Good afternoon and welcome to Raymond James Financial's First Quarter Fiscal 2023 Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. Now I will turn it over to Kristie Waugh, Senior Vice President of Investor Relations at Raymond James Financial.

Good afternoon, everyone, and thank you for joining us. We appreciate your time and interest in Raymond James Financial. With us on the call today are Paul Reilly, Chair and Chief Executive Officer; and Paul Shoukry, Chief Financial Officer. The presentation being reviewed today is available on Raymond James' Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide 2. Please note certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses, divestitures, anticipated results of litigation and regulatory developments or general economic conditions. In addition, words such as may, will, could, anticipates, expects, believes or continue or a negative of such terms or other comparable terminology 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 our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, 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 schedules accompanying our press release and presentation. With that, I'd like to turn the call over to Chair and CEO, Paul Reilly. Paul?

Good afternoon and thank you for joining us today. Although there is a lot of disappointment for us in the Bucks' playoff game and even more disappointment for me is Paul Shoukry's Bulldogs won the National Championship, Raymond James came through again with another good, solid performance. During a volatile and challenging market environment, we generated strong quarterly results, including record net income available to common shareholders of $507 million, annualized return on common equity of 21.3% and annualized adjusted return on tangible common equity of 26.1%. Once again, these results highlight the value of having diverse and complementary businesses. Record Private Client Group results driven by robust organic growth, along with strong expansion of net interest margins in the Bank segment and yields on the RJBDP balances at third-party banks in the PCG segment, offset market-driven declines experienced through the Capital Markets businesses. As demonstrated this quarter, with the sharp increase in net interest income and RJBDP fees, we have been and remain well positioned for continued rise in short-term interest rates with diverse and ample funding sources, a high concentration of floating rate assets and strong balance sheet flexibility given solid capital ratios. Turning now to the results starting on Slide 4. In the first fiscal quarter, the firm reported net revenues of $2.79 billion, record pretax income of $652 million and record net income available to common shareholders of $507 million or $2.30 per diluted share. Excluding expenses related to acquisitions and the favorable impact of a $32 million insurance settlement received during the quarter, adjusted net income available to common shareholders was $505 million or $2.29 per diluted share. Quarterly net revenues were flat compared to the prior year quarter and down 2% compared to the preceding quarter largely driven by the benefit of higher short-term…

Thank you, Paul. Starting with consolidated revenues on Slide 8. Quarterly net revenues of $2.79 billion were flat year-over-year and declined 2% sequentially. Asset management and related administrative fees declined 10% compared to the prior year quarter and 4% compared to the preceding quarter, in line with the guidance we provided on last quarter's call based on lower fee-based assets at the end of the preceding quarter due to the equity market declines. This quarter, fee-based assets grew 8%. This growth should provide a tailwind for asset management and related administrative fees, which we expect to increase 5% to 6% in the fiscal second quarter, reflecting 2 fewer billable days. Brokerage revenues of $484 million declined 13% compared to the prior year's fiscal first quarter and grew 1% over the preceding quarter. The year-over-year decline was largely due to lower fixed income and equity brokerage revenues in the Capital Markets segment as well as lower asset-based trail revenues in PCG. I'll discuss account and service fees and net interest income shortly. In a much more difficult market environment than we anticipated on last quarter's call, investment banking revenues of $141 million declined 67% compared to the record set in the prior year quarter and 35% compared to the preceding quarter. Despite a healthy pipeline and good engagement levels, there remains a lot of uncertainty in the pace and timing of deal closings given the heightened market volatility. At this point, it is too difficult to say when conditions will become conducive to increased creativity. Other revenues of $44 million declined 45% sequentially primarily due to lower revenues in the affordable housing investments business, which was seasonally high in the preceding quarter. Looking forward, this business continues to have a strong pipeline. Moving to Slide 9. Clients' domestic cash sweep balances…

