Good morning, and welcome to Raymond James Financial Fiscal Third Quarter 2020 Earnings Call. My name is Bridget, and I will be your conference facilitator today. [Operator Instructions] And will be available for replay on the company's Investor Relations website. Now I will turn the call over to Kristie Waugh, Head of Investor Relations at Raymond James Financial. Please go ahead.

Thank you, Bridget. Good morning, everyone, and thank you for joining us on this call. We appreciate your time and interest in Raymond James Financial. With us on the call today are Paul Reilly, Chairman and Chief Executive Officer; and Paul Shoukry, Chief Financial Officer. The presentation being reviewed this morning is available on Raymond James' Investor Relations website. Following their prepared remarks, the operator will open the line for questions. Please note, 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, anticipated results of litigation and regulatory development, impacts of the COVID-19 pandemic or general economic conditions. In addition, words such as believes, expects, 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 there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We urge you to consider the risks described in the most recent Form 10-K and subsequent forms 10-Q, which are available on our Investor Relations website. During today's call, we will also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedule accompanying our press release and presentation. With that, I'm happy to turn it over to Paul Reilly, Chairman and CEO of Raymond James Financial. Paul?

Thanks, Kristie, and good morning, everyone, and thanks so much for joining us. This is our second call during the COVID crisis. And but the first one, we're a little more geographically scattered. So technology and Internet willing enable, we should hopefully to have a good call here. I'm really proud of how the firm has performed during this period with the COVID crisis, social justice issues our associates and advisors have been amazing. The advisors have focused on their clients, growing their business with great net new asset numbers. Our associates have really worked hard to support them. And all of Raymond James has come together to discuss and make commitments on the social justice issue. And August is Raymond James Cares month to see how we're helping those needy and smaller groups and virtually is really inspiring. And getting into the numbers, despite lower short-term interest rates and economic uncertainty associated with COVID-19, I'm really pleased with the results for the third quarter. Fixed income generated record revenues and pre-tax income, PCG assets and fee-based accounts increased 16% sequentially, and we continue to recruit numerous high-quality financial advisors reaching a new record of 8,155, up 251 over June of 2019. We recruited 113 financial advisors domestically during this quarter alone which represents $71 million of trailing 12 production at their prior firms, all of this during the pandemic and with our offices closed for much of that period. We are also entering the fourth quarter of a healthy investment banking pipeline. Even with these market changes and uncertainty, we are continuing to focus on servicing our advisors and clients and growing all of our businesses. We generated quarterly net revenue of $1.83 billion, which was down 5% as compared to prior year's fiscal third quarter and 11% compared…

Thanks, Paul. Starting with revenues on slide 12. As Paul stated, we generated quarterly net revenues of $1.83 billion, which were down 5% on a year-over-year basis and 11% sequentially. I'll touch on a few of the revenue line items. Asset management fees were down 1% on a year-over-year basis and 14% sequentially, commensurate with a sequential decrease in fee-based assets in the and during the fiscal third quarter, which will be reflected in the fourth quarter as these assets are built at the beginning of each quarter based on balances at the end of the preceding quarter, but remember, the asset management line is also driven by financial assets under management, which increased 13% sequentially. Account service fees of $134 million, $134 million declined 27% year-over-year and 22% sequentially, primarily reflecting a decrease in RJBDP fees from third-party banks due to lower short-term interest rates, which I'll detail shortly. And jumping down to other revenues, they were up substantially from the preceding quarter as the second quarter included valuation losses of $39 million associated with our private equity investments which was largely due to the equity market decline last quarter. Moving to slide 13. Clients' domestic cash sweep balances, which are the primary source of funding for our interest-earning assets and the balances with third-party banks that generate RJBDP fees ended the quarter at $51.9 billion, representing 6.6% of domestic PCG client assets as client assets increased substantially while cash balances remained relatively stable throughout the quarter following the surge in March. And as we've mentioned on the prior quarter's call, we shifted about $4 billion of cash balances from Raymond James Bank to third-party banks in April. But as we look forward, we will likely redeploy a portion of these balances back to the bank over time as…

