Fiscal 2025 Second Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristina Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Butch Oorlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide 2. Please note that certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to, information concerning futures, strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions or our level of success in integrating acquired business, anticipated results of litigation and regulatory developments and general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts or future or additional verbs such as may, will, could, should and would as well as any other statements that necessarily depend on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?

Thank you, Kristina. Good evening, and thank you all for joining us on the call today. Last week, we had our global top financial adviser conference in Montreal. It was wonderful to spend time with our top advisers across our affiliation options from the U.S., Canada and the U.K. They are extremely pleased with Raymond James, expressing a deep appreciation for our unique adviser and client-focused culture along with our robust platform. Just the week prior, we hosted all of our investment banking managing directors in Tampa and they also conveyed enthusiasm for our unique combination of values and capabilities that enabled them to best serve clients. Since the CEO succession announcement last year, I have been spending a large portion of my time traveling to meet with as many advisers, bankers, associates and clients as possible. I know I've shared this before, but what I continue to hear with passion from advisers, bankers and associates is that the best professional decision that they ever made was joining Raymond James. And the biggest regret they have is they didn't join several years earlier. That statement is really a testament to our special culture and all the fantastic associates who provide excellent service each day. Every now and then, we get external validation of this. For example, this quarter, our advisers earned the #1 ranking in the 2025 J.D. Power survey for advice, investor satisfaction and industry trust. To all of our advisers and the associates who support those advisers, congratulations and thank you for earning this well-deserved recognition. My #1 goal as CEO will be to reinforce and strengthen our unique culture that was established by Bob and Tom James and fortified by Paul Reilly. I am so fortunate to have a top-notch leadership team who share the same commitment. Our values-based client-first approach has consistently led to results and that was the case again in the fiscal second quarter. We generated quarterly net revenues of $3.4 billion and pretax income of $671 million, up 9% and 10% over the year-ago quarter, respectively. For the first 6 months of fiscal 2025, we generated record net revenues of $6.9 billion and record pretax income of $1.4 billion, up 13% and 15% over the first half of fiscal 2024. These solid results were attributable to our diverse and complementary businesses, anchored by the Private Client Group, and augmented with the Capital Markets, Asset Management and Bank segments. Across all of our businesses, we have achieved consistent success retaining and recruiting financial professionals who provide high-quality financial advice to their clients. In the Private Client Group, we ended the quarter with $1.54 trillion of client assets under administration, representing year-over-year growth of 6%. Over the past 12 months, we recruited into our domestic independent contractor and employee channels, financial advisers with approximately $316 million of trailing 12-month production and $50 billion of client assets at their previous firms. Including assets recruited into our RIA & Custody Services division, we recruited total client assets over the past 12 months of nearly $59 billion across all of our platforms. Quarterly domestic net new assets equaled $8.8 billion, representing a 2.6% annualized growth rate on the beginning of the period Domestic PCG assets. While NNA was lower this quarter, which was similar to what we experienced in the same quarter in fiscal 2024, we saw net new assets improved throughout the quarter and also had extremely strong months of new commits in March and April, which should help our net new assets in the second half of the fiscal year. So we are very optimistic about our momentum and growing pipelines across all of our affiliation options. Our Best of Both Worlds value proposition, where we offer a unique combination of an adviser and client-focused culture combined with leading technology and solutions, continues to resonate with advisers across all of our affiliation options. In the Capital Markets segment, the investment banking pipeline is very strong but the timing of closings has been negatively impacted by market uncertainty and heightened volatility associated with tariff negotiations. So while investment banking closings are expected to remain challenged across the industry until we get more certainty, we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries we cover when the market becomes more conducive. In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group were very strong during the quarter, annualizing at 8%. In the Bank segment, loans ended the quarter at a record $48.3 billion, primarily reflecting strong growth in securities-based lending balances. Most importantly, the credit quality of the loan portfolio remains solid. Turning to capital deployment, I want to reiterate that our long-standing priorities have remained unchanged, and that starts with investing in growth first organically and complemented with strategic acquisitions. On last quarter's call, we explained that we are evaluating a few M&A opportunities. We also explained that those opportunities are often part of competitive processes and that we would not stretch on valuation, especially if we do not have conviction that we could generate strong risk-adjusted returns for our shareholders at those prices. At this point, we are no longer pursuing those aforementioned opportunities. While we will continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and at valuations that would generate attractive returns for our shareholders. Given our strong capital and liquidity positions in what we believe are attractive long-term returns from buying back our own stock at the current level, we have resumed share repurchases. During the quarter, we repurchased $250 million of common stock at an average share price of $146. Additionally, so far in April, we repurchased another $190 million of shares at an average price of $125 per share. Our current plan is to continue repurchasing shares on a more consistent basis, likely at an amount greater than the $250 million we repurchased in the fiscal second quarter. We believe this balanced and more consistent approach will still leave us with ample capital liquidity to support our strong organic growth initiatives as well as to continue pursuing attractive acquisition opportunities. Now I'll provide a few comments on our outlook before turning it over to Butch to go over our quarterly financial results in more detail. It goes without saying, but I'll say it anyway. The heightened market volatility and potential economic impacts associated with tariffs have created a highly uncertain market environment. While client sentiment on the markets and economy has declined significantly over the past quarter, the silver lining is clients are still confident with their financial plans and satisfaction with their advisers has actually increased to 97% at Raymond James. These trends highlight the fact that clients really value having a financial adviser to help them navigate these uncertain times, a similar dynamic that we experienced during the COVID pandemic. During these times, our vision will remain unchanged: to be the absolute best firm for financial professionals and their clients. In addition to our unique culture and robust platform, our strong balance sheet becomes increasingly important to prospective advisers who are seeking strength and stability for their businesses and their clients during these periods of stress. As I explained earlier, our adviser recruiting pipelines are strong and building rapidly across our affiliation options. We are also making significant investments to further strengthen our capabilities. For example, during the quarter, we established and filled a new role for the Chief AI officer. Our leadership team has conviction that AI will be a game changer for our industry. But we also know that it's still too early to know exactly how that will play out over the coming years. So we established this dedicated function to monitor developments and use cases for AI with the goal of deploying it to help our financial professionals serve their clients more effectively and efficiently. We already used AI in many areas, primarily in the back office. And just last week, we rolled out an in-house proprietary AI search tool, which has been very well received. As an industry, we are still in the early stages of utilizing AI, but we are excited and well-prepared to expand AI utilization for financial professionals and their clients in the future. During the quarter, we also announced a new leadership structure for our private capital business to help high net worth focused advisers better serve their clients with a wide variety of bespoke private investment alternatives. These are just a couple of examples of initiatives we are pursuing to continue investing in our platform for advisers and their clients. I look forward to our Analyst Investor Day in June, where we will discuss these initiatives and others in more detail. In summary, while there is significant macro uncertainty, our value strategy and approach will remain largely unchanged, and our strong balance sheet should position us relatively well in any market environment. Now I'll turn the call over to Butch Oorlog to review our financial results in more detail. Butch?

