Raymond James Financial, Inc. Q3 FY2026 earnings call

Overall Firm Performance

• The firm achieved record quarterly consolidated net revenues of $3.93 billion, up 16% year-over-year and 2% sequentially. Pretax income was $750 million, up 33% year-over-year and 2% sequentially. Net income available to common shareholders was $595 million, with diluted EPS of $3.01; adjusted diluted EPS (excluding acquisition costs) was a record $3.14.
• The firm's long-term, diversified business model delivered resilient results, supported by a client-first culture, conservative balance sheet management, and disciplined capital deployment.

Financial Adviser Growth & Retention

• Domestic net new assets reached $21.7 billion in the quarter, for a 5.5% annualized growth rate. Through the first 9 months of the fiscal year, net new assets totaled $75 billion, up 119% from the prior year record.
• Recruiting momentum remained strong: the quarter added advisers with $156 million trailing 12-month production and nearly $23 billion in client assets from prior firms. For the first 9 months, the firm added $393 million in trailing production and over $56 billion in client assets, on track to exceed fiscal 2025's record results.
• The firm maintains 97% adviser satisfaction, the highest in the industry, which underpins strong retention and organic recruiting growth. It offers all adviser affiliation options with an agnostic approach, combining a client-focused culture with leading technology and capabilities that set it apart from peers.

Technology & AI Investment

• The firm invests over $1.1 billion annually in technology, including process automation and artificial intelligence, to create operational efficiency and free advisers to focus on client relationships.
• The enterprise rollout of Raymond, the firm's proprietary internal AI assistant, was completed this quarter following a successful pilot. Initial adoption and satisfaction are extremely strong, with 6,500 unique users after just over a month and a 99.5% satisfaction rate. An internal AI Academy was also launched, with nearly 20,000 employees/advisers already completing the 4-course training module.

Strategic M&A & Capital Deployment

• The firm completed the acquisition of Clark Capital during the quarter, adding wealth-focused solutions and ~$47 billion in combined assets to the platform, with strong early retention results.
• Capital deployment remains disciplined and long-term focused, prioritizing organic growth, platform/technology investment, strategic acquisitions, and returning capital to shareholders. Over the past 12 months, the firm repurchased ~$1.6 billion in common stock, including $400 million in the quarter. The firm ended the quarter with a Tier 1 leverage ratio of 11.7%, well above regulatory requirements, with ~$1.5 billion in excess capital capacity for deployment.

Capital Markets & Lending

• Capital Markets revenues grew in the quarter on higher investment banking activity, though overall activity remains below normalized levels, especially in the middle market and sponsor-driven segments. The firm entered the fourth quarter with an encouraging deal pipeline built from years of strategic investment in the segment.
• Bank loan growth remains driven by securities-based lending, which benefits from strong synergy with the growing Private Client Group business. The firm continues to shift its loan portfolio toward lower-risk securities-based loans and residential mortgages, which now represent 64% of total loans held for investment.

1. Private Client Group (PCG): Record quarterly net revenues of $2.84 billion, up 14% year-over-year. Pretax income was $423 million, up 3% year-over-year. PCG contributed approximately 72.3% of total firm net revenues. Client assets under administration reached a record $1.86 trillion, up 18% year-over-year. PCG fee-based assets hit a record $1.15 trillion at quarter end, up 22% year-over-year.
2. Capital Markets: Quarterly net revenues of $477 million, with pretax income of $48 million. Revenues increased year-over-year and sequentially, driven by higher M&A advisory revenue and higher debt underwriting revenue. Capital Markets contributed approximately 12.1% of total firm net revenues.
3. Asset Management: Record net revenues of $362 million, with pretax income of $143 million. This contributed approximately 9.2% of total firm net revenues. Growth was driven by higher assets under management from market appreciation, strong net inflows into PCG fee-based accounts, and a partial quarter contribution from the recently acquired Clark Capital (adding ~$47 billion in combined assets).
4. Bank: Record net revenues of $488 million, with record pretax income of $206 million. This contributed approximately 12.4% of total firm net revenues. Net revenues grew 7% year-over-year, driven by net loan growth and a loan loss reserve release from improving credit quality. Total loans ended the quarter at a record $56.2 billion, up 13% year-over-year, with 34% year-over-year growth in securities-based lending balances. Credit quality across the portfolio remains strong.