Great. Thanks, Paul. And I know there's a lot to cover on this call. So I'll get through a little outlook, and we'll open for questions. So as for the outlook, we'll continue to face headwinds from lower short-term interest rates and the uncertainty around the COVID-19 pandemic. In the private Client group, our financial advisor recruiting pipeline is strong across all of our affiliation options. And the segment is going to benefit by starting the fiscal fourth quarter with a 16% sequential increase of assets and fee based accounts. And just a note in that recruiting that we've had a lot of people who have committed much earlier in March, April, may time frame, who have deferred their openings and moving before they joined because of the pandemic. So hopefully, those will show up this coming quarter also. In the Capital Markets, despite muted M&A activity in the fiscal third Quarter, clients remain engaged, and we have a pretty healthy investment banking pipeline. So we wouldn't be surprised to see an improvement in M&A revenues in the fiscal fourth quarter if the market remains relatively stable. And fixed income and brokerage revenues have remained strong thus far in July. Of course, it's always difficult to repeat the record like last quarter, but we view them to be very, very another strong quarter for that segment, again, given the market trends. In asset management, results will be positively impacted by higher financial assets under management as long as the equity market continues to remain resilient. At Raymond James Bank, we expect NIM to decline, as Paul said, from 2.29% in the fiscal third quarter is somewhere around between 2.1% and 2.2% over the next two quarters, reflecting current LIBOR rate. And a higher mix of agency backed securities. Now remember,…

[Operator Instructions] Our first question comes from Devin Ryan of JMP Securities. Please proceed with your question.

Okay, great. There. Good morning, everyone. First question here, just on the net interest income outlook over, if we can, maybe the next couple of years, if we were to hold LIBOR steady, I appreciate the NIM is going to see pressure just on the remixing of the bank. That's going to be, I think, partially a function of how fast the securities book rose. And so I'm just trying to think about parameters around how much you would move from third-party banks? And how quickly and how much as we look beyond, maybe even the upcoming quarter, the corporate book could shrink further? And then are there loan areas that could grow reasonably that could maybe provide a little bit of an offset on the NIM, like residential mortgages or something else?

Yes. Well, it's going to be hard to provide guidance over the next one or two years, Devin. But at least for the next one or two quarters, we think the guidance of NIM of 2.1% to 2.2% is our best guess right now based on where LIBOR is. We haven't set a new target yet for how much we're willing to grow the securities portfolio. There's a lot of variables there. And frankly, making a total shift in asset strategy in the middle of a global pandemic is probably not the right time to do it with all the moving parts. Cash has been resilient. Client cash balances are actually still $52 billion now, roughly even after income tax payments and the fee billing in early July or mid-July, but that could change tomorrow. So certainly not willing to go out one to two years. But as far as the corporate loan growth goes, it was down, I think, $700 million net during the quarter, we sold $355 million worth, but there's also a lot of net paydowns. And we remain very selective in making new corporate loans. But as we get more market clarity, we certainly have an appetite and the expertise to grow that portfolio. And we can we can do it pretty rapidly if the market conditions get better. So again, a lot of moving parts, can't go out one to two years. But at least over the next one to two quarters, we think 2.1% to 2.2% NIM as good a guess as we have right now.

Yes. Let me just add to one thing. I know you understand this Devin. But as we do move more from BDP to the bank, the NIM may have a little compression, but our overall net interest income will be up. We'll pick up 60-plus basis points on that move. Not insurance. So it's the NIM may be down, but overall, net interest income will be up given today's environment. So that's the reason we would do it. We think it's a good risk-adjusted return trade-off.

Right. And just a clarification because I know historically, there's been parameters around the amount of cash you're comfortable having essentially liquid with third-party banks with a short duration versus in the bank, which historically was more of a loan centric bank. And so as you're building more of a securities portfolio and growing that. Are you more comfortable just given the more liquid nature of the securities to kind of, I guess, go beyond kind of historical parameters around the mix of cash held outside the firm?

