Good morning and welcome to the Earnings Call for Raymond James Financial Fiscal Fourth Quarter and Fiscal Year 2016. My name is Raquel and I will be your conference facilitator today. This call is being recorded and will be available on the Company's website. Now I will turn the call over to Paul Shoukry, Head of Investor Relations at Raymond James Financial. Please go ahead, sir.

Thank you, Raquel and good morning. And I thank all of you for joining the call. As always, we appreciate your time and interest in Raymond James Financial. After I read the following disclosure, I'll turn the call over to Paul Reilly, our Chief Executive Officer; and Jeff Julien, our Chief Financial Officer. Following their prepared remarks, they will ask the operator to open the line for questions. Certain statements made during this call may constitute forward-looking statements. Forward-looking statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, market conditions, acquisitions, our ability to successful recruit and integrate financial advisors, anticipate results of litigation and regulatory developments, or general economic conditions. In addition, words such as believes, expects, anticipates, plans, and future or other conditional verbs, such as will, may, could and would, as well as any other statements that necessarily depends on future events are intended to identify forward-looking statements. Please note that forward-looking statements are subject to risks and there can be no assurance that actual results will not differ materially from those expressed in those forward-looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q which are available on our website. During today's call we'll also use certain non-GAAP financial measures to provide information pertinent to our management's view on ongoing business performance. These non-GAAP measures should be read in conjunction with and not as a replacement for the corresponding GAAP measures. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedule accompanying our press release. So with that, I will turn the call over to Paul Reilly, CEO of Raymond James Financial. Paul?

Good morning, Paul, thank you. Kind of a very interesting year if you'd asked me in the first or second quarter if we were going to finish on record. So I would have said, with that assets down at the start of the year in a tough market, oil prices plunging, the underwriting markets is almost freezing up, I would have been very surprised. So needless to say, we're very pleased about the record quarter and record fiscal year. We kind of achieved this remarkably in a very unremarkable fashion with just a relentless following up of a long-term implementation strategy. Tom celebrated his 50th year at Raymond James and he constantly reminds us that our mission is to focus on the well-being of our clients, and assist advisors in helping clients achieve their financial objectives, and to make all our decisions for the long-term. And if you look at this year there is nothing in particularly that stood out, except all divisions had record revenue. This year as our record revenue and profits were achieved while we underwent robust recruiting. The integration of three groups that joined our family; the Duestche Bank U.S. Private Client Service Unit that we've rebranded Alex Brown, a division of Raymond James and added capability in the Northeastern expansion of our ultra-high network capabilities. 3Macs; the firm actually older than the country of Canada, has well joined us after almost a 200-year partnership, great divisors and giving us some multi-language capabilities, back office capability in Canada. The company is expanding our M&A capability in Europe will Mel [ph] numbered his group. The implementation of masses of world-class AML system in very short order in our platform. New client and advisor technology including advisors have been able to do all their work on their iPhone…

Thanks, Paul. As Paul mentioned we had a record revenue quarter, $1.46 billion, up 9% compared to last year's fourth quarter of 7% compared to the preceding quarter. That -- this revenue growth was really across the board, all four of our core operating segments had record quarterly revenues and in the September quarter. Furthermore, three of our four segments, private client group, capital markets and the bank all generated record quarterly pre-tax profits. So a very strong quarter. Net income was $171.7 million, 19 per diluted share. That represents the 35%% growth over last year's fourth quarter and 37% over the preceding quarter. And then on a non-GAAP basis, kind of a headline number I guess that people are talking about. The adjusted net income of $185 million was $1.28 per diluted share which is a 38% increase over the preceding quarter. So obviously the $1.28 far exceeded everybody's expectations including our own. So let me touch on some of the major variances from the consensus model that really drove that feat [ph]. On the revenue side, the biggest line item that really varies from everyone's expectations was the strength of the investment banking revenues and that was really a combination of several businesses we had. We seem to have a tradition of having strong Septembers in lot of these businesses and this year was no exception. M&A, equity underwritings, both picked up and our tax credit fund business which is also in that line item had a phenomenal quarter, a lot of syndications closing in the quarter. So while we -- most of all still under that -- maybe not commissions on the institutional equity side but the other cylinders were all firing pretty well. So we're -- we have a good pipeline in most of the businesses…

Thanks, Jeff. I know there is a lot to go over on the annual call but I'll try to get through this is quickly as possible. Private Client Group segment, let me start there; record annual net revenue of $3.62 billion which is 3% over fiscal 2015. And note, it's the second best pre-tax profit of $340.6 million, down just $2 million for last year's record. Driven by really advisor recruiting, it was record independent advisor recruiting; and the employee group, probably the second best year. So very strong organic growth, it's not just the acquisitions. We also in the Private Client Group, the segment was helped by higher assets and fee-based accounts during the year, as well as higher fees earned on cash balances in the Raymond James Bank deposit program following the increased rates of last December. However, revenues were negatively impacted by declines in transactional revenues, especially new issue credits, really attributable to the market slowdown in underwritings. And retail equity commissions was a result of lower client engagement, religious training through the year. And we think we'll see a continuation in the fee-based accounts which will be pushed by the DOL [ph], sure it will. The revenue growth of 3% was lower than our asset growth during that transition year and we should note -- we also had elevated regulatory expenses in the Private Client Group segment for the year which Jeff talked about, continued into the fourth quarter. And capital markets generated record annual net revenues of -- I don't know why it can't stay a $1 billion but 99 -- $999.9 million for pre-tax over 20015 and record annual pre-tax income of $139.2 million, up really 30% over 2015; driven really by record revenues in our fixed income division and record revenues through agreements…

Thank you. [Operator Instructions] Your first question comes from the line of Devin Ryan with JMP Securities.

