Raymond James Financial, Inc (NYSE: RJF) Q2 2025 Earnings Call dated Apr. 23, 2025
Corporate Participants:
Kristina Waugh — Senior Vice President, Investor Relations
Paul Shoukry — Chief Executive Officer
Butch Oorlog — Chief Financial Officer
Analysts:
Michael Cho — Analyst
Devin Ryan — Analyst
Daniel Fannon — Analyst
Bill Katz — Analyst
Steven Chubak — Analyst
Alexander Blostein — Analyst
James Mitchell — Analyst
Kyle Voigt — Analyst
Michael Cyprys — Analyst
Presentation:
Kristina Waugh — Senior Vice President, Investor Relations
[Abrupt Start] 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 Kristie 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 businesses, anticipated results of litigation and regulatory development and general economic conditions.
In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts or future or conditional verbs such as may, will, could, should and would as well as any other statements that necessarily depends 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?
Paul Shoukry — Chief Executive Officer
Thank you, Kristie. Good evening, and thank you all for joining us on the call today. Last week, we had our Global Top Financial Advisor Conference in Montreal. It was wonderful to spend time with our top advisors 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 a unique advisor and client-focused culture along with our robust platform. Just a 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 advisors, bankers, associates and clients as possible. I know I have shared this before, but what I continue to hear with passion from advisors, bankers and associates is 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 advisors earned the number one ranking in the 2025 J.D. Power Survey for Advised Investor Satisfaction and Industry Trust. To all of our advisors and the associates who support those advisors, congratulations, and thank you for earning this well-deserved recognition.
My number one 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, and I am so fortunate to have a top-notch leadership team who share this same commitment. Our values-based client-first approach has consistently led to strong results, and that was the case again in the fiscal second quarter. We generated quarterly net revenues of $3.4 billion and pre-tax income of $671 million, up 9% and 10% over the year ago quarter, respectively.
For the first six months of fiscal 2025, we generated record net revenues of $6.9 billion and record pre-tax 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 advisors 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 and 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 improve 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 advisor and client-focused culture coupled with leading technology and solutions, continues to resonate with advisors across all of our affiliation options.
In the Capital Market segment, the investment banking pipeline is very strong, but the timing of closings has been negatively impacted with market uncertainty and heightened volatility associated with tariff negotiations. And 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 entered 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 remained solid.
Turning to capital deployment. I want to reiterate that our longstanding 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’re 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 and 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 the fiscal second quarter. We believe this balanced and more consistent approach will still leave us with ample capital and liquidity to support our strong organic growth initiatives as well as to continue pursuing attractive acquisition opportunities.
Now I will 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 advisors has actually increased to 97% at Raymond James.
These trends highlight the fact that clients really value having a financial advisor 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 advisors who are seeking strength and stability for their businesses and their clients during these periods of stress.
As I explained earlier, our advisor 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 use 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’re 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 network focus advisors 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 advisors 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 values, 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?
Butch Oorlog — Chief Financial Officer
Thank you, Paul. I’ll begin on Slide 6. The firm reported net revenues of $3.4 billion for the fiscal second quarter, pre-tax income of $671 million, resulting in a pre-tax margin of 19.7%. Net income available to common shareholders was $493 million and earnings per diluted share of $2.36. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $507 million, an adjusted pre-tax margin of 20.3% and adjusted earnings per diluted share of $2.42. We generated annualized return on common equity of 16.4% and annualized adjusted return on tangible common equity of 19.7%. Strong results for the quarter, particularly given our conservative capital base.
Turning to Slide 7. Private Client Group generated pre-tax 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 pre-tax income. Our Capital Markets segment generated quarterly net revenues of $396 million and pre-tax 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 the lower investment banking revenues.
The Asset Management segment generated pre-tax 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 pre-tax income fiscal year-to-date. The Bank segment generated net revenues of $434 million and pre-tax 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. 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 cause a significant headwind for the business near-term. Our revenues in this business could be unfavorably impacted while this uncertainty persists. 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 surprising given the timing of tax payments, with the current program 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 expenses, 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 — presented in 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 non-performing 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 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, any effect of which will affect our third quarter provision.
Slide 13 shows the pre-tax margin trend over the past five 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 five quarters. As Paul mentioned, we have been actively repurchasing shares. Over the past five 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, 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 advisors in uncertain and challenging market conditions.
That concludes our prepared remarks. Operator, will you please open the line for questions?
Questions and Answers:
Operator
Absolutely. [Operator Instructions] Thank you. Our first question comes from the line of Michael Cho with J.P. Morgan. Please go ahead.
