Raymond James has been growing steadily through selective recruiting, but the firm may have an opportunity to turbo charge its growth.
CEO Paul Reilly said last week that the firm is exploring acquisitions. And Raymond James is also reportedly in talks to acquire Deutsche Bank's U.S. private client unit.
Should Raymond James buy Deutsche Bank's unit, the bill could run between $600 million to $900 million, according to a research report written by Christian Bolu, an analyst at Credit Suisse.
Deutsche Bank, which reports earnings on Oct. 29, has a small brokerage force of about 350 advisors. But those advisors are big producers in large markets where Raymond James has a small presence. Bolu estimates that the average Deutsche advisor has $1.6 million in annual revenues compared to $574,000 annual revenue for the average Raymond James advisor.
"The boost to credibility is strategically important – while Raymond James is increasingly seen as an alternative to global investment banks, [its] current footprint is largely within provincial cities, making it difficult to attract elite advisors in key metropolitan hubs that enjoy great wealth concentration," Bolu writes.
- Read more: Raymond James Exploring Acquisitions
Although Raymond James has more than 6,000 advisors across all channels, the St. Petersburg, Fla.-based firm only opened its first employee advisors office in Manhattan last year.
An acquisition would also increase the firm's client assets. Deutsche is estimated to have about $86 billion while Raymond James recently reported that its private client group assets stood at $453.3 billion.
"It's not the biggest unit," Alois Pirker, research analyst at Aite Group, says of Deutsche's private client group "It's modest. But for gaining more representation in a market like New York, it's a great way to do it."
But how likely is a deal?
Spokespersons for Deutsche Bank and Raymond James Financial declined to comment.
During an earnings call last week, Reilly outlined how the firm would approach a possible deal, though he declined to discuss specific targets.
"We will only pull the trigger if it's good economics for our shareholders," Reilly told analysts.
Raymond James also has a German connection. In August, Raymond James named an ex-Deutsche executive to its board of directors: Charles G. von Arentschildt, former head of Global Markets, North America, at Deutsche Bank. He could not be reached for comment.
However, industry insiders are divided as to whether or not a deal will be forthcoming. Some have privately suggested that Raymond James wouldn't be the acquirer since the two firms are different, as some of Deutsche's advisors aren't pure retail brokerage.
A deal could also contain potential risks.
"Raymond James prides itself on its 'regional/family' culture; a Deutsche acquisition represents a move away from its core DNA and risks damaging/diluting that brand," Bolu writes, adding that the firm would have to work hard to integrate the new advisors.
Regardless of whether or not Raymond James is the buyer, one thing is clear: European firms, with the exception of UBS, appear to be headed for the exits.
Barclays is selling its U.S. wealth management business to Stifel while Credit Suisse has entered into an arrangement with Wells Fargo where the wirehouse can recruit away the Swiss-owned firm's advisors. Terms of both deals have not been disclosed.
"Clearly, with Deutsche and Barclays, the time of the European firms in the New York [market] – those days are being counted," Pirker says.
- Raymond James Exploring Acquisitions
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