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Raymond James Spreading its Wings

By    |   Monday, 12 March 2012 08:25 AM

Raymond James (RJF), the stalwart investment bank based in St. Petersburg, Fla., is spreading its wings.

After competitors Goldman Sachs (GS) and Morgan Stanley (MS) turned into commercial banks during the financial crisis, Raymond James was the last pure investment bank left standing. But now it’s turning into a bank holding company, too. The shift will enable Raymond James to offer a wider array of products.

In addition, the company is buying brokerage firm Morgan Keegan from Regions Financial (RF) for $930 million. Raymond James already has about 5,400 financial advisers serving 2 million accounts worldwide. Morgan Keegan will bring another 1,000 advisers to Raymond James, along with the fee income they generate.

Raymond James’ retail brokerage accounts for about 60 percent of its revenue, according to Morningstar.

Impressive return

The company has rewarded its shareholders richly over the years, with the stock providing an annualized total return of 34.1 percent over the past three years, more than tripling Morningstar’s average for capital markets stocks.

Standard & Poor’s analyst Kenneth Leon has a four-star buy rating on Raymond James shares. “We view favorably RJF's competitive position, robust capital markets issuance trends and
strong customer relationships,” he writes.

Leon’s bullish on the Morgan Keegan deal. He thinks earnings growth from asset management and emerging markets will combine with an increase in loans to counteract any shortfall in commission earnings.

Raymond James’ profit dropped 18 percent to $67.3 million in the quarter ended Dec. 31 from a year earlier. Revenue dipped 4 percent to $798.8 million.

The company next reports earnings April 25.

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Monday, 12 March 2012 08:25 AM
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