Raymond James’ ‘enhanced savings program’ got bump from SVB failure, execs say

Interest income brought the firm's revenue to a record high during the quarter ended in March, offsetting lower income from asset management fees.

Raymond James brought in record net revenue during the quarter that ended in March, despite declines in its asset management fees and brokerage revenue, the company disclosed Wednesday in an earnings presentation.

Driving those results were bumps in the revenue from the firm’s private clients group and bank businesses during its fiscal second quarter of 2023, with interest income coming in at nearly triple the amount seen during the same quarter a year ago.

A theme during the earnings call held after Wednesday’s market close was the leadership’s excitement over Raymond James’ recently launched “enhanced savings program,” which has seen a flood of money come in amid the recent bank failures. The program, which started in a pilot phase earlier this year and opened to new client assets in March, now has balances totaling more than $4.5 billion. Although it was restricted to new money at first, Raymond James opened the program to existing client assets in April.

[More: SVB failure leaves advisors, analysts questioning deeper risks in US banking system]

“The enhanced savings program added approximately $2.7 billion in new deposits in March, as the offering was only open to net new balances until April,” chief financial officer Paul Shoukry said in prepared remarks during the call. “And a good portion of these new balances were derived from brand-new clients to the firm following the Silicon Valley Bank collapse, highlighting the attractiveness of this product and Raymond James being viewed as a source of strength and stability.”

That program, which is available within the firm’s private client group, provides up to $50 million in FDIC coverage via a network of banks, each of which contributes up to $250,000 of such insurance. The enhanced savings program advertises higher yields than are available with standard checking and savings accounts and does not entail bank fees or holding periods, according to Raymond James.

The program “is designed for clients who strategically hold significant cash for the long term and prefer a higher degree of security … [but] is not suitable for everyday cash,” the company’s site states.

Despite that influx of money, the total amount of client cash, including sweep accounts, was $52.2 billion, down by 14% from the amount at the end of December, according to the firm. The decline in sweep money “reflects the expected cash sorting activity” that executives said they expect will taper off this year.

During the quarter, Raymond James bought back 350 million shares at “attractive prices,” and the firm’s board has authorized it to spend $1.1 billion to purchase more.

Fee revenue from asset management and administration fell by 11% year over year but increased 5% compared with the prior quarter. Brokerage revenue, at $496 million, was down 12% compared to a year prior but up 2% from the quarter that ended in December, the company reported.

“This year-over-year decline was largely due to lower asset-based trail revenues in [the private client group] as well as lower fixed-income brokerage revenues in the capital markets segment,” Shoukry said. “Being able to generate record quarterly revenues during a period when capital market revenues were so challenged across the industry reinforces the value of having diversified and complementary businesses.”

An unexpected $20 million arbitration award Raymond James had to pay created a drag on its non-compensation expenses, Shoukry said, referring to a Feb. 2 Finra award to Wells Fargo Advisors over claims that Raymond James and an advisor depleted an Arkansas branch office of reps.

As of March 31, Raymond James reported 8,726 advisors, nearly the same as the 8,730 from a year prior but up from the 8,699 as of the end of December.