I think you could see that as we--. Go ahead, Paul.

Yes. I mean, I think so. We grew the securities portfolio and net over $1 billion this quarter. Last time we were in zero rate environment, we had almost no securities at all. So our appetite for some duration has increased. But we're still going to be more exposed to the shorter end of the curve, which is appropriate given our deposits are floating rate deposits. So for the most part. And so we'll continue moving deposits from third-party banks to the bank's balance sheet, but we want to do it in a way that ramp over the long period.

Got it. Paul, a quick follow-up here just on the expense process that you guys announced here you went through some of the areas that you're going to kind of continue to invest in, in areas that you want to kind of hold expenses. It sounds like in, do you have any high-level thoughts right now just around some of the areas where some of those efficiencies could exist within comp or noncomp? And then just any thoughts on timing around the conclusion and execution of it?

Like I said, we're not prepared to provide any time lines on today's call. We're far along in the process. And really, we're looking at almost every single expense line item, both compensation and noncompensation expenses.

Thank you. Our next question comes from the line of Manan Gosalia of Morgan Stanley. Please proceed with your question.

Hi, good morning. I was wondering, if we look at your pre-tax margins for this quarter and exclude the elevated provision number, we baked into roughly a 15% number for this quarter. And then maybe there's another 1% or so of headwind from additional NIM pressure that you see, is that a good way of thinking about your long-term pre-tax margins as a starting point in this rate environment? And then maybe as we're modeling it, baking some benefit from the expense initiatives that you're looking at?

Yes. I think in fairness, we also had subdued business development expenses this quarter. I think they were down something like $30 million year-over-year. This is typically the quarter where we hit our high watermark, just given the timing of our recognition events and conferences. So yes, there's some offsets and also capital markets generated, I think, a 19% pre-tax margin, which is a very high margin, thanks to the record fixed income results. So there is some puts and takes. Again, we're not ready to provide, given the uncertainty in these moving parts of long-term margin target. But yes, we are focused on those expense efficiencies as well, as you said.

Got it. And I guess on the provision side, can you give us an update on how you're thinking about provisions of the bank? And I know you mentioned that you could have a a little bit more of a build if the environment deteriorates. But if it doesn't, are you comfortable with where the reserve levels are at the bank right now? And I know you're not accounting on a CECL yet. But maybe if you can give any initial guidance on what do you think the CECL true-up will look like at the end of next quarter?

We try to be as proactive as we can as we always do with reserving the loans for the loans at the bank. So we feel good about our allowances now at for the especially in the corporate portfolio, C&I is 2.4% allowance and the CRE portfolio is a 2.8% allowance. So with that being said, if economic conditions continue to deteriorate, and some of the stimulus measures, which are temporary in nature, don't get extended. And who knows what's going to happen. So we there's a certainly potential for more allowances across the entire industry. But at this juncture, we just don't know right now. So CECL goes into effect October 1. Frankly, I don't even know what our provision is going to be in the September quarter under our existing methodology. So we really aren't in a position to provide much guidance under CECL yet.

Yes. I would say, I would add one thing is that you have to recognize, too, most financial institutions haven't been selling loans. So if you were to take the sales of those loans instead of selling them, just put a reserve against them, our reserves even they would have been much higher. So we've been proactively derisking areas that we think in the transportation and hospitality and the gaming in areas we think are have more exposure. We've been actively reducing risk. But again, had we just followed what most of the industry did, our reserves would have even been higher. So we think for where we are, we've done a good job of trying to stay up in front. But again, it just depends on the outlook. In a steady state, we wouldn't be adding the economy gets worse, we will add. So we're just going to have to watch, and it's just too unpredictable right now.

Our next question comes from the line of Steven Chubak of Wolfe Research. Please proceed with your question.

Hey, good morning. So I wanted to start off with just a question, Paul, on the strategy regarding loan portfolio sales. And as we look ahead, how large is the remaining pool of loans that you are looking to evaluate for a potential sale? If you could just speak to the time line also for when you'd look to execute those and whether the decrease in criticized loans that we saw in the quarter, is that what's driving at least the decision to execute on some of those? Or what's the I guess, the prevailing factors that are driving the strategy from here?

