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Based in St. Petersburg, Fla., the company offers financial planning services and employs 8,300 advisors. In May, Raymond James Financial reached an agreement to acquire Cebile Capital, a secondary market advisor to private equity firms, indicating its interest in growing its investment banking business.

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Headquartered in St. Petersburg, Fla., the financial services firm serves clients through 8,100 financial advisers throughout the U.S., Canada, and overseas.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Raymond James Financial is an American investment bank and financial services company with over $1.5 trillion in client assets under administration. The multinational bank offers financial planning, private client group, and capital markets services to individuals, companies, and municipalities.

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Raymond James Financial (RJF): Company Profile, Stock Price, News, Rankings

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Raymond James Financial

raymond james financial

Fiscal twenty twenty five Second Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristy Wah, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shickry and Chief Financial Officer, Butch Orlov.

The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide two. Please note that certain statements made during this call may constitute forward looking statements. These statements include, but are not limited to, information concerning futures, strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions or our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments and general economic conditions.

In addition, such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts or future or conditional verbs such as may, will, could, should and would as well as any other statements that necessarily depend on future events are intended to identify forward looking statements. Please note that there could be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10 ks and subsequent Forms 10 Q and Forms eight ks, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shugri. Paul?

Thank you, Christy. Good evening, and thank you all for joining us on the call today. Last week, we had our Global Top Financial Advisor Conference in Montreal. It was wonderful to spend time with our top advisors across our affiliation options from The U. S, Canada and The UK.

They are extremely pleased with Raymond James, expressing a deep appreciation for our unique adviser and client focused culture along with our robust platform. Just a week prior, we hosted all of our investment banking managing directors in Tampa, and they also conveyed enthusiasm for our unique combination of values and capabilities that enable them to best serve clients. Since the CEO succession announcement last year, I have been spending a large portion of my time traveling to meet with as many advisers, bankers, associates, and clients as possible. I know I've shared this before, but what I continue to hear with passion from advisers, bankers, and associates is the best professional decision that they ever made was joining Raymond James. And the biggest regret they have is they didn't join several years earlier.

That statement is really a testament to our special culture and all the fantastic associates who provide excellent service each each day. Every now and then, we get external validation of this. For example, this quarter, our advisers earned the number one ranking in the 02/2025 J. D. Power survey for advice, investor satisfaction, and industry trust.

To all of our advisers and the associates who support those advisers, congratulations, and thank you for earning this well deserved recognition. My number one goal as CEO will be to reinforce and strengthen our unique culture that was established by Bob and Tom James and fortified by Paul Riley. And I am so fortunate to have a top notch leadership team who share the same commitment. Our values based client first approach has consistently led to strong results, and that was the case again in the fiscal second quarter. We generated quarterly net revenues of $3,400,000,000 and pretax income of $671,000,000 up 910% over the year ago quarter, respectively.

For the first six months of fiscal twenty twenty five, we generated record net revenues of $6,900,000,000 and record pretax income of $1,400,000,000 up 1315% over the first half of fiscal twenty twenty four. These solid results were attributable to our diverse and complementary businesses, anchored by the private client group and augmented with the capital markets, asset management and bank segments. Across all of our businesses, we have achieved consistent success retaining and recruiting financial professionals who provide high quality financial advice to their clients. In the Private Client Group, we ended the quarter with $1,540,000,000,000 of client assets under administration, representing year over year growth of 6%. Over the past twelve months, we recruited into our domestic independent contractor and employee channels financial advisors with approximately $316,000,000 of trailing twelve month production and 50,000,000,000 of client assets at their previous firms.

Including assets recruited into our RIA and custody services division, we recruited total client assets over the past twelve months of nearly $59,000,000,000 across all of our platforms. Quarterly domestic net new assets equaled $8,800,000,000 representing a 2.6% annualized growth rate on the beginning of the period domestic PCG asset. While NNA was lower this quarter, which was similar to what we experienced in the same quarter in fiscal twenty twenty four, we saw net new assets improve throughout the quarter and also had extremely strong months of new commits in March and April, which should help our net new assets in the second half of the fiscal year. So we are very optimistic about our momentum and growing pipelines across all of our affiliation options. Our best of both worlds value proposition, where we offer a unique combination of an advisor and client focused culture coupled with leading technology and solutions continues to resonate with advisers across all of our affiliation options.