Thank you, Paul. As I said in the start of the call, I'm pleased with our results and our ability to generate record earnings during what continues to be a very volatile market. And while there are many uncertainties, we believe we're well positioned to drive growth over the long term across all of our businesses. In the Private Client Group, next quarter results will be favorably impacted by the expected 5% to 6% sequential increase in asset management and related administrative fees. Additionally, the segment will continue to benefit from higher short-term interest rates, as described by Paul. Focusing more on the long term, I am optimistic we will continue delivering industry-leading growth as current and prospective advisers are attracted to our client-focused values in leading technology and production solutions. In the Capital Markets segment, while M&A pipelines remain healthy, the pace and timing of closings will be heavily influenced by market conditions. And in the fixed income space, depository clients are experiencing declining deposit balances and have less cash available for investing in securities, putting pressure on our brokerage activity. However, SumRidge, with its rapidly evolving fixed income and trading technology marketplace, enhances our position as this business typically benefits from elevated rate volatility. Over the long term, we are well positioned across Capital Markets for growth given the investments we have made over the past 5 years, which have significantly increased our productive capacity and market share. In the Asset Management segment, financial assets under management are starting the fiscal second quarter up 7% compared to the preceding quarter, which should provide a tailwind to revenues if markets remain conducive. We remain confident that the strong growth of assets in fee-based accounts in the Private Client Group segment will drive long-term growth of financial assets under management.…

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

I guess just a couple of quick ones on my end. First, on the buyback. So you repurchased $138 million. It's a bit below the implied $250 million average target. And so I guess the implication is there's going to be a catch up. So I'm just trying to understand the factors that impact the cadence, whether it was being price conscious or were you in blackout through the quarter that we didn't see or maybe any other reasons trying to think about, again, kind of the cadence there.

We're still targeting the $1 billion of repurchases for fiscal 2023, as we've said several times now. And so that obviously means we would have to ratchet that up on an average basis going forward to get to that $1 billion mark. There was a lot of volatility in this particular quarter. And then as you point out, there's always a blackout period. So we were pleased to get $136 million in. But understand that to hit our target going forward, we're going to have to kind of increase that average. But with that being said, we're still going to -- a lot can change between now and the end of the fiscal year, so we do monitor market conditions and all the sources and uses that we have for cash and capital at the firm.

Got it. Okay. And just a follow-up here on net interest income in private clients. So that's been obviously very strong, and that came in better than we were looking for. And we see the decline in the kind of the Client Interest Program. And so if you're trying to think about the other drivers there, was the kind of continued strength there driven by margin and just higher margin rates? Or some of your peers had some sec lending that helped as well. So I'm curious if there was any kind of lumpy sec lending in there. Just trying to think about some of the moving parts that's keeping that really strong.

Sec lending was not a driver. Really, it was just the higher yields on both the segregated assets pursuant to the broker-dealer regulations as well as the higher yields on the margin balances. But I will point out going forward, sort of the "last in, first out" type of cash is really the Client Interest Program cash, and that has declined the most dramatically during this cash sorting cycle. And so we're probably at around $3 billion to $4 billion of those balances today versus sort of the average balance for the quarter of $6 billion. So that would be something you would need to consider, which would partially be offset by the higher rates going forward as well, factoring in a full quarter of last quarter's rate hikes and potential rate hikes this quarter, but something that you would need to factor into your modeling.

And the next question comes from the line of Gerry O'Hara from Jefferies.

Hoping you might be able to just give a little incremental color on the enhanced yield product, where you see the sort of demand coming for that and what the potential kind of rates might be that could be offered to clients.

Yes. If you look at -- I think almost everyone has offered enhanced yield programs today that are not new. We just haven't had a need for them because of the amount of the client cash we've had. And as that dwindles more and just even as a defensive mechanism, we will offer them. And that's the account. Whether people have people and money markets and on an insured product, which we have, or if people are thinking of moving their money, they have a competitive yield without moving their money into sweeps -- I mean, into money markets or fixed income products or things. So that's really a number of firms in the industry primarily than relying on that. We haven't because of the cost of funds. But as we've had it -- we're reaching an area where we've always said, "If we get to this area, we'll offer some of those products." The competitive rates in today's market are probably between 3.75% and 4%. Some -- to cut some outliers on either side, but that's the cost and what our competitors have been doing and to the point that we're going to make sure we're always on the positive side the cash. Good news is even at those much higher rates, we can still earn a spread. And also since we really have all low-yield deposits and almost virtually 0 high-cost deposits, adding some will just be -- it won't be as big of an impact on our cost of funds as most places have significant deposits today.