Yes. So probably it's not a shock for most people. The Raymond James has taken a little different approach. As we just looked at the industries that we think are very COVID dependent, and said, on a risk-reward basis, there are loans that we are, in certain industries, we're just not comfortable that we think there's more downside and upside. So one way to do it is just increase your reserves and increase your criticized loans on your balance sheet and just ride through it. But that also limits your flexibility, both regulatorily and the drag long term. And on those highly risk areas are the ones we decided just to lighten our exposure. And so that's been our strategy. If those loans perform better, and some of these industries don't go through prolonged bankruptcy restructurings, we will have made a bad long-term debt. If it's if the case is, they're very long restructurings, and it's going to be a tough slug for them, we made a good bet. And we are willing to do that in what we viewed with the most at risk industry. So we're looking we have a list of about another $100 million of loans. Again, the market's been good. That's why we lightened this. As Paul said, it's 93% it per whether we would do those or go more, I don't know. We're evaluating that as we go and looking at the pricing risk, long-term versus reserves kind of trade-off. And once again, had we just added them to reserves, we've been more flexible, but we think it's the right thing to do from a risk structure basis. So we started out of the box quickly. We've slowed down a little bit, but we're still looking.

And just a follow-up for me regarding the securities portfolio. I was hoping you can give us some sense as to how we should think about the potential pace of additional purchases? I know you've been reluctant to commit to that. But also just given your historical reluctance, I would say, to take on additional duration risk, but why the willingness to take this on now during this COVID environment when the incremental spread between taking on that additional duration risk on an agency security versus what you're earning off-balance sheet at 70 basis points is actually relatively low relative to prior historical periods?

Yes. Well, we have a significant amount of cash with third-party banks now, $25 billion. So we have more capacity now than we've had historically and frankly, the demand at third-party banks is continuing to evolve. There was a significant demand in March when there was a lot of revolver fundings, and that has that dynamic has changed, as you know. And so that demand is not as strong as it was in March. And so we're willing to take some duration, not as much duration as many of our peers, but we're willing to take some incremental duration for that yield pickup but we haven't again set a glide path just yet, but we're comfortable with that taking on some more duration. And we've certainly we hope we're wrong, but we certainly don't think that short-term rates are going to increase anytime soon, especially after hearing Powell again yesterday. So again, hopefully, we're wrong because we're still going to be much more exposed to the short end of the curve.

Got it. And just one quick follow-up, if I may. Just on the non comps. You delivered a positive surprise there given the lower business and other expense. We have been seeing similar trends at peers here. So putting aside the future expense initiatives, I know you're not ready to speak to. How should we think about the appropriate jumping off point for that noncomp ex provision base, recognizing that P&E conference spend is going to be on pause versus same period of time?

Yes. Well, excluding the kind of elevated provisions, we were of guiding to about $325 million per quarter for this fiscal year. And obviously, we've been well below that, excluding the provisions, largely due to, as you mentioned, lower business development expenses. We want that. We expect that to go up over time, not next quarter, but as soon as people are more comfortable traveling, we expect business development expenses to increase but one of the things that we're looking at as a part of our overall expense initiatives is we've learned that a lot of our advisors are perfectly comfortable and happy doing some of these regional workshops and other product-focused sessions virtually versus a physically in person at various locations across the country. So the Private Client Group leadership team is also looking at this as a long-term opportunity to certainly transition to more virtual events as well, which could help business development expenses. So again, we're looking closely at the long-term opportunities coming out of this crisis.

Yes, But it would be a mistake to think they're all going away, the conferences or gettogethers, they're the educational trips for the top advisors are all part of our culture and our ability to have feedback with our advisors. So going forward, I think that we'll find there's a lot of trips, why would I take this two day trips to virtually. But some of those conferences, we do anticipate coming back when it's safe to do so.

Thank you. Our next question comes from the line of Chris Harris of Wells Fargo. Please proceed with your question.