In the capital market segment, the investment banking pipeline is very strong, but the timing of closings has been negatively impacted with market uncertainty and heightened volatility associated with tariff negotiations. And while investment banking closings are expected to remain challenged across the industry until we get more certainty, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries we cover when the market becomes more conducive. In the asset management segment, net inflows into managed fee based programs in the private client group were very strong during the quarter, annualized annualizing at 8%. In the bank segment, loans ended the quarter at a record 48,300,000,000 primarily reflecting strong growth in securities based lending balances. Most importantly, the credit quality of the loan portfolio remains solid.

Turning to capital deployment. I want to reiterate that our long standing priorities have remained unchanged, and that starts with investing in growth versus organically and complemented with strategic acquisitions. On last quarter's call, we explained that we're evaluating a few M and A opportunities. We also explained that those opportunities are often part of competitive processes and that we would not stretch on valuation, especially if we do not have conviction that we could generate strong risk adjusted returns for our shareholders at those prices. At this point, we are no longer pursuing those aforementioned opportunities.

While we will continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and at valuations that would generate attractive returns for our shareholders. Given our strong capital and liquidity positions and what we believe are attractive long term returns from buying back our own stock at the current level, we have resumed share repurchases. During the quarter, we repurchased $250,000,000 of common stock at an average share price of $146 Additionally, so far in April, we repurchased another $190,000,000 of shares at an average price of $125 per share. Our current plan is to continue repurchasing shares on a more consistent basis, likely at an amount greater than the $250,000,000 we repurchased the fiscal second quarter. We believe this balanced and more consistent approach will still leave us with ample capital liquidity to support our strong organic growth initiatives as well as to continue pursuing attractive acquisition opportunities.

Now I'll provide a few comments on our outlook before turning it over to Butch to go over our quarterly financial results in more detail. It goes without saying, but I'll say it anyway, the heightened market volatility and potential economic impacts associated with tariffs have created a highly uncertain market environment. While client sentiment on the markets and economy has declined significantly over the past quarter, the silver lining is clients are still confident with their financial plans. And satisfaction with their advisers has actually increased to 97% at Raymond James. These trends highlight the fact that clients really value having a financial adviser help them navigate these uncertain times, a similar dynamic that we experienced during the COVID pandemic.

During these times, our vision will remain unchanged to be the absolute best firm for financial professionals and their clients. In addition to our unique culture and robust platform, our strong balance sheet becomes increasingly important to prospective advisers who are seeking strength and stability for their businesses and their clients during these periods of stress. As I explained earlier, our adviser recruiting pipelines are strong and building rapidly across our affiliation options. We are also making significant investments to further strengthen our capabilities. For example, during the quarter, we established and filled a new role for the Chief AI Officer.

Our leadership team has conviction that AI will be a game changer for our industry, but we also know that it's still too early to know exactly how that will play out over the coming years. So we established this dedicated function to monitor developments and use cases for AI with the goal of deploying it to help our financial professionals serve their clients more effectively and efficiently. We already use AI in many areas, primarily in the back office. And just last week, we rolled out an in house proprietary AI search tool, which has been very well received. As an industry, we're still in the early stages of utilizing AI, but we are excited and well prepared to expand AI utilization for financial professionals and their clients in the future.

During the quarter, we also announced a new leadership structure for our private capital business to help high net worth focused advisors better serve their clients with a wide variety of bespoke private investment alternatives. These are just a couple of examples of initiatives we are pursuing to continue investing in our platform for advisors and their clients. I look forward to our Analyst Investor Day in June, where we will discuss these initiatives and others in more detail. In summary, while there is significant macro uncertainty, our value strategy and approach will remain largely unchanged. And our strong balance sheet should position us relatively well in any market environment.

Now I'll turn the call over to Butch Orlaug to review our financial results in more detail. Butch?

