Raymond James Financial Financial Model

For EACH revenue segment or product line:

Private Client Group (PCG)

• Segment name: Private Client Group
• Revenue driver formula: (Fee-based AUA x Average Fee Rate) + Brokerage Commissions + Account/Service Fees
• Historical growth rate: 8-12% CAGR
• Key growth levers and headwinds: Advisor headcount growth, net new asset inflows, and equity market appreciation drive growth; headwinds include industry-wide fee compression and lower cash sweep yields in falling rate environments.
• Pricing dynamics: Advisory fees face competitive pressure; cash sweep revenue is highly sensitive to short-term interest rates.
• Revenue recognition notes: Asset management fees are recognised over the period services are provided; commissions are recognised on the trade date.
• Seasonality: Generally tracks market performance, but the December quarter often sees higher performance fees and year-end planning activity.

Capital Markets

• Segment name: Capital Markets
• Revenue driver formula: M&A Advisory Fees + Underwriting Fees + Institutional Brokerage
• Historical growth rate: Highly cyclical, ranging from -15% to +20% annually
• Key growth levers and headwinds: Macroeconomic environment, interest rates, and corporate confidence driving M&A and capital raising.
• Pricing dynamics: Negotiated deal-by-deal fees for advisory; underwriting spreads are relatively standard across the industry.
• Revenue recognition notes: Advisory fees are recognised upon deal closing or milestone achievement.
• Seasonality: The September and December quarters are often stronger for deal closings.

Asset Management

• Segment name: Asset Management
• Revenue driver formula: Financial AUM x Average Management Fee Rate
• Historical growth rate: 10-14% CAGR
• Key growth levers and headwinds: Market appreciation and net inflows into managed programmes drive growth; headwinds include the structural shift toward passive investing.
• Pricing dynamics: Contractual basis points on AUM, subject to tiered pricing as account sizes grow.
• Revenue recognition notes: Billed quarterly based on beginning-of-quarter or average AUM.
• Seasonality: Minimal, primarily driven by broader equity and fixed income market levels.

Bank

• Segment name: Bank
• Revenue driver formula: Average Interest-Earning Assets x Net Interest Margin
• Historical growth rate: 5-10% CAGR
• Key growth levers and headwinds: Loan growth in Securities Based Lending and commercial loans; headwinds include inverted yield curves and rising deposit betas.
• Pricing dynamics: Floating rate loans are tied to SOFR; deposit rates are adjusted based on the competitive environment.
• Revenue recognition notes: Interest income is recognised on an accrual basis using the effective interest method.
• Seasonality: Minimal, driven entirely by the macroeconomic rate environment.

• Total assets: Approx. $88.2 billion as of September 2025.
• Key asset categories: Bank loans ($53.8 billion), Cash and cash equivalents, Brokerage client receivables, and Investment securities.
• Goodwill & intangibles as % of total assets: Approx. 2-3%, driven by TriState and other historical acquisitions.
• Working capital profile:
• Traditional working capital metrics like DSO, DIO, and DPO are not applicable to broker-dealers.
• Regulated broker-dealer net capital requirements dictate liquidity positioning.
• PP&E: Minimal at approx. 1% of assets, primarily consisting of leasehold improvements and technology hardware.
• Right-of-use assets / operating leases: Approx. $500-$600 million, representing branch and corporate office leases.

• Capex as % of revenue: 1-2%, primarily for technology and software development.
• Maintenance capex vs. growth capex: Estimated at 40% maintenance for hardware refresh and facility upkeep, and 60% growth for new technology platforms and digital client interfaces.
• Major capex programmes: Enhancing advisor desktop tools, cybersecurity infrastructure, and integration of acquired platforms.
• Capitalised software / development costs: A material component of capex, amortised over 3-5 years.
• M&A pattern: Primarily a bolt-on acquirer with occasional transformational deals like TriState Capital.
• Typical acquisition multiple paid: 10-15x forward earnings for asset managers and boutique investment banks.