Thanks guys. Paul, you mentioned a reinvestment rate around 100 basis points for Agency MBS today. Is it fair to assume that ultimately where the yield on the entire securities book will go assuming static rates? And if so, when might you expect that to occur over what time frame?

Yes. I mean, we have an average duration of the securities we buy is roughly three years. And so the existing book has an average yield of about 2%. And I'd say the average life on the existing book, remaining life is probably a couple two to three years because, again, the vintage is relatively new, the portfolio as we've grown it. So it will take some time for that reinvestment yield to sort of reset as we add securities.

Got it. And just one quick question on the Asset Management segment. Those revenues were down 11% sequentially. And I know it was a volatile quarter in terms of AUM moving around, but that decline seems to be more than potentially average AUM decline. So is there something else that's going on in that segment that drop the revenues a bit?

Yes. That AUM, Chris, includes both kind of institutional assets under management as well as assets under retail assets under management. So I would say roughly 65% of those assets are built based on the beginning of the period assets. So you can't just look at it on an average basis. So that's what's driving the variance that you're describing.

Thank you. And our next question comes from the line of Jim Mitchell of Seaport Global. Please proceed with your question.

Okay. Hey, good morning guys. Just maybe a quick question on capital management. What I understand the uncertainty is keeping me holding you back. But how do you think that what are the markers you're looking for? Is it just do we have to wait for a vaccine for you to feel comfortable putting capital to work what are the markers, I guess, is there macro markers that you're looking at? And I guess as an ancillary, does that also mean that you're as much as you want to do acquisitions, you're holding back to put capital work there until you have a clarity as well?

So I think in order of we would have no comps whatsoever doing an acquisition if we had the right one. So we think we have plenty of capital and an ability to do an acquisition for the right one and integrate it. So we don't see that's not an issue. In terms of stock buybacks, we've agreed that our goal is to go ahead and minimize dilution and restart that program. But I think both given the uncertainty and honestly, even you have political and regulatory pressure right now in stock buybacks, we don't think it's just really prudent to start that yet and but more importantly, driven by the economics if we do enter into a second round of coded issues like we're seeing in the south, if we do have a really, really tough winter, we may need those. So if we're buying a producing asset. We're very comfortable doing that, but we're just going to be a little more conservative on outside of dilution doing proactive stock buybacks in this pandemic time. So whether that's a vaccine or ceiling trailing off or people getting comfortable with the operating environment. I can't say. It's one of those things I think we'll know when we feel it, but I can't give you an objective. This is the answer.

That's helpful. And then just maybe on the compensation in PCG. When I look at sort of FA compensation to compensable revenues, the percentage did seem to drop quite a bit in the quarter, which was a little surprising. Am I just not thinking about that right? Is there something unusual there? Just trying to get a sense of if that's sustainable in terms of the lower payout?

No, the I'm not sure we could speak offline on how that, how you're doing the math, but the payout is still right around 75%. So it's been pretty stable sequentially.

Okay, I'll take. We'll talk offline.

Thanks.

Thank you. And our next question comes from the line of Alex Blostein of Goldman Sachs. Please proceed with your question.

Hey, good morning everyone, thanks for taking the questions. Just a couple of follow-ups. I guess, if you look at the loan book, can you guys talk about the size of loans that you're ultimately evaluating for sales? I know you sold $355 million and you sold another $100 million so far this quarter, but what's the total amount of kind of riskier loans that you're looking to potentially sell what are the yields on those loans? And maybe you can talk a little bit about how these loans ultimately made their way to launch your balance sheet, whether these were originated or purchased?