Great. And then maybe one just on the recruiting environment. Is there anything seasonal kind of about turning the calendar that would be sort of advantageous as it relates to kind of attracting and recruiting advisers? And perhaps if you could also just kind of touch on just any of the dynamics around transition assistance and what you're kind of seeing in the marketplace.

Thank you. I mean for years, everybody said, "Well, we hear it's competitive." It's been competitive a long time. It continues to be competitive. I would say that the competitive environment is about the same. I said the only thing new in the last year is there are some third-party RIA aggregators that have paid more than the other firms competing for people in the adviser space. But we are at a very strong backlog. Last year, our employee division led the way and set its own record. And our independent division was a little slower in this first quarter. The independent's recruiting faster and the employee, a little slower, I mean, through one quarter, but what we see is the backlog, very, very strong in both divisions, very large teams. So we still feel good about the recruiting. And it's -- if you just look at the last few years, I think we've been right up at the top of the charts on net new assets and recruiting.

And the next question comes from the line of Manan Gosalia with Morgan Stanley.

I wanted to ask a question on cash sorting. Can you comment on the broader trends in cash sorting? We're sort of getting closer to that 5% of client assets that has been a lower end of the range in the past. So is that 5% still a good base for where cash should settle? And how quickly do you think we'd get there?

I think the true answer is no one really knows. We -- that 5% number was based on that 2016 to '19 period. So we don't have a lot of -- as an industry, a lot of great historical benchmarking because, of course, even in that 2016 to '19 period, the Fed funds target topped out at 2.5%. And so arguably, client sensitivity around rate is heightened when you're at today's Fed fund target rate and the yields that you can earn on your investable cash balances. So 5% is good, I guess, as any, but we're certainly not hanging our hat on that potentially being a 4%, which is why, as Paul says, we are looking at all the diversified sources of funding that we can offer our clients, that would be attractive to our clients and also gives us additional appreciation of the TriState Capital franchise because they have an independent and diversified funding source as well.

I don't think we tried to figure out what the bottoms are when we acquired -- when TriState joined us, and we talked about diversified funding, I think a lot of people said, "Well, why are you even bringing that up? You've got record cash deposits." Well, we always anticipate these time frames. And just in 2019, where we started -- ready to roll out some higher-yielding products because no one wanted cash, all of a sudden, we got flooded with cash again overnight. So we know these dynamics can change, and change rapidly. And so cash sorting as reported, it's continued. Whether 5% at the bottom or it goes a little lower, I don't know. A lot of the lower balance deposits, which are significant, have been very, very steady. So at some point, the higher deposits probably find a home where it's material enough at today's rates to make a difference on the lower -- just like bank accounts, it's not enough to make a change. So we're just -- we always prepare and fear the worst. But generally -- because you just don't know. So I wish -- I hope 5% is the bottom, but we'll see. And we'll be prepared if it wasn't.

Got it. Okay. Great. And then in terms of deposits, you noted you're allocating more deposits to the bank rather than a third-party bank program. So is there a specific loan-to-deposit ratio or liquidity level that you're thinking about maintaining at a bank? And how should we think about this going forward if cash hoarding continues at the same rate?

Yes. The biggest constraint on that is just sort of the percentage of BDP sweep deposits that we want in our own bank because we always wanted there to be a cushion of balances that are swept to third-party banks and case balances, as Paul said, do decline more rapidly than we expect. So that's really kind of the governing factor. It's roughly at 75% today in terms of the amount of the BDP sweep cash that is going to our own banks. Maybe it will go a little bit higher than that. I mean of the $14 billion to $15 billion of cash with third-party banks, today, a good portion of that could be swapped over to our own bank while still preserving clients' FDIC insurance that we offer them, which is best-in-class in the industry, by the way, as far as we can tell. But we also want to make sure we're being prudent and not exposing ourselves to funding risk by shifting too much over.

Yes. We have plenty of capital and liquidity. So our first source is to fund the banks, that's our business. And then to the extent, the sweep is really a cash overflow in a lot of ways, but a good part of our business model. So right now, we're not alarmed. We still have flexibility. But at some point, we've known people that have gone up to 90% of cash or something. We just -- that's a little to leverage for us.

And the next question comes from the line of Alex Blostein with Goldman Sachs.

