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How Raymond James Financial Is Managing Its Expenses

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Non-interest expense

Raymond James Financial’s (RJF) non-interest expenses increased 10% on a YoY (year-over-year) basis to $1.4 billion. Compensation, commissions, and benefits accounted for the largest portion and constituted 81% of its total expenses.

Acquisition expenses in fiscal 1Q18 declined 69%. Business development costs were also lower during the quarter. Business development costs are seasonal and slow down during the holidays. Recruiting activities also slow down during the holidays. Even though expenses in these quarters were low, RJF expects them to be $30 million–$40 million.

Communication and information processing expenses were lower than expected and are based on the timing of new systems. The company expects the number to be in the same range. It forms 6% of its total expenses.

The company has about $700 million of net loan growth in the quarter. It projected the loan loss provision at $7 million, but the expenses were reduced due to five to six criticized loans during the quarter. The company expects net loan growth to be 1%.

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Interest expense

Interest expense for 1Q18 increased 10% from 1Q17 and decreased 7% from 4Q17. Rising interest rates may further increase these expenses in the next two to three quarters.

RJF has a net interest margin of 11.4%, while the industry median is 16.5%. Financial Engines (FNGN) has a net interest margin of 12.6%, and Charles Schwab (SCHW) has a net interest margin of 25.3%. TD Ameritrade’s (AMTD) net interest margin is 23.6%.

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