Thank you, Paul. I'll meet you over on Slide 6. The firm reported net revenues of $3.4 billion for the fiscal second quarter, pretax income of $671 million, resulting in a pretax margin of 19.7%. Net income available to common shareholders was $493 million with earnings per diluted share of $2.36. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $507 million, an adjusted pretax margin of 20.3% and adjusted earnings per diluted share of $2.42. We generated an annualized return on common equity of 16.4% and an annualized adjusted return on tangible common equity of 19.7%. These are strong results for the quarter, particularly given our conservative capital base. Turning to Slide 7, the Private Client Group generated pretax income of $431 million on quarterly net revenues of $2.49 billion. Results were driven by 6% higher PCG assets under administration compared to the previous year, the result of market appreciation and the consistent addition of net new assets. Fiscal year-to-date, PCG generated record revenues and pretax income. Our Capital Markets segment generated quarterly net revenues of $396 million and pretax income of $36 million. Net revenues grew 23% year-over-year, driven primarily by higher investment banking and fixed income brokerage revenues. However, sequential results declined 18% largely due to lower investment banking revenues. The Asset Management segment generated pretax income of $121 million on net revenues of $289 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the 12-month period and strong net inflows into PCG fee-based accounts. Sequentially, although market values declined we had strong net inflows of approximately $3.7 billion into managed programs on our platform. The Asset Management segment generated record revenues and pretax income fiscal year-to-date, while the Bank segment generated net revenues of $434 million and pretax income of $117 million. On a sequential basis, Bank segment net interest income grew 1%, driven by continued loan growth and a 7 basis point expansion of net interest margin to 2.67%, resulting from a favorable shift in asset mix along with a higher portion of lower-cost deposits. Turning to consolidated revenues on Slide 8. Second quarter net revenues grew 9% over the prior year and declined 4% sequentially. Asset Management and related administrative fees of $1.73 billion grew 14% over the prior year and decreased 1% compared to the preceding quarter. The sequential decline was primarily due to fewer billing days in the quarter, while PCG fee-based assets equaled $873 billion at quarter end, up 9% year-over-year and slightly lower compared to the preceding quarter. As we look ahead, we expect third quarter Asset Management and related administrative fees to be relatively flat with the second quarter. Although PCG assets and fee-based accounts are slightly lower sequentially at quarter end, the third quarter will benefit from one additional billing day in the quarter. Brokerage revenues of $580 million grew 10% year-over-year primarily due to higher fixed income brokerage revenues. Despite these strong results in our second quarter, the fixed income market at the start of the third quarter is challenging as market and interest rate uncertainty pose a significant headwind for the business in the near term. Investment banking revenues of $216 million increased 21% year-over-year but declined 34% sequentially. The sequential decline reflected lower investment banking activity broadly. As you may remember, the prior quarter reflected near record M&A results. Moving to Slide 9, clients' domestic cash sweep and Enhanced Savings Program balances ended the quarter at $57.8 billion, down 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. Domestic cash sweep and Enhanced Savings Program balances have decreased so far this fiscal quarter, not surprisingly given the timing of tax payments, with the current program's balance aligning roughly with April's quarterly fee billings of approximately $1.5 billion. Turning to Slide 10, combined net interest income and RJBDP fees from third-party banks was $651 million, a 3% sequential decline, primarily the result of two fewer billing days in the quarter. Net interest margin in the Bank segment grew 7 basis points to 2.67% for the quarter, the result of the factors I described earlier. The average yield on RJBDP balances with third-party banks decreased 12 basis points to 3%, primarily due to the full-quarter impact of rate cuts that occurred late in the preceding quarter. Based on current