Michael Cho
Hey. Good evening, guys. Thanks for taking my question here. I just wanted to start on the Wealth business, particularly NNA. Paul, you kind of called out nuances in NNA during the quarter and that improved sequentially throughout. I guess I was hoping 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 magnitude of pipeline today, maybe versus last year at this time, just to help us get a sense of direction here? Thanks.
Paul Shoukry
Yeah. Thanks for that question, Michael. The pipeline, I mean, NNA is tough to measure month-to-month or even quarter-to-quarter. The sales cycle takes a long time from the initial conversations to the time that advisors affiliate with the firm. So what I would just tell you high level is that, throughout the quarter, the actual NNA improved and as well as the new commits, particularly in the months of March, which was a very strong month, followed by another good month in April. These are new commits that will be affiliating with us at a future date. So that’s not reflected in the NNA number. And this is really from a variety of firms and across our affiliation options.
So what I would tell you is that, we’re really optimistic about the pipelines and that our value proposition of the best-of-both-worlds where we provide culture that’s advisor and client focused with capabilities, technologies and solutions. And now increasingly importance is the strong balance sheet that we have because advisors are looking for a source of strength and stability for their businesses. And a lot of these roll ups or even other strategics don’t have tangible capital, for example and so they’re looking for a source of strength and stability so they can grow their businesses and provide good service for their clients through any market environment.
Michael Cho
Great. Thanks for that, Paul. If I could just switch gears quickly, Butch, you talked about some moving pieces in the balance sheet and nuances across the segment. 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. Anything notable considerations in terms of what you’re seeing in terms of loan demand exiting the quarter and maybe into the fiscal third quarter as well? Thanks.
Butch Oorlog
Sure. With regard to loan demand during the quarter, I would say exiting the quarter, loan demand has been tepid on the corporate side, as you would expect, given the volatility. And so we remain poised and ready to opportunistically make investments when the returns — return to a reasonable risk adjusted target level for us.
But that said, we continue to see significant demand for our SBL loans. During the quarter, we had SBL loan growth of over $600 million and total loan growth of over 2% in balances. So strong loan growth on the balance sheet overall during the quarter. And exiting the quarter, we’ve still seen a strong demand in SBL loan growth during April, so far in April, which is seasonally a typically strong time for us and quarter for us with respect to SBL loan growth, given clients’ needs for liquidity around tax payments.
Michael Cho
Great. Thanks, Butch.
Operator
Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.
Devin Ryan
Great. Hey, Paul. Hey, Butch. How are you?
Paul Shoukry
Good, Devin. How are you doing?
Devin Ryan
I’m doing well. 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 would 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 advisors 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 advisors’ willingness to move maybe has nothing to do with the M&A firms, but just more broadly advisors in motion? Thanks.
Paul Shoukry
Yeah. 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 advisors, treating them like clients and respecting the relationship advisors 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 advisors to take a look at other options. And so to the extent those advisors are looking for the type of culture and capabilities that Raymond James provides, and that would absolutely increase the opportunities with those advisors that are interested.
Devin Ryan
Okay, great. Thanks, Paul. And just to follow up also on the loan book as well. So Butch, I heard the comment about 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. 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? Thanks.
Butch Oorlog
Yeah, sure. Thanks, Devin. The nature of the comment was more to make sure it’s understood that the volatility commenced on April 2nd. And so the effects of the volatility both on the economic forecast that underpins the provision, as well as anything specific to our loan book, would not — was not reflected in our second quarter results. So that will impact our third quarter.
Paul Shoukry
That’s really more of a comment around credit versus, I mean, a comment around accounting versus credit. It’s just from an accounting perspective to the extent that we have new assumptions that are given to us that we put in the CECL models. That hasn’t been reflected in these results yet just because the timing of the macroeconomic changes that we anticipate will come through the new models would be following the end of this quarter that we’re talking about today.
Devin Ryan
Right, exactly. Okay. That’s what I assume, but I appreciate the clarification. Thanks, guys.
Operator
Your next question comes from the line of Dan Fannon with Jefferies. Please go ahead.
Daniel Fannon
Thanks. One more on N&A. Just for the quarter, I wanted to confirm just any change in attrition in the period to make the numbers lower. Was it just timing of the onboarding? And then to follow up on Devin’s question, curious of how your view of advisor 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, does advisor movement for the industry slow? Knowing that your competitive positioning is better today, but just curious about the overall industry trends?
Paul Shoukry
Yeah. I mean, each period of volatility is different. So one of our best recruiting years in history was during the financial crisis when advisors were looking for a source of strength and stability. And with all the industry disruption and 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 advisors 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 advisor 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 2025 and beyond.