• Total debt: Approx. $3.5 to $4.0 billion in corporate debt.
• Debt/EBITDA ratio: Not the primary metric; the firm is evaluated on its Total Capital Ratio (24.1% in Sept 2025) and Tier 1 Leverage (13.1%).
• Credit rating: BBB+ / Baa1 range.
• Key debt instruments: Senior notes, including $650 million at 4.90% due 2035 and $850 million at 5.65% due 2055 issued in late 2025.
• Maturity profile: Well-laddered, with recent issuances pushing significant maturities beyond 2035.
• Interest rate profile: Primarily fixed-rate senior notes following the redemption of floating-rate subordinated notes in FY2025.
• Covenants: Standard regulatory capital minimums and broker-dealer net capital requirements.
• Share repurchase programme: Highly active, with $1.1 billion repurchased in FY2025 at an average price of $148 per share.
• Dividend policy: Consistent dividend payer, recently raised by 8% in late 2025 to $0.54 per quarter, yielding approx. 1.2%.

• Operating cash flow conversion: Highly volatile due to changes in brokerage client receivables, payables, and trading inventory.
• Free cash flow margin: Traditional FCF is not a meaningful metric for a bank or broker-dealer; the focus is on capital generation and dividend capacity.
• Major non-cash items: Depreciation, amortisation of intangibles, stock-based compensation, and provision for credit losses.
• Working capital cash flow impact: Driven by client trading activity, margin lending, and cash sweep balances.
• Capex intensity: Very low for the asset-light parent company, excluding the bank.
• Cash tax rate vs. GAAP effective tax rate: The effective tax rate is approx. 17-21%, benefiting from non-taxable corporate-owned life insurance gains and tax-exempt interest.

1. Assumptions: Hardcoded drivers for AUA growth, fee rates, advisor headcount, loan growth, NIM, and compensation ratios.
2. Scenarios: Base, Bull, and Bear cases for equity markets and interest rates.
3. PCG_Segment: Forecasts fee-based AUA, brokerage revenues, and account fees.
4. Capital_Markets_Segment: Forecasts M&A advisory, underwriting, and institutional brokerage revenues.
5. Asset_Management_Segment: Forecasts financial AUM, net inflows, and management fees.
6. Bank_Segment: Forecasts loan balances, deposit balances, interest income, interest expense, and provision for credit losses.
7. Consolidated_Income_Statement: Aggregates segment revenues, calculates firm-wide compensation, communications, occupancy, and taxes.
8. Consolidated_Balance_Sheet: Projects cash, trading assets, bank loans, deposits, corporate debt, and equity.
9. Consolidated_Cash_Flow: Indirect method, adjusting net income for non-cash items and changes in operating assets and liabilities.
10. Capital_&_Regulatory: Tracks Tier 1 capital, Total capital ratio, risk-weighted assets, and share repurchases.
11. Valuation: Sum-of-the-parts valuation applying different P/E multiples to wealth management versus banking earnings, plus a Dividend Discount Model.

1. PCG Asset Management Fees = Average Fee-Based AUA x PCG Average Fee Rate
2. Asset Management Segment Revenue = Average Financial AUM x Asset Management Fee Rate
3. Bank Net Interest Income = Average Interest-Earning Assets x Bank Net Interest Margin
4. Bank Provision for Credit Losses = (Ending Gross Loans x Target Allowance Percentage) - Beginning Allowance + Net Charge-Offs
5. Total Compensation Expense = Consolidated Net Revenues x Target Compensation Ratio
6. PCG Pre-Tax Income = PCG Net Revenues - PCG Allocated Compensation - PCG Non-Compensation Expenses
7. Total Client Assets Under Administration = Beginning AUA + Net New Assets + Market Appreciation
8. Bank Deposit Balances = Beginning Deposits + Net Deposit Inflows
9. Interest Expense on Corporate Debt = Average Corporate Debt Outstanding x Weighted Average Interest Rate
10. Ending Common Shares Outstanding = Beginning Shares - (Share Repurchase Amount / Average Share Price) + Shares Issued for Stock-Based Compensation