interest rates and quarter end balances net of third-quarter fee billings, we would expect the aggregate of NII and RJBDP third-party fees to be relatively unchanged in the fiscal third quarter. As we expect the effect of slightly lower balances in the bank deposit program to be offset by one additional billing day. Keep in mind, there are many variables that will impact actual results, including any interest rate actions during the upcoming quarter and factors impacting our balance sheet, including changes in our loan and deposit balances. Turning to consolidated expenses on Slide 11. Compensation expense was $2.2 billion, and the total compensation ratio for the quarter was 64.8%. Excluding acquisition-related compensation expense, the adjusted compensation ratio was 64.5%. Non-compensation expenses of $528 million increased 2% sequentially, mostly due to a relatively modest bank loan provision for credit losses compared to the prior quarter where the provision was near zero and higher communications and information processing expenses. Through the first half of the fiscal year, we are on track for full-year non-compensation expenses of approximately $2.1 billion, excluding the bank loan provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments related to our non-GAAP financial measures. Importantly, we remain committed to investing to support growth across the business while maintaining discipline over controllable expenses. On Slide 12, we provide key credit metrics for our Bank segment. We grew loans during the quarter by 2%, primarily in support of our clients with this loan growth continuing to be led by our securities-based loans and, to a lesser extent, residential mortgage loans. The credit quality of the loan portfolio remains strong. Criticized loans as a percentage of total loans held for investment decreased to 1.14% at quarter end, and nonperforming assets remain low at 34 basis points of Bank segment assets. The bank loan allowance for credit losses as a percentage of total loans for investment ended the quarter at 93 basis points, down 2 basis points from the prior quarter. The allowance percentage has trended lower, largely due to the loan mix shift towards the more securities-based loans and residential mortgages, which carry lower allowance levels. These two loan categories represent well over half of our total loan book, reflecting 36% and 20%, respectively. With regard to the relatively smaller corporate loan book, the bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.94%. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios, including any potential impact of tariff negotiations on certain corporate borrowers and the effect of which will affect our third-quarter provision. Slide 13 shows the pretax margin trend over the past 5 quarters, demonstrating the resilience of our diverse business mix to consistently deliver strong margins. On Slide 14, at quarter end, our total assets were $83.1 billion, a 1% sequential increase resulting primarily from loan growth. Liquidity and capital each remain very strong. RJF corporate cash at the parent ended the quarter at approximately $2.5 billion, well above our $1.2 billion target. With a Tier 1 leverage ratio of 13.3% and total capital ratio of 24.8%, we remain well above regulatory requirements. As Paul mentioned, our capital levels provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate for the quarter was 26.2%, an increase over the preceding quarter as the benefit from the excess share-based compensation that vested in the preceding quarter did not recur this quarter. For the fiscal year 2025, we estimate our effective tax rate for the year to be approximately 25%. Slide 15 provides a summary of our capital actions over the past 5 quarters. As Paul mentioned, we have been actively repurchasing shares. Over the past 5 quarters, we have returned to shareholders over $1.5 billion through common dividends and share repurchases, and we have been actively repurchasing shares in April. We remain committed over the long term to operate our businesses at capital levels in line with our stated targets. With our strong capital levels, we are well-positioned to continue investing in organic growth and prudently pursue acquisitions that meet our criteria of being a good cultural and strategic fit, and we are well-positioned to meet the needs of our clients and advisers in uncertain and challenging market conditions. That concludes our prepared remarks. Operator, will you please open the line for questions.

