A message from our chairman and chief executive officer
Through another year of extraordinary circumstances, our associates and advisors proved once again that their dedication to our values of putting clients first, acting with integrity, valuing independence and thinking long term not only guides us through uncertain conditions, but enables us to thrive.
As a result of their hard work, the firm generated record results in fiscal 2021, lifted by record revenues and pre-tax income for the Private Client Group, Capital Markets and Asset Management segments, reinforcing the value of having diverse and complementary businesses.
Record net revenues of $9.76 billion increased 22%, record pre-tax income of $1.79 billion increased 70%, and record net income of $1.40 billion increased 72% compared to fiscal 2020. Adjusted net income of $1.49 billion,(1) which excludes $98 million associated with losses on extinguishment of debt and $19 million of acquisition-related expenses, increased 74% compared to adjusted net income in fiscal 2020. As last year’s earnings were negatively impacted by the onset of the COVID-19 pandemic, the comparison of our results in fiscal 2021 to fiscal 2019 are also informative. Our net revenues increased 26% and our net income increased 36% over this two-year period – remarkable growth, especially considering near-zero short-term interest rates during fiscal 2021.
The growth of client assets and record brokerage and investment banking revenues drove record net revenues in fiscal 2021. Client assets under administration increased 27% during the year to $1.18 trillion, another record, lifted by equity market appreciation and the net addition of financial advisors in the Private Client Group segment. For the fiscal year, we generated a return on equity of 18.4% and an adjusted return on equity of 19.5%(1) – strong results, given our robust capital position and the low interest rate environment. We ended the year with shareholders’ equity of $8.2 billion and book value per share of $40.08, which increased 16% and 15%, respectively, over September 2020. Our capital ratios remained well above regulatory requirements, with a total capital ratio of 26.2% and Tier 1 leverage ratio of 12.6% at the end of the year, giving us the balance sheet capacity to not only be defensive but also opportunistic during these uncertain times.
During the fiscal year, we completed a 3-for-2 common stock split and increased our quarterly dividend approximately 5% to $0.26 per share from nearly $0.25 per share, both figures adjusted for the stock split. We repurchased 1.47 million shares for $118 million, an average price of $80.20 per share. Through the combination of dividends and share repurchases, the firm returned total capital of approximately $335 million to shareholders. Subsequent to the fiscal year-end, the Board of Directors approved a 31% increase of the quarterly cash dividend to $0.34 per share and a share repurchase authorization of $1 billion, which replaces the previous authorization under which $632 million remained available.
Turning to our segment results, the Private Client Group (PCG), by far our largest business, generated record net revenues of $6.61 billion, an increase of 19% over fiscal 2020, and record pre-tax income of $749 million, a 39% increase compared to 2020. Record net revenues were driven by strong growth in assets in fee-based accounts along with higher brokerage revenues. Fiscal 2021 concluded with records for PCG assets under administration of $1.12 trillion, up 26%, and PCG assets in fee-based accounts of $627.1 billion, up 32% over the end of fiscal 2020. The strong client asset growth in the year was primarily driven by equity market appreciation and our continued success retaining and recruiting financial advisors.
We ended the year with a record 8,482 financial advisors affiliated with the firm, a net increase of 243 advisors. Our regrettable attrition of advisors remained extremely low at approximately 1% in fiscal 2021, despite an intensely competitive environment during the year. Meanwhile, financial advisors with approximately $330 million of trailing 12-month production and approximately $54 billion of assets at their prior firms joined Raymond James’ domestic independent contractor and employee channels during the year, a new record. Our financial advisor recruiting pipeline is strong across all affiliation options. While more firms are starting to realize the value of offering multiple affiliation options, we are uniquely positioned in the market with scale and growth momentum across all of our affiliation options through our AdvisorChoice® platform.
The Capital Markets segment had a phenomenal year, with record net revenues of $1.89 billion increasing 46% and record pre-tax income of $532 million increasing 136% over fiscal 2020 – notable as fiscal 2020 was the segment’s second-best year. Record results in the Capital Markets segment were driven by record fixed income brokerage and investment banking revenues, the latter due to broad-based strength in M&A and underwriting activity.
