By Brett Philbin
Raymond James Financial Inc. (RJF) Chief Executive Paul Reilly said the investment bank and brokerage, which acquired Morgan Keegan last April, plans to drop the regional brokerage's name next month, calling the move a sign of the "cultural integration and the satisfaction" of financial advisers at the firm.
In an interview, Mr. Reilly, who has led the St. Petersburg, Fla., company for nearly three years, said Raymond James had planned to keep the Morgan Keegan name for two years and maintain some dual branded businesses, but instead will make the change at the request of employees.
"The [Morgan Keegan] managers came to us and said they think it's better if we do it now than at the [platform] conversion in February so we don't cause marketing confusion," he said, adding that "to me it's a sign that the integration is going very well."
Raymond James, which added more than 900 brokers from the $1.2 billion deal and now boasts 6,289 in total, plans to move Morgan Keegan advisers on to the same computer system as its legacy-advisory force next month.
Mr. Reilly says integration expenses at the company were $17 million in the fiscal first quarter, noting that costs related to the Morgan Keegan deal have "remained elevated" as Raymond James upgrades its technology systems. However, Mr. Reilly still expects the company to realize $60 million to $80 million in cost synergies from the transaction, half of which has already been achieved.
"We are committed to getting the efficiencies out, but I think we're really looking that into the fourth quarter," he said.
Raymond James has retained 95% of Morgan Keegan advisers who were offered retention packages by the company, Mr. Reilly said, noting that many of the brokers who had left the firm had less than $100,000 in annual production.
Retention packages are incentives that are typically offered to brokers or other employees in an acquisition or management change that are designed to keep them in place.
Late Wednesday, Raymond James reported fiscal first-quarter profit that jumped 28% from a year ago as the company benefited from strong results from its private-client group and posted record equity-capital-markets revenue within its investment banking unit.
The better-than-expected results boosted Raymond James stock, which climbed 4.5% to $43.77 on Thursday, earlier reaching an all-time intraday high of $43.89, on a split-adjusted basis. The stock has climbed 14% so far in 2013.
Raymond James, which posted its 100th straight quarter of profitability, reported strong results from its private-client group, where revenue rose 35% from a year ago to $712.8 million.
The segment, which accounted for 63% of the company's revenue, was boosted by increased "tax positioning" by clients in December, Mr. Reilly said. Many companies announced special dividends or accelerated dividend payouts that month to avoid higher tax rates in 2013, as heated "fiscal-cliff" negotiations persisted in Washington. Brokerages from Charles Schwab Corp. (SCHW) to TD Ameritrade Holding Corp. (AMTD) have already reported strong periods of net new-asset growth due to that same issue.
Similarly, Raymond James clients had an increased appetite for dealmaking in the period as its capital-markets revenue climbed 82% from a year earlier, with legacy Morgan Keegan bankers' deals generating many of those transactions.
Mr. Reilly said Raymond James's record M&A volume, was probably somewhat accelerated by year-end deals, but was also buoyed by uncertainty in the tax laws.
Reflecting the strong period, Mr. Reilly told analysts, "our [quarterly] M&A volume was almost 60% of our total M&A volume last year."
Write to Brett Philbin at [email protected]
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