Daniel Fannon
Great. That’s helpful. And then, Butch, just to follow up on the cash comments, just want to make sure I heard you correctly. The $1.5 billion from billing and another $1.5 billion, I think, is what you said for tax payments. And if that’s correct, how does that compare to historical levels and is there any other change just given maybe some selling of derisking and cash build in this type of market backdrop?
Butch Oorlog
Thanks, Dan. The indication was that the balances are down since quarter end roughly equivalent to that $1.5 billion fee billings that came out of the account in April. So it’s not in addition to or an increment of that. That basically is where our cash balances sit, just net of those collection of those fees.
Paul Shoukry
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.
Daniel Fannon
Great. Thank you.
Operator
Next question comes from the line of Bill Katz with TD Cowen. Please go ahead.
Bill Katz
Okay. Thank you very much. As you look ahead to — well, first of all, Paul, congrats again to you in the new role. So in terms of the earning asset, interest earning asset dynamic, I’m sort of curious. Loans grew nicely, but the earning assets were sort of down sequentially. As you think through maybe the funding mix and the loan demand commentary you mentioned, how do you see the intermediate term view for earning asset growth? Is it flattish here or a remix within the loan category or could you actually see some kind of incremental expansion? Thank you.
Butch Oorlog
Yeah. Thanks, Bill. We saw maturities in the AFS portfolio of $350 million during the quarter two that was redeployed and part of funding the loan balances. And 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.
Paul Shoukry
I would say on the loan side of the equation, securities-based loans, as Butch mentioned, have continued to grow in April, and we — and this is — that’s through the volatility in the month of April as well. Again, some of that’s 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. 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 there’s more loan demand, and loan demand at prices that generate good risk-adjusted returns.
Bill Katz
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’d give us maybe the nature of the kind of transactions you were looking at. 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? Thank you.
Paul Shoukry
Yeah. The 10% target is still a good target for us. We’re obviously above that now, which is why we are going to be more consistent going forward with buybacks, because even at $400 million to $500 million of buybacks a quarter going forward, if that’s the target now, which could change based on a whole set of circumstances, but that’s kind of the target, just to look to $400 million to $500 million per quarter. That really just keeps our capital ratios where they are, which gives us plenty of capacity for our top priority, which is growth, both organic growth and to pursue acquisitions. So of course, we don’t talk about acquisitions unless we’re announcing them for ourselves, so I’m not going to get into the details around that.
Bill Katz
Okay. Thank you.
Paul Shoukry
Thanks.
Operator
Your next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.
Steven Chubak
Hi. Thanks so much for taking my questions. Paul, I wasn’t planning to ask you on buyback, but you just, I guess, opened the kimono, so to speak. It’s certainly encouraging to see you guys so active in April. I think when you mentioned the $250 million buyback floor, my initial concern was that you would continue to accrete more capital and that ratio would continue to build. Essentially, it wouldn’t be sufficient buyback to at least maintain the ratio and even drive it towards that target. You mentioned $400 million to $500 million as a run rate, so I’m just trying to understand that mean. My interpretation of your remarks is don’t underwrite $250 million or the floor. Underwrite something closer to $400 million to $500 million a quarter, which will ensure that your capital ratios are at least stable but not necessarily building from here. Is that correct?
Paul Shoukry
Yeah, that’s a good interpretation of it. And of course, if loan growth accelerates, then that may cause us to slow down buybacks. If there’s acquisition opportunities, like we saw last quarter when we stopped — when we slowed down buybacks as we were evaluating live acquisition opportunities. So there’s always different factors to consider, but absent those, the $400 million to $500 million that you’re talking about to keep the capital ratios really from growing much further from here is a good assumption. It’s something you can underwrite in the models.
Steven Chubak
All right. That’s great. Then for a follow-up, just on the outlook for NII and NIM, you had noted that the spread revenues were expected to be flat sequentially, which is certainly encouraging. The one trend that we did notice, which surprised positively, was the deposit beta, which came in, I believe, around 90%. I just want to understand how you’re managing deposit costs? What assumptions you’re making as we get further cuts. If you can just unpack some of the component pieces that support that flattest spread revenue guide, which came in a little bit better than we had been anticipating, given some of the quarterly trends.
Paul Shoukry
Yeah. That’s based on spot balances. If we can grow loan balances more throughout the quarter, there might be some upside to that and vice versa if loan balances decline during the quarter. So that’s just our sort of conservative estimate for the quarter is for BDP fees and NII to remain relatively flat sequentially.