Yes. So again, I said we had about another $100 million that we are looking at selling. And again, these are risk reward, right. These were loans that are syndicated loans and in January, we had what we call them pizza parties, the lender stoping. So we get them to show, go through the loan portfolios, the most leveraged, the lest performing. And we really once you're doing an evening on each section of the portfolio, and they've really put lenders through what I call, it's almost like a flight simulator, we try to crash the pilot to see what they do. We really go through and push really hard, how are these loans? How are they underwritten? And I'll tell you, I felt as good as I have in 10 years about the underwriting. I think they were underwritten well. They were strong. What we didn't underwrite them for was a pandemic in places having zero revenue. In January, we didn't say the airlines weren't going to fly or nobody was going to fly and no one was going to travel and hotels are going to shut down and the restaurants are going to shut down. So it's those areas of those loans. I think the underwriting is strong. It's just we had a circumstance we've never seen in recent 100 years, probably almost in the country. So that's how they got into the balance sheet. So I don't blame our team. I think they were very conservative. We're just in a very, very unusual time. As Paul said, one of the advantages of the loans we did have is they were marked we're able to sell that 93% of par and the last $100 million. And then some of those loans have reserves on it on top. So the loss of selling is even less than that. It might be 300 or 400 basis points. So we just viewed the trade-off and the risk. So that next $100 million we sold is more worth. It's more worth to take the loss now than to hold on to the risk and hope that they would turn around and what most people think is going to be a longer haul the pandemic. So the yield is, I think, was comparable to the rest of the loan portfolio. They weren't the highest yielding loans. They were when underwritten from a lower yielding loans, they were higher credits in industries that just got hit really hard in the pandemic.

Yes, I think just the range of the yield is somewhere around LIBOR plus 175 to LIBOR plus 300 of the loans that we sold in that kind of range.

That makes sense. I guess my question ultimately is like, is the $100 million that you mentioned, is that a cleanup? And it's kind of down or you guys will be able will be looking to sell down more?

Yes. We're open to selling down. I think what we've done is we've looked at the loans that we are most concerned of, and they were really more concerned about the industry. In some places, the credits we were aggressive on very quickly. I think the loans now are almost opportunistic as loan pricing recovered, we said we could get these credits off our balance sheet with almost no loss, and we decided to go ahead and do that. So they're more opportunistic and again, we have $100 million that we're looking at. We've done $100 million and doesn't say we will do the $100 million, doesn't say we won't do more, we'll do an evaluation. And again, we've made a handful of new loans, too, because we like the industries, the spreads and the risk. So we just haven't opened up widely, but we are still open on originating in the corporate portfolio, too, but we're just a lot more a lot more critical to make sure we think those are good loans given the environment.

Got it, makes sense. Perfect. And just a quick follow-up. Thanks with the net nuance disclosure. Very good to see you guys get that out there. I guess when you talk about the pipeline and the strong momentum you continue to have in recruiting, can you talk a little bit about the mix? And how that mix might have changed between the employee channel, given the kind of the work from home dynamics and the independent channel? So just kind of as you're looking out the next 12 months, and the assets that are going to come in into Raymond James. How does that mix compare to historical kind of employee versus independent levels?

During the quarter, it was much stronger in the independent channel. The reason is most of them have their own branches and offices. So there's no reason to put off a move. They just they can change honestly, sometimes it's actually easier right now because clients are at home, you can find them to do the transition. So that has been more robust in the quarter than the employee channel. Having said that, the recruiting in the employee channel and the commits have been good, but a lot of them have delayed because we shut our offices. And we're now in the limited reopening, limiting the number of people in the branches. And so we now have on a voluntary basis. So we now have the offices open where people joined and one just joined. I think we announced this week and another one the week before. So we do have people joining but we have an awful lot of people that have decided to put off their joins and a lot of them to September now. And some of these have been signed up since April, May, June. They said they're coming. They just don't want to transition until they feel that they're in a comfortable spot for the pandemic. So that's the so I think the employee side will do a little catching up once people feel comfortable about going into an office.

Great. Makes sense. Thanks for taking all the questions remains in the end very well.

Thank you. And our next question comes from the line of Chris Allen of Compass Point. Please proceed with your question.

Good morning, guys. Most of my questions have been answered. Just a quick one. On the fixed strength, you noted continuing into drive the brokerage side. Most of the areas we look at, it seems like things are slowing down a little bit. So maybe you could just give us some color there, how your business is holding up from a market share perspective as well would be helpful.