Good morning. Maybe just starting on the deal while I appreciate some of the comments but obviously a lot of moving parts there. And we're hearing from some that they're looking to apply kind of the fiduciary requirements across all brokerage assets; and then others are talking about going to level commissions for similar products. So I appreciate you're going to offer choice but I'm curious maybe where you stand on those? And then also you'd spoken about the overtime here, renegotiation that could occur with products manufacturers, just around the economics of the sale. And I'm curious if any of those have already occurred and kind of how you see the economics changing?

So first from an advisory standpoint, we will be leveled fee in those accounts. So we will be moving -- but that we're already there and our employee division and we will have to move there on fee-based accounts for our independent contractors. So we believe that the -- we're lots of discussions with our partners that we think most of the revenue impact if any will be pushed off into next year as we get through the transition fiscal year '18. So on the DOL impact, so that's hard to quantify; and I believe that to the best of our knowledge right now that in our operating technology in operations kind of cost guidance that we have the cost of that transition building for next year or so. So we'll see more as we go. But also the DOL is going to release the questions -- answered the questions that they've talked about releasing in the summer -- so late summer this year has been warm around the country. So we expect those times to -- and that maybe some weeks -- some of our response but we fully expect to offer a range of options for advisors to help their clients.

Got it. Okay, that's helpful. And maybe the increase in the securities portfolio in the bank and I think some people will like to see that you're moving in that direction. I'm just curious if you can put in more context around how much more you look to expand that? And then just in terms of the economics, so you're picking 150 basis points in a ballpark in the securities; what's the current give up on that -- I guess, I'm assuming it's coming from the third-party bank deposits, so I'm just starting to think about the net benefit there?

Yes, we think the overall securities portfolio -- it's been $400 million type range already, we're thinking about growing it to by about $1 billion. So over the course of the year just to put a frame of reference on it. In terms of the give up, we're still earning a little over 50 basis points from the banks we programmed. So to redeploy that cash -- we'd be picking up about 100 basis points by doing this -- and deploying a little bit of capital.

We're staying mainly with all agencies in the short-term. So our portfolio will probably be more short-term.

Yes, the duration down as [indiscernible] itself three years on what we've been putting on over the last quarter.

Yes, Devin. The -- as a reminder, we have a lot of our corporate loans to have LIBOR floors as such -- about $4 billion of our corporate loans have floors so they would not enjoy the benefit of that LIBOR increase until we really get over 100 basis points in LIBOR. We also have a mix of 30 day in LIBOR based loans; loans that are based on 30-day and 90-day. There has obviously been a lot more increase in the 90-day rate over the last year as compared to the 30-day rate. But that would be beneficial to the us in general but the impact is not as great as it may appear on the surface because of the LIBOR force.

Got it. And just one last quick one here; just on FA recruiting; you still seem to have some pretty good momentum, I'm just curious is that shifting at all with the uncertainty around DOL where FA's may be waiting to make a move or even you would think about slowing -- just to kind of get some better perspective around what the real revenue implications could be?

Surprisingly not. We've kind of expected that but we haven't seen it. And the pipeline is robust, this month's a little slower but it always is going to go through the year and we -- our backlog is very strong and we have not seen a slowdown, it doesn't mean it won't happen as we get closer but we haven't seen that yet.

Got it. Okay, thank you guys for taking my questions and congratulations on the strong quarter.

Thank you.

Your next question comes from the line of Chris Harris from Wells Fargo.

Thank you. So the margin in private client; I thought it was particularly good. It sounds like you guys still have some elevated legal expenses running through there. So can you maybe talk just a little bit how the margins were so good? And related to that, is Alex Brown coming through at a higher margin; maybe that's providing some advances [ph]?

Unfortunately Alex Brown -- actually for the month it was been because the amortization starts hitting but it's not going to provide -- it's going to provide some pressure on the margins because it's more of a breakeven business before we -- on our internal accounting. So that's how allocate cost between advisor retention and costs -- but it generates a lot of activity, both in the bank and the cash sweep and other things that make up a good investment. And we've got great advisors, so the -- we don't -- we think that both 3Macs and Alex Brown, if anything we'll put a little pressure on the margin, the other way.

As well as the impact of DOL, whatever it might be – extend the expenses.

So what I mean -- so margin was up 200 basis points from last quarter in that segment, I'm just trying to figure out what happened there?