Thank you, Paul. I'll begin on Slide six. The firm reported net revenues of 3,400,000,000 for the fiscal second quarter, pretax income of $671,000,000 resulting in a pretax margin of 19.7%.

Net income available to common shareholders was $493,000,000 and earnings per diluted share of $2.36 Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $5.00 $7,000,000 an adjusted pretax margin of 20.3% and adjusted earnings per diluted share of $2.42 We generated annualized return on common equity of 16.4% and annualized adjusted return on tangible common equity of 19.7%. Strong results for the quarter, particularly given our conservative capital base. Turning to Slide seven. Private Client Group generated pretax income of $431,000,000 on quarterly net revenues of $2,490,000,000 Results were driven by 6% higher PCG assets under administration compared to the previous year, the result of market appreciation and the consistent addition of net new assets. Fiscal year to date, PCG generated record revenues and pretax income.

Our Capital Markets segment generated quarterly net revenues of $396,000,000 and pretax income of $36,000,000 Net revenues grew 23% year over year, driven primarily by higher investment banking and fixed income brokerage revenues. However, sequential results declined 18%, largely due to the lower investment banking revenues. The Asset Management segment generated pretax income of $121,000,000 on net revenues of $289,000,000 Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the twelve month period and strong net inflows into PCG fee based accounts. Sequentially, although market values declined, we had strong net inflows of approximately $3,700,000,000 into managed programs on our platform. The Asset Management segment generated record revenues and pretax income fiscal year to date.

The Bank segment generated net revenues of four thirty four million dollars and pretax income of $117,000,000 On a sequential basis, bank segment net interest income grew 1%, driven by continued loan growth and a seven basis point expansion of net interest margin to 2.67%, resulting from a favorable shift in asset mix, along with a higher portion of lower cost deposits. Turning to consolidated revenues on Slide eight. Second quarter net revenues grew 9% over the prior year and declined 4% sequentially. Asset management and related administrative fees of $1,730,000,000 grew 14% over the prior year and decreased 1% compared to the preceding quarter. The sequential decline was primarily due to fewer billing days in the quarter.

PCG fee based assets equaled $873,000,000,000 at quarter end, up 9% year over year and slightly lower compared to the preceding quarter. As we look ahead, we expect third quarter asset management and related administrative fees to be relatively flat with the second quarter. Although PCG assets and fee based accounts are slightly lower sequentially at quarter end, the third quarter will benefit from one additional billing day in the quarter. Brokerage revenues of $580,000,000 grew 10% year over year, primarily due to higher fixed income brokerage revenues. Despite these strong results in our second quarter, the fixed income market at the start of the third quarter is challenging as market and interest rate uncertainty caused a significant headwind for the business near term.

Our revenues in this business could be unfavorably impacted while this uncertainty persists. Investment banking revenues of $216,000,000 increased 21% year over year but declined 34% sequentially. The sequential decline reflected lower investment banking activity broadly. As you may remember, the prior quarter reflected near record M and A results. Moving to Slide nine.

Clients' domestic cash sweep and enhanced savings programming balances ended the quarter at $57,800,000,000 down 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. Domestic cash sweep and enhanced savings program balances have decreased so far this fiscal quarter, not surprising given the timing of tax payments, with the current program balance aligning roughly with April's quarterly fee billings of approximately 1,500,000,000 Turning to Slide 10. Combined net interest income and RJBDP fees from third party banks was $651,000,000 a 3% sequential decline, primarily the result of two fewer billing days in the quarter. Net interest margin in the bank segment grew seven basis points to 2.67% for the quarter, the result of the factors I described earlier. The average yield on RJBDP balances with third party banks decreased 12 basis points to 3%, primarily due to the full quarter impact of rate cuts that occurred late in the preceding quarter.