I just wanted to start on the wealth business, particularly. And then Paul, you kind of called out nuances in NNA during the quarter and that it improved sequentially throughout. I guess I was hoping if you could just flesh out some of those comments in terms of the magnitude of improvement into April and maybe any particular segments or channels that you might call out. And if possible, if you could talk through the size or the banks in the pipeline today maybe versus last year at this time just to help us get a sense of the direction here.

Thank you for your question, Michael. Measuring M&A on a month-to-month or quarter-to-quarter basis is challenging. The sales cycle can be lengthy, from initial discussions to when advisers officially join the firm. At a high level, I can tell you that throughout the quarter, net new assets improved, and we also saw new commitments, especially in March, which was a strong month, followed by another solid month in April. These new commitments will affiliate with us at a later date, so they are not included in the net new assets figure. This includes a range of firms and various affiliation options. We remain optimistic about our pipelines, leveraging our strong value proposition that combines a client-focused culture with advanced capabilities, technologies, and solutions. Additionally, our robust balance sheet is increasingly important, as advisers seek stability and strength for their businesses, especially since many roll-ups and other strategic options lack tangible capital. They are looking for a reliable source to support their growth and ensure quality service for their clients, regardless of market conditions.

Great, Paul. If I could just switch gears quickly. Both of you talked about some moving pieces in the balance sheet and some nuances across the segment. So I was hoping you could just talk through what you're seeing in terms of loan demand. I mean, you called out bank loans grew slightly this quarter, quarter-to-quarter. Just anything notable considerations in terms of what you're seeing in terms of loan demand exiting the quarter and maybe into the third fiscal quarter as well.

Sure. Regarding loan demand during the quarter, I can say that as we exited the quarter, loan demand on the corporate side was limited, which was expected due to the volatility. We remain ready to make investments when the returns align with our risk-adjusted target levels. However, we have seen a strong demand for our SBL loans. During the quarter, we experienced SBL loan growth exceeding $600 million, contributing to an overall loan growth of more than 2% in balances. Overall, the balance sheet showed strong loan growth during the quarter. As we moved into April, we have continued to see robust demand for SBL loans, which is typically a strong month for us due to clients needing liquidity for tax payments.

