James said would result in approximately $5 million of compensation savings per quarter.
We must also complete our cost reduction programs over the next one to two quarters," Reilly said in the release.
The firm had also stabilized its headcount. After a boost of around 900 Morgan Keegan advisors, the total number fell for several quarters due to the departure of some lower producing Morgan Keegan brokers, the firm said. Raymond James had 5,431 advisors this quarter, up from 5,427 at the end of last year.
The successful conversion of the Morgan Keegan Private Client Group onto our platform marked a significant milestone in our integration," Reilly said. "We are now able to operate under the unified Raymond James brand and focus on the growth of our businesses."