We just had a lot higher fee billings in that quarter than we had in the preceding quarter. We -- and we did enjoy most of the quarter, some of the interest spread on these balances, we got one from one-third of the quarter, things like that -- but we haven't really looked at what the margin target is for PCG next year but maybe between that 10% to 11% range we got to look at what it is and if there is another interest rate hike it may go up from there. But I don't think this was -- and any one thing you can really point to is saying that it was really strange. So it was just more solid and a little help from the acquisition and the interest earnings from those balances.

Very good, thank you.

[Operator Instructions] Your next question comes from the line of Jim Mitchell with Buckingham Research.

Good morning guys. Maybe just quickly on -- Jeff, on your commentary on rate sensitivity; I think if you think about 25 basis points, you said about $4 million per basis point, I know you're not assuming -- you recapture 25 but that would be about $100 million if you did capture 25. I think you guys have been targeting about $80 million for the next 75. It seems to me you should be able to get 25 out of another 75. So are you taking up the rate sensitivity because of Alex Brown or something else or how should we think about that?

That's exactly right, our cash balances the loan at $43 billion now which is -- was $34 billion a year ago. So it's obviously a big delta there and so our sensitivity is much higher. We get the $12 million to $15 million a quarter saying if the rates get up 25, and if we pass 40% through, that's 10 basis points, we keep 15 at $60 million a year; as such $15 million a quarter. If we pass-through 13, the client which roughly have -- we keep 12 which is $48 million, which is the $12 million quarter. So it's kind of how we get that range. I think from the next -- if that's true and a lot of that depends Jim on what the competition is doing. I mean we're trying to be fair to clients and then we have to look at the alternatives the clients have if -- money market funds or competitors etcetera are much more aggressive than that in terms of passing rates through declines and we probably would have to respond accordingly. But so far we've kind of been leading the pack, and my guess is if we pass-through 10 or 15, we still be leading the pack of the next hike. But then the next two rate hikes if and when they happen – there would be much less for us to retain I believe. So definitely that total capture from the first 100 basis point increase is very, very front-loaded here.

Fair enough. And just maybe on your pre-tax and large a target of 16%; I think you guys are sort of indicating the acquisition are net depressing for margins but you still feel comfortable with the 16. Is that relying on an improvement in banking which tends to be higher margin or do you just feel good about the rest of the business that you had with [ph] Alex Brown?

I think to realize it's an improvement in all three of the other segments. I mean at the bank we expect to continuing growth in the bank, we do expect I think better results in equity capital markets for the year than we've just saw in the most recent year. We're hopeful fixed income can come close to matching this year but at least within year short and we've already talked about the tailwinds that asset management has with the balance levels at the beginning of the year. So we actually expect some nice improvement in all of those. The acquisitions themselves -- yes, you're right, the Alex Brown acquisition particularly will not be help the PCG margins. It's very difficult to have a good operating margin when virtually a 100% of the advisors are on transition assistance deals which starts hitting. As Paul mentioned, $35 million, next year roughly of amortization of those retention deals, that's hard to overcome, at least have a big party of margin.

Okay, great, thank you very much.

Your next question comes from the line of Conor Fitzgerald with Goldman Sachs.

Good morning. First one just on DOL, I know you mentioned continuing the migration towards the fee-based accounts. One of your competitors when they stopped offering commission-based retirement accounts offered; fee released to customers who might have been a little -- had a little bit of a sticker shock coming from the advice based account pricing. Do you think that's something you would consider cutting fees in advice-based account that hope migrate customers over to that channel?

I think our whole philosophy is to offer kind of products -- roughly flexibility with clients and advisors. And I know that others believe they want to put them totally on fee-based platform and they are pushing them that way. And then when you do that you do get some misallocations where you discount. I -- we're not looking to force anyone under any platforms. So with the pick [ph] or maybe some more limitations in that we have to make sure that everything complies but our goal isn't to force someone onto a platform and kind of lower the fees and induce it. And I'm not saying there is anything wrong with that but it's not our strategy; our strategy is to offer the flexibility. So our pricing is not done, when we're through, the DOL is going to impact the client and advisor, and firm; and we're still going through that but right now our plans aren't to push people -- try to push people or heavily influence them under our fee-based platforms.

Got it. And then on the 16% pre-tax margin guidance; can you just help us understand what you're assuming for in terms of interest rates? I mean you think about that and if we did get a Fed hike in December, how would that impact that assumption?

Well, if we took -- if we did get the benefit of another 25 basis point rate hike based on what we're assuming we would keep and that would probably lead to another -- probably lead to 1% percent increase in the pre-tax margin, and roughly $6 billion type revenue base. So if we make $60 million, that's another one. So we would probably up the target -- internal target by about 100 basis points if we get that.

It's very helpful. Thanks for taking my questions.

[Operator Instructions]. This concludes the Q&A session for today. I would turn the call over to management for closing remarks.

First, thank you all. We appreciate your taking the time to follow us. Another -- lots of earnings is coming out last week and this week. So we'll continue to stay hard focused on the long-term and talk to you next quarter. Thank you very much.

Thank you, ladies and gentlemen. This concludes the Raymond James Financial fiscal fourth quarter and fiscal year 2016 conference call. You may now disconnect.