I want to come back to the kind of recruiting backdrop. And obviously, there's maybe more M&A of late than there has been in the market. And so I just love to get a sense of how much of the recruiting backlog right now is coming from maybe some of the M&A affected firms? Or just maybe also just kind of the level of advisers in motion, kind of whether it's much more elevated today than it has been in a while because of the M&A. So that's kind of one piece of it. But then the other side, market volatility can obviously affect pipelines as well. So just whether we're only maybe a few weeks into kind of post-tariff world. But whether you're seeing kind of this volatility impact that pipeline at all or maybe change sentiment around advisers' willingness to move. Maybe it has nothing to do with the M&A firms but I think more broadly advisers in motion.

Yes. Our recruiting momentum has been strong over the last several years with or without M&A, and that's really just the consistency of putting advisers, treating them like clients and respecting the relationship advisers have with their clients and that Best of Both Worlds value proposition that I discussed. So as you know, our recruiting success has been consistent over the past several years and certainly has been building up. And our pipelines were looking good before even recent M&A was announced. Now with that being said, whenever there's a change of control, potentially change of leadership and culture and capabilities and service levels, that always creates a catalyst for advisers to take a look at other options. And so, to the extent those advisers are looking for the type of culture and capabilities that Raymond James provides, that would absolutely increase the opportunities with those advisers that are interested.

Okay. Great. And just a follow-up also on the loan book as well. So Butch, I heard the comment about a provision in the third quarter or at least anything related to tariffs would be considered, then I just wanted to see if that's kind of a generic comment? Or if there's anything kind of in the loan book that would maybe warrant closer attention because of tariffs? So I'm not aware of anything that's maybe directly, but obviously, there's always kind of second derivatives of volatility, but just figured I'd ask since you had mentioned that.

Yes, of course. Thanks, Devin. The comment was intended to clarify that the volatility began on April 2, and therefore, the effects of this volatility on the economic forecast that informs the provision, as well as any specifics related to our loan book, were not reflected in our second quarter results. This will impact our third quarter.

That's primarily a comment about accounting in relation to credit. From an accounting standpoint, we have new assumptions that we are incorporating into the CECL models. These new assumptions haven't yet been reflected in the current results because the timing of the macroeconomic changes we expect to see from the new models will occur after the end of the quarter we are discussing today.

One more on M&A. Just for the quarter, I wanted to confirm just any change in attrition in the period to make the numbers lower? Or was it just timing of the onboarding? And then to follow up on Devin's question, curious of how your view of adviser movement for the industry in a period of volatility like we've seen. So historically, if you look back after periods of this type of movement, is adviser movement for the industry slow? Knowing that your competitive positioning is better today, but just curious about the overall industry trends.

Yes. I mean each period of volatility is different. So one of our best recruiting years in history was during the financial crisis when advisers are looking for a source of strength and stability, and with all the industry disruption in M&A and firms exiting the business. We were huge beneficiaries of that because we had a strong balance sheet as we do today. We have a strong balance sheet, and I think we are viewed by advisers in the industry as a source of strength and stability for their businesses and for their clients. So we think that there's still movement just based on the pipelines and the discussions that we're having and the home office visits that we're having. And I've been traveling across the country, meeting with very high-quality prospects that are interested in moving. And so we're still optimistic about the pipelines and the recruiting activity going forward. And what I would tell you around the retention is this quarter didn't have any significant or notable adviser attrition like the prior quarters did with a super OSJ or two. So the retention looks good. And so again, we're pretty optimistic about net new assets as we look in the second half of fiscal '25 and beyond.

Great, that's helpful. Butch, I wanted to follow up on the cash comments to ensure I understood you correctly. You mentioned $1.5 billion from billing and another $1.5 billion for tax payments. If that's accurate, how does that compare to historical levels? Are there any other changes, considering some selling or derisking of cash build in this market backdrop?