Based on current interest rates and quarter end balances, net of third quarter fee billings, we would expect the aggregate of NII and RJBDP third party fees to be relatively unchanged in the fiscal third quarter as we expect the effect of slightly lower balances in the bank deposit program to be offset by one additional billing day. Keep in mind, there are many variables that will impact actual results, including any interest rate actions during the upcoming quarter and factors impacting our balance sheet, including changes in our loan and deposit balances. Turning to consolidated expenses on Slide 11. Compensation expense was $2,200,000,000 and the total compensation ratio for the quarter was 64.8%. Excluding acquisition related compensation expenses, the adjusted compensation ratio was 64.5%.

Non compensation expenses of $528,000,000 increased two percent sequentially, mostly due to our relatively modest bank loan provision for credit losses compared to the prior quarter where the provision was near zero and higher communications and information processing expenses. Through the first half of the fiscal year, we are on track for full year non compensation expenses of approximately $2,100,000,000 excluding the bank loan provision for credit losses, unexpected legal and regulatory items and non GAAP adjustments related presented in our non GAAP financial measures. Importantly, we remain committed to investing to support growth across the business while maintaining discipline over controllable expenses. On Slide 12, we provide key credit metrics for our bank segment. We grew loans during the quarter by 2%, primarily in support of our clients, with this loan growth continuing to be led by our securities based loans and to a lesser extent residential mortgage loans.

The credit quality of the loan portfolio remains strong. Criticized loans as a percentage of total loans held for investment decreased to 1.14% at quarter end and non performing assets remained low at 34 basis points of bank segment assets. The bank loan allowance for credit losses as a percentage of total loans for investment ended the quarter at 93 basis points, down two basis points from the prior quarter. The allowance percentage has trended lower largely due to the loan mix shift towards more securities based loans and residential mortgages, which carry lower allowance levels. These two loan categories represent well over half of our total loan book, reflecting 3620%, respectively.

With regard to the relatively smaller corporate loan book, the bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.94%. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios, including any potential impact of tariff negotiations on certain corporate borrowers, any effect of which will affect our third quarter provision. Slide 13 shows the pretax margin trend over the past five quarters, demonstrating the resilience of our diverse business mix to consistently deliver strong margins. On Slide 14, at quarter end, our total assets were $83,100,000,000 1 percent sequential increase, resulting primarily from loan growth. Liquidity and capital each remained very strong.

RJF corporate cash at the parent ended the quarter at approximately $2,500,000,000 well above our $1,200,000,000 target. With a Tier one leverage ratio of 13.3% and total capital ratio of 24.8, we remain well above regulatory requirements. As Paul mentioned, our capital levels provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate for the quarter was 26.2%, an increase over the preceding quarter as the benefit from the excess share based compensation that vested in the preceding quarter did not recur this quarter. For the fiscal year 2025, we estimate our effective tax rate for the year to be approximately 25%.

Slide 15 provides a summary of our capital actions over the past five quarters. As Paul mentioned, we have been actively repurchasing shares. Over the past five quarters, we have returned to shareholders over $1,500,000,000 through common dividends and share repurchases, and we have been actively repurchasing shares in April. We remain committed over the long term to operate our businesses at capital levels in line with our stated targets. With our strong capital levels, we are well positioned to continue investing in organic growth, prudently pursue acquisitions that meet our criteria of being a good cultural and strategic fit, and we are well positioned to meet the needs of our clients and advisers in uncertain and challenging market conditions.

That concludes our prepared remarks. Operator, will you please open the line for questions?

Absolutely. Our first question comes from the line of Michael Cho with JPMorgan. Please go ahead.

Hey, good evening, guys. Thanks for taking my question here. I just wanted to start on the wealth business, particularly NNA. Paul, you kind of called out nuances in NNA during the quarter and that improved sequentially throughout.

just flush out some of those comments in terms of, you know, the magnitude of improvement into April and maybe, you know, any particular segments or channels that that you might call out. And and if if possible, if you could talk through, you know, the size or the magnitude of pipeline today, maybe versus last year this time, just to help us get a sense of direction here? Yes.

Thanks for that question, Michael. The pipeline, I mean, NNA is tough to measure month to month or even quarter to quarter. The sales cycle takes a long time from the initial conversations to the time that advisors affiliate with the firm. So what I would just tell you high level is that throughout the quarter, the actual NNA improved and as well as the new commits, particularly in the months of March, which was a very strong month, followed by another good month in April. These are new commits that will be affiliating with us at a future date.