The deposit beta assumption, really, it’s two different — primarily two different buckets. There’s the higher yielding buckets, that Enhanced Savings Program, for example, which have nearly 100% deposit beta, as if they’re tracking with Fed funds target. And then there’s the Cash Sweep bucket, where the deposit — the rate — the cost of those deposits is much lower, and therefore, the deposit betas are much lower as well. So it’s a little hard to calculate that deposit beta quarter-over-quarter, just given the timing of the rate cuts last quarter, but that’s what we’re using to forecast for the upcoming quarter.
Steven Chubak
Very helpful caller, Paul. Thanks for taking my questions.
Paul Shoukry
Thanks, Steve.
Operator
Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.
Alexander Blostein
Hey, guys. Thank you for the question. A little bit of a bigger picture question, NNA, so less related to the quarterly or the monthly trends that we’ve seen. As you zoom out, Reggie used to do 5% plus NNA. And I get it, it’s really not a perfect metric and there’s a lot that goes into it, but it just feels like you’ve been at a 3% run rate over the last few quarters. So as you look forward, what’s been the problem in the last year or so? What do you think could change to get you guys back to this 5% plus or is the 5% plus still a realistic target?
Paul Shoukry
Just last quarter, we were above 3%. I mean, we were at 4% last quarter, and if you excluded that OSJ departure, we’re in the mid-5s last quarter. So I would just — this is really just between this quarter and then the year-ago quarter, where it was sub-3% or 4% range. But listen, we are optimistic. Again, it’s hard to look at it quarter-to-quarter, big picture. We’re optimistic about our recruiting pipelines, and we’re optimistic that we can continue to be best-in-class NNA growers, just as we have been year after year after year.
And so there’s nothing in our calculus or in our expectations that’s changing around that. We’re very optimistic about the recruiting pipelines. The months of March and April were very strong for us in terms of new commits, and that’s just continuing to accelerate. In terms of the interest in Raymond James, we are certainly a destination of choice for high-quality financial advisors across the industry, across all of our channels. And so we’re really excited about the recruiting momentum and the retention of our existing advisors and the NNA trajectory going forward.
Alexander Blostein
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 Ray J. 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?
Paul Shoukry
Yeah. We have a lot of upside in that business. We’ve made a lot of progress over the last five years in building out the platform, the capabilities, the resources, the expertise, the internal research around it. And we have a lot of high-network-focused advisors with clients that are interested in the products. And it’s a wide range. It captures a wide range of products, everything from the alternative private equity mutual fund-type products all the way to we have a private pick desk, we call it, private investments for clients with $50 million and above of investable assets and everything in between.
This is an open architecture platform for us, just like most of the rest of our Wealth platform is really an open architecture platform. So we bring in the best providers across all of the product types to the extent that we provide our own products. For example, we hired a new Head of Private Placements to kind of work with our Capital Market clients to the extent that they want to raise capital from our Private Client Group business.
So that’s an example of collaboration and synergy between the businesses that could be win-win for clients in the Private Client Group and Capital Markets business alike. But we’re excited about the opportunity. The penetration is still relatively low. It’s not for every client, even very high-net-worth clients, a lot of them like having liquidity. And these are, by definition, less liquid, but certainly there’s a growing appetite amongst clients and our advisors for these type of products.
Alexander Blostein
That’s great. Thanks so much.
Operator
Your next question comes from the line of Jim Mitchell with Seaport Global Security. Please go ahead.
James Mitchell
Hey. Good evening. Paul, just maybe a follow-up on capital return. Appreciate the quarterly comments. But when we think about keeping ratios flat, capital levels flat, you’re at 13.3% Tier 1 leverage. You’ve had a target out there of 10%. Doesn’t sound like a deal is in the near-term. So is it we just don’t expect to get to 10% without deals or can you kind of push that ratio down from here, because when you look at just the math of 13.3% versus 10%, that’s a couple of billion of excess capital versus your target?
Paul Shoukry
Certainly, I mean, we would like to deploy that through growth investments, both organically and through acquisitions. But we — before — the first thing we have to do is ensure that it doesn’t continue growing and that’s why we’re significantly increasing the amount and also the consistency of the buybacks, which again, to your point, still gives us plenty of capacity for growth, which is our top priority as far as deploying capital goes and so that would be the plan going forward is to continue looking for growth opportunities. We have not given up on M&A. And in fact, M&A opportunities sometimes present themselves in periods of volatility and uncertainty like we’re in today, and so we’re still very actively pursuing acquisition opportunities across our businesses as well.
James Mitchell
So is it the 10% more of a target with assuming growth, but you’re not going to get to that target with buybacks? You just need to have some investments to get there?
Paul Shoukry
Yeah. I mean, that’s really the way we’re going to get down to 10% is hopefully through growth investments. That would be the ideal way to get down to 10% is by investing in top-line growth.