Thanks, Dan. The indication is that the balances have decreased since the end of the quarter, approximately matching the $1.5 billion in fee billings recorded in April. This amount is not in addition to or an increment of that. Essentially, this reflects our current cash balances, net of those fees being collected.

And overall, that's a pretty good result considering the tax payments that we experienced in April as well. So to have the cash be down commensurate with the quarterly fee billings in April is a pretty good result.

As you look ahead, first of all, Paul, congratulations again on your new role. In terms of the interest-earning asset dynamic, I'm curious. Loans grew nicely, but earning assets were somewhat down sequentially. Considering the funding mix and the loan demand commentary you mentioned, how do you view the intermediate term for earning asset growth? Is it likely to remain flat, or will there be a remix within the loan category? Or do you think we might see some incremental expansion?

Yes. Thanks, Bill. We saw maturities in the AFS portfolio of $350 million during quarter 2. That was redeployed as part of funding the loan balances. With respect to that dynamic, we see more of that dynamic continuing in our Q3 as well as our Q4 to continue to reprice from the securities book into loans. In Q3, we approximate that to be about $275 million and in Q4, about $325 million.

I would say on the loan side of the equation, securities-based loans, as Butch mentioned, have continued to grow in April. And so that's through the volatility in the month of April as well. Again, some of that is related to the tax payments and liquidity needs around that, but we would expect those to continue to grow and then the corporate loans, as we've always said, that's going to be market dependent. And right now, the demand for corporate loans is still very tepid, certainly during this period of market volatility in April. And so we wouldn't expect those to grow meaningfully until there's more clarity and certainty in the market, and then there's more loan demand. And loan demand at prices that generate good risk-adjusted returns.

Okay. Just as a follow-up, I'm sort of curious, a little bit of a nested question, so I apologize in advance. You mentioned that you were looking at a couple of transactions. I was wondering if you could give us maybe the nature of the kind of transactions you were looking at. And as you look ahead, is a 10% Tier 1 leverage ratio still the appropriate bogey to which you are looking to manage the platform on?

Yes, the 10% target remains a suitable goal for us. We are currently exceeding that, which is why we plan to be more consistent with buybacks moving forward. We are looking at a target of $400 million to $500 million in buybacks each quarter, though this could change depending on various factors. This level helps maintain our capital ratios, allowing us ample capacity for our main focus, which is growth—both organic growth and potential acquisitions. We generally do not discuss acquisitions unless we are making an announcement, so I won’t provide any details on that.

Paul, I wasn't planning to ask you about the buyback, but it seems you provided some insight. It's encouraging to see you active in April. When you mentioned the $250 million buyback floor, my initial concern was that you might continue to accumulate more capital, leading to a situation where the buyback wouldn't be enough to maintain the ratio or even push it towards the target. You referred to a run rate of $400 million to $500 million, so I'm trying to clarify my understanding of your comments. Should we be looking at a buyback closer to $400 million to $500 million per quarter instead of just the $250 million floor, to ensure that your capital ratios remain stable rather than increasing? Is that correct?

Yes, that's a good interpretation. If loan growth accelerates, it may cause us to slow down buybacks, or if there are acquisition opportunities like we saw last quarter, we may also reduce buybacks while we evaluate those opportunities. There are always various factors to consider. However, absent those factors, the $400 million to $500 million to maintain the capital ratios from growing much further is a reasonable assumption and can be factored into the models.

All right. That's great. For a follow-up, could you provide outlooks for net interest income and net interest margin? You mentioned that spread revenues are expected to remain flat sequentially, which is encouraging. One positive trend observed was the deposit beta, which I believe came in around 90%. I would like to understand how you are managing deposit costs and what assumptions you're making as further cuts come into play. Additionally, could you elaborate on the components that support the guidance for flat spread revenue, which seems to have performed better than anticipated based on some quarterly trends?