In our history, it is atypical to have both Fixed Income and Global Equity and Investment Banking generating record results at the same time, but fortunately that was the case in fiscal 2021. Fixed income brokerage revenues benefited from a high level of client activity, particularly with small- and mid-sized depositories, as these clients had significant deposits and heavily invested in their securities portfolios during the year. This is one example of the benefits of our selective acquisition strategy: Morgan Keegan, acquired in 2012, had a leading position serving depository clients, an extremely valuable capability since the onset of the COVID-19 pandemic. Additionally, the investment banking pipeline remains very strong as we have continued to enhance our platform through acquisitions such as Financo, a consumer-focused investment bank, and Cebile, a private funds placement agent and secondary market advisor to private equity firms, as well as adding senior talent during the year. While strong investment banking activity across the industry was certainly a tailwind, the fantastic performance we achieved in fiscal 2021 would not have been possible without the significant investments we have made over the past five years to broaden and deepen our M&A platform.
The Asset Management segment generated record net revenues of $867 million, which were up 21%, and record pre-tax income of $389 million, which increased 37% over fiscal 2020. Record net revenues were driven by growth in financial assets under management, which rose 25% to $191.9 billion at the end of the fiscal year. The annual growth in financial assets under management was attributable to strong net inflows in fee-based accounts in PCG and to equity market appreciation, which more than offset net outflows for Carillon Tower Advisers. Asset Management results should be positively impacted by higher financial assets under management as long as the equity markets remain resilient.
Raymond James Bank net revenues of $672 million decreased 12%, while pre-tax income of $367 million increased 87%, compared to fiscal 2020. The decline in net revenues was driven primarily by lower net interest income due to the decrease in short-term interest rates since March 2020, which caused the bank’s net interest margin to decline 68 basis points to 1.95% in fiscal 2021, from 2.63% in fiscal 2020. Net loans of $25 billion grew 18% over fiscal 2020, driven by loans to PCG clients and corporate loan growth. Our focus over the past several years has been strengthening our lending solutions to PCG clients, and that was evident in fiscal 2021 with very impressive growth of 31% from September 2020 to September 2021. The increase in pre-tax income was due primarily to a bank loan benefit for credit losses in fiscal 2021 compared to a bank loan provision in the prior year. As the credit environment stabilized along with the economic recovery, the bank generated an annual benefit for credit losses of $32 million. The allowance for credit losses as a percent of total loans decreased to 1.27% from 1.65% as of September 2020. Our strong credit performance and continued loan growth since the start of the pandemic reinforces our agile and opportunistic approach at Raymond James Bank, which is led by a very experienced management team.
As we outlined at our Analyst & Investor Day, we have remained focused on deploying capital throughout the year, maintaining our longstanding capital deployment priorities: investing in organic growth, which we believe delivers the best returns for our shareholders over time; selectively making acquisitions; paying an ongoing dividend; and repurchasing our stock. Our focus on deploying capital to generate attractive returns for our shareholders – while maintaining ample liquidity and Total Capital and Tier 1 ratios of more than double the regulatory requirements to be considered well-capitalized – was evident in fiscal 2021. Along with the aforementioned Financo and Cebile additions, we acquired NWPS Holdings, a provider of retirement plan administration, consulting, actuarial and administrative services, expanding our retirement services offerings to advisors and their clients.
In addition to these completed acquisitions, we announced agreements to acquire two additional firms:
Charles Stanley Group, a U.K.-based wealth management firm with nearly 200 wealth managers and £27.1 billion in client assets. We expect this addition to further accelerate the growth of our U.K. wealth management franchise, which has reached nearly £15 billion in client assets since its inception approximately 20 years ago. Charles Stanley’s multiple affiliation options will give us the ability to offer wealth management affiliation choices consistent with our model in the United States and Canada.
TriState Capital Holdings, a client-centric, technology-enabled franchise focusing on serving clients with premier private banking, commercial banking and niche investment management products and services. This combination will help diversify our funding sources and add internal FDIC insurance capacity through a second independent bank charter, while providing capital to fuel TriState Capital’s strong growth.
Overall, these actions illustrate our increased focus on acquiring businesses that enhance our core operations, and those with technology that can help grow and position us for the future.