So that's not reflected in the NNA number. And so and this is really from a variety of firms and across our affiliation options. So what I would tell you is that we're really optimistic about the pipelines and that our value proposition of the best of both worlds where we provide culture that's adviser and client focused with capabilities, technologies and solutions. And now increasingly important is the strong balance sheet that we have because advisers are looking for a source of strength and stability for their businesses. And a lot of these roll ups or even other strategics don't have tangible capital, for example.

And so they're looking for a source of strength and stability so they can grow their businesses, and provide good service for their clients through any market environment.

Great. Thanks for that, Paul. If I could just switch gears quickly, Butch, you talked about some moving pieces in the balance sheet and some nuances across the segment. Was hoping you could just talk through what you're seeing in terms of loan demand. I mean, called out bank loans grew slightly this quarter, quarter to quarter.

If anything notable considerations in terms of what you're seeing in terms of loan demand exiting the quarter and maybe into the third fiscal third quarter as well? Thanks.

Sure. With regard to loan demand during the quarter, I would say exiting the quarter, loan demand has been tepid on the corporate side, as you would expect, given the volatility. And so we remain poised and ready to opportunistically make investments when when the returns, you know, return to the a reasonable risk adjusted, target level for us. But that said, we continue to see significant demand for our SBL loans. During the the quarter, we had SBL loan growth, of over $600,000,000 and, total loan growth of over 2% in balances.

So strong loan growth on the balance sheet, overall during the quarter. And exiting the quarter, we've we've still, seen a strong demand in, in SBL loan growth during April so far in April, which is, you know, seasonally a a typically strong month a time for us and quarter for us with respect to SBL loan growth given clients' needs for liquidity around tax payments.

Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.

Great. Hey, Paul. Hey, Butch. How are you?

to the kind of recruiting backdrop. And and, obviously, you know, there's maybe more M and A of late than there has been in the market. And so just want to love to get a sense of how much of the recruiting backlog right now is coming from maybe some of the M and A affected firms or just maybe also just kind of the level of advisers in motion kind of whether it's much more elevated today than it has been in a while because of the M and A. So that's kind of one piece of it. But then the other side, market volatility can obviously affect pipelines as well.

So just whether we're only maybe a few weeks into kind of post tariff world, but whether you're seeing kind of this volatility impact that pipeline at all or maybe change sentiment around advisers willingness to move. Maybe it has nothing to do with the M and A firms, but just more broadly advisers in motion.

Yes. Our recruiting momentum has been strong over the last several years with or without M and A. And that's really just the consistency of putting advisers, treating them like clients respecting the relationship advisers have with their clients and that best of both worlds value proposition that I discussed. So as you know, our recruiting success has been consistent over the past several years and certainly has been building up and our pipelines were looking good before even recent M and A was announced. Now with that being said, whenever there's a change of control, potentially change of leadership and culture and capabilities and service levels, that always creates a catalyst for advisors to take a look at other options.

And so to the extent those advisors are looking for the type of culture and capabilities that Raymond James provides, and that would absolutely increase the opportunities with advisers that are interested.

Okay, great. Thanks, Paul. And just a follow-up also on the loan book as well. So Butch, I heard the comment about provision in the third quarter or at least anything related to tariffs would be considered. Then I just wanted to to see if that's kind of a generic comment or if there's anything kind of in the loan book that would maybe warrant closer attention because of tariffs.

I'm not not aware of anything that's maybe directly, but but obviously, there's there's always kind of second derivatives of volatility. But just figured I'd ask since since you had mentioned that. Thanks.

Sure. Thanks, Devin. The the the nature of the comment was was more to to make sure it's understood that the the volatility commenced on April 2. And and so the effects of of the volatility both on the on the economic forecast that underpins the provision at at as well as any anything specific to our loan book would not was not reflected in our second quarter results. So, that will be that will be, impact our third quarter.

a comment around credit versus, I mean, a comment around accounting versus credit. It's just from an accounting perspective to the extent that we have new assumptions that are given to us that we put in the CECL models that hasn't been reflected in these results yet just because the timing of the macroeconomic changes that we anticipate will come to the new models would be following the end of this quarter that we're talking about today.