James Mitchell
Okay, great. And then maybe just thinking through on the NII side with three to four cuts in the forward curve, it’s bouncing around. But can you just update your NII sensitivity? You highlighted some asset turnover in the low yielding AFS book and being reinvested in higher yielding assets. Does that help offset maybe pressures from a few rate cuts? How do we think about that bigger picture?
Butch Oorlog
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’s static analyses you can do and we can share that with you. It’s just a 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.
James Mitchell
Okay. Fair enough. Thanks.
Paul Shoukry
Thank you.
Operator
Your next question comes from the line of Kyle Voigt with KBW. Please go ahead.
Kyle Voigt
Hi. Good evening, everyone. Maybe just one for me, just on non-comp expenses. I heard in the prepared remarks that you were 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 pretty quickly. Meaningfully, will that lead to non-comps coming in lower than the $2.1 billion guide, just given some of the offsets on advisory fees?
Butch Oorlog
Yeah. Thanks, Kyle. With respect to our non-comp expenses, it’s not unusual for us to have a ramp up as we move deeper into our fiscal year. And so we believe that ramp up will occur in certain of the line items, especially in our communications and IT expense lines. And therefore, we believe that it would be too early to make a call to adjust that non-comp expectation or that guidance.
We remain committed to invest long-term, especially in our leading technology. So any impacts from the current volatility would not likely impact our long-term thinking with respect to that. And then also keep in mind that a significant portion of those non-comp expenses are variable and move with revenues, things like FDIC insurance and sub-advisory fees. So that aspect is something that we’ll keep an eye on, but definitely not the time to us in our thinking to provide any revised expectation on that level.
Kyle Voigt
Thanks. I guess, I have 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?
Butch Oorlog
Yeah. Kyle, the one thing to think about that is it’s hard with respect to comp. There are different elements that would affect sub-components within the comp from quarter-to-quarter. So although the percentage change was, as you noted, for the quarter, we would advise you to think about it long-term. And if you look at year-to-date, at the six-month year-to-date relative to the prior year year-to-date, it’s up 5%, which is consistent for that six-month period, which is consistent with what we’d expect given the growth in the business and the growth in the elements of those types of expense components.
Kyle Voigt
Okay. Thank you.
Operator
Your last question for today comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.
Michael Cyprys
Great. Thank you for taking the question. I just wanted to ask about the new Chief AI Officer role. I was hoping to talk about the responsibilities for this new function, what resources will be at their disposal, what sort of conditions you have here and how will you go about measuring success at Raymond?
Paul Shoukry
I’m really glad you asked that question and it’s something that we plan on talking more about at the Analyst Investor Day in June. But the new Chief AI Officer, Stuart Feld, who was an internal promotion, so one of our senior leaders in technology, is really, and he will have a dedicated team, really focused on evaluating, I kind of call it a lookout function, which is somewhat unique in that usually we outsource lookout functions to consulting firms.
But we think the leadership team has conviction that AI will be such a game-changer for our industry and it will occur relatively rapidly, that we need to have that function internally, also because the way we use AI will be very different than how many of our competitors we anticipate will use AI, whereas we’re really wanting to use AI to help our financial professionals and our financial advisors better serve their clients, where many of our competitors have used technology and are planning on using AI to essentially try to get around their financial advisors to go direct to their clients.
And that is not our goal. Our goal is to use AI to better empower our advisors and financial professionals so they can provide even better service to their clients. And so this function will be monitoring changes in model developments, third-party providers and vendors who are coming up with new AI solutions, what competitors are doing and essentially use cases for Raymond James, given our unique approach of really betting on the financial professional to provide great advice to their clients. And so they’ve already made pretty good progress, and there’ll be a lot more to talk about over the coming years, and certainly we’ll talk about it more at Analyst Investor Day in terms of how they’re structuring their work and thinking around AI.
Michael Cyprys
Great. And just a quick follow-up on that, just curious around the 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?
Paul Shoukry
Yeah. 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.
Michael Cyprys
Fair enough. Look forward to it. Thank you.
Operator
There are no further questions at this time. I would like to turn the call back over to Paul Shoukry.
Paul Shoukry
Great. Well, I want to thank everyone for your time this evening and also just thank, again, our financial advisors 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 advisors through this turbulent period and the J.D. Power Award, number one for client satisfaction for any advised firm, and most importantly, number one in being the most trusted firm. And so just want to thank all of our advisors and associates and thank all of our clients as well for entrusting Raymond James. Thank you very much and have a great evening.
Operator
[Operator Closing Remarks]