Complementing the outstanding performance in our businesses, we achieved several other notable accomplishments during this fiscal year:
As the pandemic increased need across the nation, our associates and advisors rose to the challenge to give back and support the communities where we live and work. This year we celebrated our 10th annual month of focused giving, called Raymond James Cares Month, with more than 2,200 advisors and associates volunteering over 6,600 hours to benefit 250 charitable organizations across the United States, Canada and the United Kingdom. Additionally, between associate contributions and a company match, Raymond James raised nearly $6.7 million for communities across the United States through its annual United Way campaign. Furthermore, our associates raised more than $365,000 for the American Heart Association through the 2020 Heart Walk.
Building upon our 2020 pledge to the Black community, this year we collaborated among firm leaders, associates and advisor inclusion networks to select three areas of focus for our commitment: education, financial empowerment and mentorship. With these pillars in mind, the firm chose 12 charitable organizations spanning a variety of service areas, including K-12 education, college preparation, affordable housing, economic development and leadership training, to receive funding from the initial $1.5 million contribution. These partnerships are complements to our sustained relationships with national organizations such as Junior Achievement and Habitat for Humanity, as well as local programs we have cultivated over many years in the Tampa Bay, Florida, community where we are headquartered.
Raymond James was also recognized in other major lists for overall corporate reputation and diversity and inclusion programs, and the number of advisors who were named to industry lists across various categories has grown significantly, to almost 400 advisors.
Marlene Debel, executive vice president and chief risk officer of MetLife, Inc., was appointed to the Raymond James Board of Directors and serves on its Audit and Risk Committee. With more than three decades of experience in financial, strategic and risk management, Marlene’s unique perspective is already proving valuable in helping us deliver on the firm’s long-term growth strategy in the ever-evolving marketplace and regulatory environment. Refreshing and adding diversity to our board has always been a priority at Raymond James. With the addition of Marlene, we now have four female directors. We also have three racially diverse directors. Most importantly, all of our directors bring diverse perspectives and experiences to the board, helping us arrive at strong long-term outcomes for our shareholders.
Just after our fiscal year-end, we announced the retirement of two members of our Executive Committee.
Raymond James Financial President John Carson, who joined Raymond James close to 10 years ago when we purchased Morgan Keegan, where he served as CEO, will retire as president effective December 31, 2021, and will also step down as head of the Fixed Income and Public Finance divisions. He will remain with the firm as vice chairman to ensure a successful transition of responsibilities to Executive Vice President of Fixed Income Capital Markets Horace Carter, who will become president of Fixed Income and join our Executive Committee.
Raymond James Ltd. Chairman and CEO Paul Allison, head of the firm’s Canadian subsidiary, will also retire at the end of calendar year 2021, transitioning to the newly created role of RJ Ltd. executive chairman to provide strategic guidance to the management team and serve in a senior client relationship capacity. Jamie Coulter, currently executive vice president of wealth management, succeeds Paul as RJ Ltd.’s CEO. Jamie will also join our Executive Committee, as well as the board of RJ Ltd.
I am deeply grateful to both John and Paul for their many tangible contributions to the firm, as well as their leadership and counsel, which will continue as they take their new roles. Equally important, I look forward to the ongoing contributions of Horace and Jamie, whose leadership appointments are the result of our long-term, diligent succession planning efforts.
We enter fiscal 2022 well-positioned with strong capital ratios and records for client assets, number of PCG financial advisors and bank loans. However optimistic we may be for the year ahead, we also understand there are uncertainties, including the pace of recovery from the initial shutdowns related to COVID-19, the continued effects of the pandemic, and U.S. economic policy. Whatever the potential challenges, I’m confident we have strong capital and liquidity to not only withstand them but also to be opportunistic in these environments.
I’m extremely proud of the dedication and perseverance of our associates and advisors, and for their tireless efforts to support each other and clients, not just during this extraordinary period, but throughout our firm’s history. Our long record of profitability and growth is not possible without their contributions, and I thank each of them for their efforts to ensure Raymond James is a firm as unique as the people we serve, one that truly transforms lives, businesses and communities through the power of personal relationships and professional advice.
Thank you for your continued trust and confidence in Raymond James.
Paul C. Reilly
Chairman and Chief Executive Officer
Raymond James Financial
December 10, 2021
(1) “Adjusted net income” and “adjusted return on equity” are each non-GAAP financial measures. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” on page 40 of Form 10-K for a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures, and for other important disclosures.