• The Assumptions sheet feeds all segment sheets (PCG_Segment, Capital_Markets_Segment, Asset_Management_Segment, Bank_Segment).
• The segment sheets feed the Consolidated_Income_Statement for revenue aggregation.
• The Bank_Segment feeds the Consolidated_Balance_Sheet for loan and deposit balances.
• The Consolidated_Income_Statement feeds the Consolidated_Balance_Sheet for retained earnings and the Consolidated_Cash_Flow for net income.
• The Consolidated_Balance_Sheet feeds Capital_&_Regulatory to calculate capital ratios.
• Capital_&_Regulatory dictates the maximum allowable share repurchases, which feeds back into the Consolidated_Balance_Sheet to reduce equity and cash, and the Consolidated_Income_Statement to reduce share count for EPS. This is the primary circularity risk in the model.

• Revenues and assets are modelled as positive numbers.
• Expenses, capital expenditures, and liabilities are positive in their specific schedules but subtracted in aggregation formulas.
• Cash outflows such as share repurchases and dividends are negative on the Cash Flow Statement.
• Contra-assets like the Allowance for Credit Losses are positive in the notes but subtracted from Gross Loans to yield Net Loans.

1. Applying traditional working capital metrics to a broker-dealer will break the cash flow logic.
2. Failing to eliminate intercompany revenues; PCG earns fees from the Bank segment on deposits, which must be eliminated in consolidation.
3. Mismodelling the compensation ratio; compensation is highly variable and should be modelled as a percentage of net revenues rather than a fixed growth rate.
4. Ignoring the impact of interest rates on the Raymond James Bank Deposit Program; cash sweep revenues are highly sensitive to the Fed Funds rate.
5. Double-counting AUA and AUM; Asset Management AUM is a subset of total PCG AUA, and fees are shared between segments.
6. Overestimating Bank segment NIM; deposit betas typically lag in a rising rate environment but catch up, compressing NIM over time.
7. Miscalculating regulatory capital; share repurchases must be constrained by the requirement to maintain Tier 1 and Total Capital ratios above internal targets.
8. Using a standard DCF for valuation; a Dividend Discount Model or Sum-of-the-parts is required for financial institutions due to regulatory capital constraints on free cash flow.

1. Total Compensation Ratio must remain between 63.0% and 66.0% of net revenues.
2. Bank segment NIM should be in the 2.60% to 3.00% range based on recent filings.
3. Total Capital Ratio must remain above 20.0% to satisfy regulatory and internal targets.
4. Effective tax rate should be between 17.0% and 21.0%.
5. Consolidated Balance Sheet must balance: Total Assets = Total Liabilities + Shareholders' Equity in every period.
6. Intersegment eliminations must exactly offset the internal revenues recognised between PCG and the Bank.
7. Return on Common Equity should track between 15.0% and 20.0%.
8. Dividend payout ratio should remain between 15% and 25% of net income based on stated policy.

• SEC EDGAR link: Raymond James Financial (CIK 0000720005)
• Investor Relations: raymondjames.com/investor-relations
• Key peers for benchmarking: Stifel Financial (SF), LPL Financial (LPLA), Ameriprise Financial (AMP), Morgan Stanley (MS)
• Industry data sources: SIFMA for broker-dealer industry metrics, FDIC for banking sector data
• Consensus estimates source: FactSet or Bloomberg for EPS and revenue estimates

• Raymond James Financial FY2025 Form 10-K (filed November 2025)
• Raymond James Financial Q4 2025 and Q1 2026 Earnings Press Releases
• Raymond James 2025 Analyst & Investor Day Presentation
• SEC EDGAR database