Raymond James Lays Off More Than 500 Employees
Raymond James Financial on Tuesday said it is laying off close to 4% of its employees, or about 500 people, in response to the coronavirus-induced economic slowdown.
“While 5% or higher job cuts may be an annual exercise at many firms, at Raymond James any reductions are rare and are never taken lightly,” Chairman and Chief Executive Paul Reilly wrote in an email to the company’s 13,900 employees.
The 8,155 revenue-generating brokers in Raymond James private client group will not be directly affected, and the company said it is limiting layoffs in advisor and client support areas.
“[T]hese steps are not expected to diminish service levels to advisors or their clients, or impair our ability to continue our growth momentum,” wrote Reilly, who said he and other senior leaders will be taking “significant” pay cuts. “[W]e do not intend to have another round of job eliminations.”
After reporting in July that fiscal third-quarter earnings fell 34%, Raymond James executives told analysts they would be attacking “almost every single” line-item expense.
“Due to the uncertainty caused by the COVID-19 pandemic, and related negative impact on our results, we are evaluating ways to reduce costs and find efficiencies to remain well-positioned for future growth and success,” the company explained in its 10-Q regulatory filing last month. “To that end, we are currently engaged in a firm-wide process of evaluating both compensation and non-compensation expenses.”
The St. Petersburg, Florida-based brokerage firm reduced payouts to its employee-channel brokers three years ago in an attempt to offset rising regulatory costs, and in 2013 cut about 160 information technology and operations personnel following its acquisition of Morgan Keegan & Co, according to a report at the time. Riley said in Tuesday’s memo that Raymond James will continue to look for efficiencies throughout the organization.
Citigroup on Monday said it will resume job-cutting after temporarily suspending a cost-cutting campaign to accommodate work-from-home disruptions. Wells Fargo & Co. plans to cut as much as $10 billion in costs, with much of it coming over several years through layoffs, its chief financial officer said at a conference this week. J.P. Morgan Chase & Co. reportedly cut around 100 jobs in mid-July.
In its 10-Q filing last month, Raymond James estimated that it may have to add as much as $125 million to loan loss reserves for legal and regulatory matters in the future.
Tuesday’s layoff announcement will increase expenses in the short term. Raymond James will offer full-year bonuses and 12 months of company-paid medical benefits and job support to affected employees, according to Reilly’s email, and has expanded its severance policy to provide up to a year of total compensation “for our most tenured associates.”
Raymond James’s net revenue in the first nine months of its fiscal year, which ends in October, rose 3% to $5.9 billion from a year earlier, but net income fell by $160 million, or 21%, to $769 million.
Its total noninterest expense for the three quarters rose by $419 million, or 8.9%, to $5.12 billion.
“The unexpected swing in interest rates and uncertainty that comes with a global recession requires us to evaluate ways to reduce costs,” Chief Financial Officer Paul Shoukry said on the company’s earnings call in July. “The goal is for these initiatives to yield significant efficiencies for the firm, which is critical so we can continue investing in growth.”
Raymond James’s private client division, its largest business, contributed 68% of the company’s revenue and 53% of its net income last quarter.
Raymond James’s shares closed down 2.8% at $74.32 on Tuesday. Its shares are off more than 25% from its 52-week high of $102.45 in February.