Rising rates damp Raymond James' quarterly results

Fighting bond market head winds, Raymond James Financial Inc. posted modest profit gains for its fiscal third quarter ended June 30, just missing analyst estimates. Net revenue of $1.11 billion rose 2% from a year ago, and net income rose 7% to $84 million. Excluding nonrecurring items, Raymond James posted earnings of $0.65 per share, up 2% from the prior year's quarter. Analysts were expecting $0.66 a share, according to Thomson Reuters' Institutional Brokers' Estimate System. The bond market sell-off put a damper on results. “It was an extremely difficult quarter” for the firm's fixed-income unit, chief executive Paul Reilly said in an earnings report today. Higher rates “led to low commission volumes and a net trading loss,” particularly in municipal bond inventories, he said. The firm's retail business “showed modest improvement” from the preceding quarter, Mr. Reilly said. Revenue in the private-client group were up 2%, and pretax income rose 8%. Retail was also hit by rising rates, as well as Canada-based client assets that declined in U.S. dollar terms, the firm said. Asset management continues to be a bright spot. Assets under management rose to a record $52.2 billion, the company said. Raymond James has another $405 billion under administration, overseen by a total of 6,300 advisers in its various channels. Mr. Reilly said the firm was “substantially complete” in its integration of Morgan Keegan & Co. Inc. last year. As a result, Raymond James reduced head count in its capital markets unit in June, following a layoff in April of about 160 people after converting Morgan Keegan's private-client accounts to the Raymond James platform. The company continues operating at “elevated support levels, as the familiarization and utilization of our systems by our legacy Morgan Keegan advisers will take some time,” Mr. Reilly said. Raymond James has said it retained about 95% of Morgan Keegan advisers who were offered retention packages.