Right, exactly. Okay. That's what I assume, but appreciate the clarification. Thanks, guys.

Your next question comes from the line of Dan Tannon with Jefferies. Please go ahead.

Thanks. One more on NNA. Just for the quarter, I wanted to confirm just any change in attrition in the period to make the numbers lower? Or was it just timing of the onboarding? And then to follow-up on Devin's question, curious of how your view of adviser moving for the industry in a period of volatility like we've seen.

So historically, if you look back after periods of this type of movement, does adviser movement for the industry slow, knowing that your competitive positioning is better today? But just curious about the overall industry trends.

Yeah. I mean, each period of volatility is different. So, one of our best recruiting years in history was during the financial crisis when advisers were looking for a source of strength and stability. And with all the industry disruption and M and A and firms exiting the business, we were huge beneficiaries of that because we had a strong balance sheet as we do today. We have a strong balance sheet and I think we are viewed by advisors in the industry as a source of strength and stability for their businesses and for their clients.

So we think that there's still movement, just based on the pipelines and the discussions that we're having and the home office visits that we're having. And I've been traveling across the country meeting with very high quality prospects, that are interested in moving. And so we're still optimistic about the pipelines and the recruiting activity going forward. And what I would tell you around the retention is this quarter didn't have any significant or notable adviser attrition like the prior quarters did with a super OSJ or two. So the retention looks good.

And so again, we're pretty optimistic about net new assets as we look in the second half of fiscal twenty twenty five and beyond.

Great. That's helpful. Then just to follow-up on the cash comments, just want to make sure I heard you correctly. The $1,000,000,000 from billing and another $1,000,000,000 I think is what you said for tax payments. And if that's correct, how does that compare to historical levels?

And is there any other change just given maybe some selling of derisking and cash build in this type of market backdrop?

Thanks, Dan. The the the indication, was that the balances are down, since quarter end, roughly equivalent to that $1,500,000,000 fee billings that came out of the account in April. So it's not in addition to or an increment of that. That basically, is is where our cash balances sit just net of those collection of those fees.

pretty good result considering the tax payments that we experienced in April as well. So to have the cash be down commensurate with the quarterly fee billings in April is a pretty good result.

Next question comes from the line of Bill Katz with TD Cowen. Please go ahead.

Okay. Thank you very much. As you look ahead to well, of all, Paul, congrats again to you in the new role. So in terms of the earning asset interest earning asset dynamic, I'm sort of curious, loans grew nicely, but the earning assets were sort of down sequentially. As you think through maybe the funding mix and the loan demand commentary you mentioned, how do you see the intermediate term view for earning asset growth?

Is it flattish here in a remix within the loan category? Or could you actually see some kind of incremental expansion? Thank you.

Yes. Thanks, Bill. We saw maturities in the, the, AFS portfolio of, $350,000,000 during the quarter two. That was, that was redeployed and and part of funding the the, loan balances. And and, you know, we with respect to to to that dynamic, we we we see more of that dynamic continuing, in our q three and as well as our q four, to continue to reprice from the securities book into the into the, into loans.

At q three, we approximate that to be about $275,000,000 and in q four, about $325,000,000

I would say on the loan side of the equation, securities based loans, as Butch mentioned, have continued to grow in April. And so, we and this is that's through the volatility, in the month of April as well. And some of that's related to the tax payments and liquidity needs around that. But we would expect those to continue to grow. And then the corporate loans, as we've always said, there's that's going to be market dependent.

And right now, the demand for corporate loans still very tepid certainly during this period of market volatility in April. And so we wouldn't expect those to grow meaningfully until there's more clarity and certainty in the market and then there's more loan demand and loan demand at prices that generate good risk adjusted returns.