• Asset management and related administrative fees for the fiscal fourth quarter 2026 are expected to increase approximately 11% from the third quarter level, driven by higher quarter-end PCG fee-based assets.
• Aggregate net interest income and third-party bank RJBDP fees for the fourth quarter are expected to be approximately flat with the third quarter level, assuming static interest rates and unchanged end-of-quarter balances. Actual results may vary based on future interest rate moves and changes in loan/deposit balances.
• The full-year effective tax rate is estimated to approximate 24%.
• Full-year noncompensation expenses (excluding loan loss provisions, unexpected legal/regulatory items, and non-GAAP adjustments) remain on track to hit the prior target of approximately $2.3 billion, even with unanticipated additional costs from the Clark Capital and GreensLedge acquisitions.
• The adjusted pretax margin target of approximately 20% was achieved this quarter, with potential upside from higher investment banking activity and rising interest rates, and the firm remains comfortable with this target.
• The Capital Markets segment long-term pretax margin target is 15%, which management expects to return to once M&A activity normalizes.

• A previously disclosed putative class action lawsuit related to the firm's cash sweep programs resulted in elevated legal defense costs this quarter, and while the firm believes it has strong defenses and is vigorously defending the claim, additional near-term legal expenses are expected (though not at this quarter's elevated level).
• Investment banking transaction activity remains below normalized levels, and the timing of a return to normal activity is uncertain, as valuation gaps between buyers and sellers and sector-specific headwinds (such as AI-related uncertainty for software/fintech) have delayed deal closing.
• Forward-looking financial results are subject to material uncertainty from future changes in interest rates, which can impact net interest income, loan growth, and deposit balances.
• The productivity and cost savings benefits of AI investments are still unproven at this stage, and it is too early to accurately estimate the scale of operational improvements from current AI initiatives.
• Actual results may differ materially from forward-looking guidance due to risks related to acquisition integration, regulatory developments, litigation outcomes, and general economic and market conditions.

Q: Can you confirm that current strong recruiting momentum and a robust pipeline will allow the firm to maintain its current high organic growth rate? / A: Management notes that strong adviser retention is the foundation of growth, supported by a 97% industry-leading adviser satisfaction rate. Raymond James offers the full range of adviser affiliation options with an agnostic approach, treating advisers as clients, which creates broad-based demand across channels. The pipeline is diverse across firms, geographies, and affiliation options, and year-to-date net new asset growth is already up 119% from last year's record, leading management to feel very confident about continued strong growth.

Q: How is the proprietary AI tool Raymond being adopted, and what are the expected cost and benefits of AI initiatives? / A: After full rollout just over a month prior, 6,500 unique users already use Raymond, with a 99.5% satisfaction rate. Nearly 20,000 employees/advisers have completed the firm's AI Academy training. The core goal of AI is to free advisers from administrative work to spend more time on client relationship building; management states that advisers who use AI will eventually replace those who do not. While there are costs to AI initiatives, the firm is managing costs closely and expects long-term return on investment will exceed costs.

Q: Is it too early to measure productivity uplift and expense reduction from AI, and what potential cost savings could come from automation of back-office roles? / A: Management confirms that while productivity and efficiency improvements are expected to be significant, it is still too early to quantify the size of these gains at this stage of AI rollout. The firm's priority is to avoid falling behind, ensure all advisers are trained on AI capabilities, and continue investing in tools, with no concrete estimates available yet.

Q: What explains the lower segment margins this quarter in Capital Markets and Asset Management, and when can we expect improvement? / A: In Capital Markets, lower margin stemmed from a one-off increase in deal-related non-compensation expenses; long-term, the 15% pretax margin target will be achieved once M&A activity normalizes. In Asset Management, the quarter includes 2 months of acquisition-related costs from the Clark Capital acquisition, which created temporary noise in segment results; a full quarter of normalized results will be available after Clark Capital is fully integrated.

Q: How has your strong success growing enhanced savings program (ESP) deposit balances impacted the firm's asset sensitivity to interest rate changes? / A: Raymond James maintains a mostly floating-rate balance sheet, so all else equal, rising interest rates are a tailwind for earnings. While growing on-balance sheet ESP deposits can modestly impact net interest margin because they have higher interest costs, management manages total earnings (combining net interest income and off-balance sheet third-party sweep fees) in aggregate, and the diversified funding model is working as intended to maximize total returns.