And that's based on spot balances. If we can increase loan balances throughout the quarter, there might be some potential upside, and conversely, if loan balances decline during the quarter. This is our conservative estimate for the quarter, expecting BDP fees and NII to remain relatively flat from the previous quarter. Regarding the deposit beta assumption, there are mainly two categories. One includes the higher-yielding deposits, such as the Enhanced Savings Program, which has nearly a 100% deposit beta because it follows the Fed funds target. The other category is the cash sweep deposits, where the cost is significantly lower, resulting in much lower deposit betas. It's challenging to calculate the deposit beta from quarter to quarter due to the timing of last quarter's rate cuts. However, this is the basis for our forecast for the upcoming quarter.

I have a broader question regarding net new assets, moving beyond just the quarterly or monthly trends we've observed. In the past, RayJay achieved over 5% net new assets, and I understand that this is not a perfect metric and involves many factors. However, it appears you have been maintaining around a 3% run rate for the last few quarters. Looking ahead, what do you think has been the issue over the past year? What changes could help you return to the 5% level, or is that still a realistic target?

Last quarter, we exceeded 3%, reaching 4%. If we disregard the OSJ departure, we were around the mid-5s for that quarter. Comparing this quarter to the same time last year, which was below 3% or in the 4% range, we remain optimistic. It's challenging to assess fluctuations from one quarter to another, but on a broader scale, we believe in our recruitment capabilities. We are confident we can maintain our position as top NNA growth leaders like we have in previous years. Our outlook on recruitment remains unchanged, and March and April have shown significant activity in new commitments, with this momentum continuing to grow. Raymond James is becoming a preferred choice for high-quality financial advisers within the industry across all channels. We are excited about our recruitment progress, the retention of our current advisers, and the future trajectory of NNA.

Great. That's helpful. For my follow-up, I wanted to dig a little more into the comment you made around the private investment alts platform. Maybe spend a minute on kind of what does that look like today at RayJay. And I'm curious both in terms of sort of manufacturing capabilities and if there's anything you're looking to add there from an asset management side. And more importantly, on the distribution side as you sort of look at the footprint you have in the wealth channel and how you can monetize that with alternative managers?

We see significant potential in that business. Over the past five years, we have made considerable progress in developing the platform, enhancing our capabilities, resources, expertise, and conducting internal research. We have many high net worth advisers and clients who are interested in our products, which cover a wide range, from alternative private equity mutual funds to specialized services for clients with $50 million or more in investable assets. Our platform operates on an open architecture model, similar to most of our wealth management offerings, allowing us to partner with top providers across various product types. For instance, we have appointed a new head of private placements to collaborate with our capital market clients wishing to raise capital from our Private Client Group. This illustrates the synergy between our different business areas, benefiting both Private Client Group and Capital Markets clients. We are optimistic about the future, though the current penetration of these offerings is still relatively low. While not all high net worth clients are suited for these products due to their less liquid nature, there is definitely an increasing interest among clients and advisers for these types of investments.

Paul, I wanted to follow up on capital return. I appreciate your comments from the quarterly report. However, considering that we aim to keep our ratios and capital levels stable, you mentioned having a Tier 1 leverage of 13.3% with a target of 10%. It seems like there’s no deal expected in the near future. Are we anticipating that we can't reach 10% without making any acquisitions? Or is it possible to reduce that ratio from here? The difference between 13.3% and 10% indicates a couple of billion in excess capital compared to your target.

Yes, we would like to use that for growth investments, both organically and through acquisitions. However, our primary focus is to ensure that our growth does not continue unchecked. This is why we are significantly increasing the amount and consistency of our buybacks, which still provides us with ample capacity for growth, our top priority for capital deployment. Moving forward, we plan to continue seeking growth opportunities. We have not abandoned mergers and acquisitions. In fact, M&A opportunities often arise during times of volatility and uncertainty like we are experiencing today, so we are actively pursuing acquisition opportunities across our businesses.

Is the 10% growth target achievable through investments, rather than relying solely on buybacks?