So I think that there was a rush in fixed income, both in repositioning and for, frankly, for credit underwriting and debt underwriting. And so I think you've seen that slow down a little bit, but a lot we have a very a leading position with small and midsized banks. As loan activity has kind of slowed down, they've been investing more in securities and redoing their securities. So although I think we're not if you asked me to guess, it'd be hard to repeat last quarter's record. It's always hard to repeat a record, but I think it's going to be very strong fixed income for us. So and all sites so far shows it's very strong. So we expect another good quarter. And we anticipate just on closing that capital markets with the M&A transactions, will be up, but you never know if we're closing for an M&A deal. You can guess all you want, even with a good pipeline. It's when they close and what gets in the way. But so we feel pretty good about that segment for this quarter. And then in the Private Client Group segment and asset management since the assets are pegged, I mean that should be a pretty good quarter, too. So in terms of revenue increases for those.

Thank you. And our next question comes from the line of Craig Siegenthaler of Credit Suisse. Please proceed with your question.

Good morning, everyone. And, hope you're all well and healthy. I want start off with recruiting. Do you have the number of gross or net number of financial advisors added in each of the months in the June quarter? And if you don't, could you provide any commentary on how recruiting trended in the quarter as you adapted to the virtual recruiting backdrop?

Yes. We're not going to provide kind of monthly or kind of we, of course, track that internally, but haven't provided that externally yet. What I would tell you is what paul said is that the recruiting momentum really rebounded throughout the quarter as we've adjusted to our virtual home office visits. And we are all doing, Paul doing them. I'm doing them. The home office is it's virtually, and they're going pretty well. So we feel really good about the activity levels, again, across all our affiliation options, but aren't going to provide month-to-month statistics on those.

Got it. And just one follow-up on reserving. Can you provide us some color or at least what to expect from the CECL loan loss reserve build that's coming in the October quarter? I think seasonally, this one may be different than the others. And I'm just interested in the underlying process relative to the reserve that was just built in both the March and the June quarters?

Yes. And again, we still have another quarter under the incurred loss process for provisions, and we don't even know what that's going to be yet. So we'll have to wait and see. But I know that even for the big banks, the macro assumptions are changing rapidly so too. [Indiscernible] the macro assumptions and projections are going to look like even in October. It seems like it's right around the corner, but every week, things changed dramatically. So we'll wait and see kind of how things progress between now and then.

I think the problem with it the problem with CECL is that the macro has changed all the time. So I mean if you took a point in time today, we wouldn't see a huge change, but you know you don't know, right? So that could change tomorrow. So but right now, instantaneous, we did it today. We don't think there'll be a huge change.

Thank you. And our final question for today comes from the line of William Katz of Citi. Please proceed with your question.

Hi, everyone. This is actually Renee Marthaler speaking on behalf of William Katz. So we just appreciate some more color on July. Like any kind of initial color on client engagement metrics and flows?

Yes, question. It's a pretty broad one in terms of the client engagement across our businesses, as Paul said in his outlook comments in the Private Client group business, the fee-based assets are going to should provide us a tailwind for asset management revenues and recruiting activity remains remains healthy. In capital markets segment, the M&A pipeline entering into the fourth quarter looks good. We expect M&a revenues to be up, assuming that the market environment remains relatively resilient here through the rest of the quarter. And the fixed income activity, well, hard to repeat a record, as Paul said, the depository client segment, in particular, remains very engaged. So we feel good about the client activity levels, but we'll provide more details as we go along here.

Then I would just like to thank you all for participating. I know your jobs are hard, given all so many extraneous market factors and depend on it and everything else and working remotely. So I know it's harder for all of us, but we really appreciate you taking the time. We'll try to provide as much color as we can and hopefully get an Analyst Day scheduled as soon as we can. And so we get a little more color to just next month or so. So thank you very much for joining us.

And that does conclude today’s presentation. We do thank you for your participation. And ask that you please disconnect your lines. Have a good rest of the day everyone.