Raymond James Bank rakes in the profits

NEW YORK — With assets increasing, the Raymond James Bank is beginning to have an effect on the results of parent company Raymond James Financial Inc.
Known for its various platforms with more than 5,000 registered representatives, Raymond James reported bank revenue of $79 million for the fiscal third quarter ended in June, an increase of 41% over the amount in the fiscal second quarter.
Positive headlines
“Bank Story Starting to Click” and “Bank Continues to Outpace Expectations” were two of the headlines from a research note about Raymond James’ earnings by Douglas Sipkin, a senior analyst in New York with Wachovia Capital Markets LLC of Charlotte, N.C.
“Management notes that the pace of organic deposit growth is strong given that bank deposits are now the default option for new brokerage accounts,” he wrote in a note July 25. “The recent widening in credit spreads is also helping incremental lending.”
The bank is a small but growing part of Raymond James’ overall financials. The company’s total net revenue for the quarter was $689 million.
That was an increase of 9% over revenue of $633 million in the prior year’s third quarter.
By the end of July, total deposits at the bank reached $5.7 billion. It has about $4 billion in loans, divided between residential mortgages, corporate loans and real estate.

“I think that’s an incredibly impressive job, since it started from zero,” said Richard Bove, an analyst with Punk Ziegel & Co. of New York. He noted that the bank’s success comes from “the strength of the brokerage system.”
Raymond James is considering adding to its banking platform, said Steve Raney, president and chief executive of Raymond James Bank. The firm offers bank products inside brokerage accounts, and a credit card is “actively being considered,” he said.
The bank, which was launched in 1994, offers checking accounts, and residential and corporate loans. Mr. Raney joined the company in January 2006. He had worked in Tampa for Charlotte, N.C.-based Bank of America Corp. for 17 years.
Mr. Raney said the bank ranks sixth in deposits of broker-dealers that own banks. The industry leader is Merrill Lynch & Co. Inc. of New York, which has two bank subsidiaries with about $85 billion in assets.
Taking a page from the playbook of Merrill Lynch and others, the bank has increased its deposits by sweeping its brokerage customers’ cash positions into deposits insured by the Federal Deposit Insurance Corp.
Raymond James reps and advisers are becoming “intrigued” with the bank, particularly how they can use it to work with high-net-worth clients, Mr. Raney said.
“There’s adviser interest in how we can become an active part of their practice,” he said.
Mr. Raney in addition said that the company also is considering building more branches. Currently, there’s only one, in the company headquarters.
Potential cities that could see another branch would have large populations of Raymond James reps, he said, citing Atlanta, Nashville, Tenn., and Houston.
Strategy questioned
Mr. Bove, however, questioned a plan to build a bank network with only one branch in a city.
“To be one branch in a market with thousands of branches doesn’t work,” he said.
Mr. Raney added that a “bricks and mortar” strategy to build a network of branches was “much further down the road.” Raymond James already has 400 financial advisers working in financial institutions, and the company doesn’t want to compete with those financial advisers.
Also of note, Tom James, chairman and CEO of Raymond James Financial of St. Petersburg, Fla., stepped down as chairman of the bank board in April, turning over the position to Jeff Julien, a longtime bank board member and chief financial officer of the parent company.
In May, Mr. James’ son, Court, was named to the bank’s board of directors. Court James is director of human resources with Raymond James Financial.