Okay. Just as a follow-up, I'm sort of curious, a little bit of a nested question, so I apologize in advance. You mentioned that you were looking at a couple of transactions. I was wondering if could give us maybe the nature of the kind of transactions you were looking at. And then as you look ahead, is a 10% Tier one leverage ratio still the appropriate bogey to which you are looking to manage the platform on?

Yes. The 10% target is still a good target for us. We're obviously above that now, which is why we are going to be more consistent going forward with buybacks because even that $400 to $500,000,000 of buybacks a quarter going forward, if that's the target now, which could change based on all set of circumstances, but that's kind of the target is to look to 400 to $500,000,000 per quarter. That really just keeps our capital ratios where they are, which gives us plenty of capacity for our top priority, which is growth, both organic growth and to pursue acquisitions. So but of course, we don't talk about the acquisitions unless we're announcing them for ourselves.

So not going to get into the details around that.

Your next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.

Hi. Thanks so much for taking my questions. Paul, I I was implying to ask you on buyback, but you just, I guess, opened the kimono, so to speak. You know, it's certainly encouraging to see you guys so active in April. I think when you mentioned the 250,000,000 buyback floor, my initial concern was that you would continue to accrete more capital and that ratio would continue to build.

Essentially, it wouldn't be sufficient, buyback to at least maintain the ratio and even drive it towards that target. You mentioned 4 to 500,000,000 as a run rate. So I'm just trying to understand. I mean, or at least my interpretation of your remarks is don't underwrite $2.50 or the floor, underwrite something closer to 400 to 500,000,000 a quarter, which will ensure that your capital ratios are at least stable, but not necessarily building from here. Is that correct?

Yeah. That's a good that's a good interpretation of it. And, of course, you know, if loan growth accelerates, then that may cause us to slow down buybacks or if there's acquisition opportunities like we saw last quarter when we stopped when we slowed down buybacks as we're evaluating live acquisition opportunities. So there's always different factors to consider. But absent those, the 400 to $500,000,000 that you're talking about to keep the capital ratios really from growing much further from here is a good assumption and something you can underwrite in the models.

Alright. That's great. And then for a follow-up, just on the outlook for NII and NIM, you had noted that the spread revenues were expected to be flat sequentially, which is certainly encouraging. The one trend that we did notice would surprise positively with the deposit beta, which came in, I believe, around 90%. I just wanna understand how you're managing deposit costs, what assumptions you're making once as we get further cuts.

And if you can just unpack some of the component pieces that support that flattish spread revenue guide, which maybe came in a little bit better than we had been anticipating, given some of the quarterly trends.

And that's based on spot balances. So, if we can grow loan balances more throughout the quarter, there might be some upside to that and vice versa if loan balances decline for, during the quarter. So that's just our sort of conservative estimate for the quarter as to for BDP fees and NII to remain relatively flat sequentially. The deposit beta assumption, mean, really, it's two different, primarily two different buckets. There's a higher yielding, buckets, that enhanced savings program, for example, which have, you know, nearly a % deposit beta because they're they're tracking with Fed funds target.

And then there's the cash sweep bucket where the rate of the cost of those deposits is much lower and therefore the deposit betas are much lower as well. So it's a little hard to calculate that deposit beta quarter over quarter just given the timing of the rate cuts last quarter. But that's what we're using to forecast for the upcoming quarter.

Very helpful color, Paul. Thanks for taking my questions.

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

bit of a bigger picture question and then in a so less sort of related to the quarterly or the monthly trends that we've seen. But as you sort of zoom out, Rayju used to do kind of 5% plus NNA. And I get it. It's really not a perfect metric, and there's a lot that kinda goes into it. But it just feels like you've been at kind of a 3% run rate over the last few quarters.

So as you look forward, what's been, I guess, the problem in the last year or so? What do you think could change to get you guys back to this 5% plus? Or is the 5% plus still a realistic target?

Yeah. Well, just last quarter, we were above 3%. I mean, we're 4% last quarter. And if you excluded that kind of OSJ departure, we're kind of in the mid fives last quarter. So I would just I would this is really just between this quarter and then a year ago quarter where it was sub 3% or 4% range.

Raymond James Financial (RJF) Q2 2025 Earnings Call Transcript

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