Yes. The way we aim to reach 10% is primarily through growth investments. Ideally, we plan to achieve that by focusing on top-line growth. I think the bigger picture is that rate cuts can actually result in increased loan balances, both for securities-based loans and corporate loans alike. And so we don't think that rate cuts would necessarily be bad for NII over the long term. We actually think it would potentially be beneficial to NII as it helps loan balances grow at lower rates. So there are static analyses you can do, and we can share that with you. It's just the deposit beta assumption based on the static balances. But I think what's more interesting and realistic is what would happen dynamically to balances if rates were to be lower over a longer period of time.

Good evening, everyone. Maybe just one for me, just on non-comp expenses. I heard in the prepared remarks that you're on track for the $2.1 billion for the full year. I think first half annualized is coming in a bit under that. So just wondering if you could speak to some of the push and pull factors in the back half of the year? And if markets stay near current levels down quarter-to-date meaningfully, that would lead to non-comps coming in lower than the $2.1 billion guide, just given some of the offsets on advisory fees.

Thank you, Kyle. Regarding our non-comp expenses, it's typical for us to see an increase as we progress further into our fiscal year. We anticipate this increase will be evident in specific line items, particularly in our communications and IT expenses. Therefore, we think it's premature to adjust our expectations or guidance at this point. We are committed to long-term investments, particularly in our leading technology, so any effects from the current market volatility are unlikely to alter our long-term perspective. It's also important to remember that a significant share of our non-comp expenses is variable and linked to revenues, such as FDIC insurance and sub-advisory fees. We will monitor this closely, but we don't see this as the right time to revise our expectations in this regard.

Could I just ask one modeling follow-up as well, just on administrative comp within PCG? It was down quarter-on-quarter and year-on-year, looked a bit off trend. Just wondering if there's anything to call out for that administrative compensation line within the PCG segment in the quarter?

Yes, Kyle, it's important to note that there are various factors influencing the components of compensation on a quarterly basis. While the percentage change for this quarter is noteworthy, we'd encourage you to consider the long-term perspective. Looking at the year-to-date figures, the six-month comparison to the previous year shows a 5% increase, which aligns with our expectations due to the business growth and related expense components.

I just wanted to ask about the new Chief AI Officer role. I was hoping you could talk about the responsibilities for this new function, what resources will be at their disposal? What sort of additions do you have here? And how will you go about measuring success?

We're really glad you asked that question. We plan to discuss it further at the Analyst Investor Day in June. The new Chief AI Officer, Stuart Feld, was promoted from within our organization. He will lead a dedicated team focused on an internal lookout function, which is unusual since companies typically outsource this task to consulting firms. Our leadership team believes that AI will significantly impact our industry and will do so quickly, which is why having this function in-house is essential. We intend to use AI to enhance the capabilities of our financial professionals and advisers, unlike many competitors who aim to bypass their advisers and engage directly with clients. Our goal is to empower our advisers to deliver even better service. This function will track developments in models, new AI solutions from third-party providers, competitor activities, and applicable use cases specific to Raymond James, considering our approach focuses on the financial professional's role. They have already made considerable progress, and there's much more to share in the coming years, especially at the Analyst and Investor Day concerning the structure of their work and AI strategy.

Great. And just a quick follow-up on that. Just curious around use cases that you've identified. Just curious how many you've identified, how many you have in production? And any sort of lessons learned from your initial foray into it so far?

Yes. I think I would defer the specifics to the experts at our Analyst Investor Day in terms of the number of actual use cases and what we've learned from it. So, better discussion for Analyst Investor Day. Great. Well, I want to thank everyone for your time this evening, and also just thank again our financial advisers for the excellent service and the advice they're providing to their clients through these volatile periods of time. And you see with the client survey showing 97% satisfaction with their advisers through this turbulent period and the J.D. Power award, #1 for client satisfaction for any advice firm and most importantly, #1 in being the most trusted firm. And so I just want to thank all of our advisers and associates and thank all of our clients as well for entrusting Raymond James. Thank you very much, and have a great evening.

Our first question comes from Michael Cho with JPMorgan. This concludes today's conference call. Thank you for your participation. You may now disconnect.