Apologies for a 2-parter, but it is related. So I'm hoping to just better understand the balance sheet strategy for you guys from here. So on the one hand, Paul, you talked about slowing loan growth in this environment. And then at the same time, you're talking about launching an enhanced yield product on the deposit side despite the fact that you have lots of liquidity in third-party bank deposit sweep still. So maybe help me understand how much of that $18 billion third-party bank is ultimately sweepable to your bank. How big the enhanced yield program you think ultimately will be for you guys over the next 12 months? And how are you thinking about the overall growth at the bank in terms of the growth in assets?

Yes. So the growth -- ultimately, the growth in the bank is driven by client demand, right? And so as Paul said in his prepared remarks, that client demand is experiencing headwinds now that interest rates are on the move, as you would expect. Until they get used to the new normal of interest rates, we expect those headwinds to continue. But one thing we will not do is when client demand does slow down naturally given the rate environment today, we're not going to stretch for growth or get into asset classes that are not really client-oriented. With that being said, in terms of the funding, we always want to prepare for the future. One quarter is certainly not a trend. And so we want to be there for our clients, whether it's a year to 2 to 5 years out from now. And so we want to make sure that we're diversifying our -- and strengthening our funding sources so that we have the ample funding for when client demand does come back. Because we know it will eventually come back, we just don't know when or how quickly it will be. So that's sort of how we think about the strategy, it's a long-term strategy versus trying to manage it quarter-to-quarter.

I think in terms of the amount, it's we don't know. So what you do is you turn on the program, start raising money, and you can always accelerate it by letting more clients know, pushing it more, changing the rate in the competitive market. I mean you have lots of levers to speed it up. You certainly can slow it down or you can stop it. So -- but you can't do any of those unless you start it. So we have the technology up and running. We've got it tested. And now we're going to go out and open it up to a degree. And if we need it more, we'll spread it out to a broader base of the adviser segments. And if it ends up being more than we need and we see cash goes the other way, we'll slow it down or turn it off. So it's about being prepared. It's the same in TriState, has third-party sources, too. And we said, just prepare to turn them on, make sure they're there, get interest. And then if we need them, we could be more aggressive. If we don't, we can just stop. So it's just a balance. If we know how much cash we need -- yes, if we know how much cash we need, we'd tell you. We know how much we have to raise, but we're -- we always assume we can run models and speculate, but we -- the truth is we really don't know, so we just need to be able to react to it.

And the next question comes from the line of Bill Katz with Credit Suisse.

Also appreciate you moving back the conference call tonight. Just following up on sort of this last line of questioning. As you think about earning asset growth, a, can you grow that in an environment where there's sorting and mixed loan demand? And b, if it does grow, could you talk a little bit about the sort of decision-making between loan growth and the investment securities portfolio?

Again, right now, in a tighter funding environment and more uncertain funding environment, we are certainly prioritizing client demand and client funding needs over the securities portfolio just like we prioritize the security portfolio when we needed to accommodate surplus client cash balances. Again, our balance sheet is primarily there for clients. And that's how we -- that's kind of -- a difference between how we think about our balance sheet and many of our peers is that we really do think about the client demand, both on the asset and on the funding side. So yes, in terms of the loan growth going forward, as Paul says, we really don't know what it's going to be. What we're not going to do is force our stretch for growth, but we will continue to provide -- have our advisers provide excellent advice for their clients. And to the extent that they need mortgages or securities-based loans or our corporate clients reengage in M&A and they need financing, then we want to be there for them.

Okay. And then just a follow-up. Maybe switch back to capital for a moment. Obviously, you said a pretty strong capital position, as you both have mentioned. Can you update us on what your latest thinking is on where you'd like to have that Tier 1 leverage ratio settle out? And I think you've mentioned a couple of times of opportunities to deploy your capital. Will you be able to buy back -- would you buy back the full $1 billion? Or is it a function of potential M&A? And if you're interested in M&A, where might you be looking?

So yes, let me go backwards into the question. And first, we like organic growth the best. It's been our focus because it's sustained, it's large, consistent, net new assets. Even when we're not doing acquisitions in the PCG space, we're still growing. And -- but we like acquisitions for the right targets, and we can't tell if and when those would happen. I think in the last few years, people doubted if we were serious, and then we closed 3 deals pretty quickly. So our goals right now in our balance sheet, we gave a Tier 1 target of 10%. We're still at that target. It's gone up faster. Good news is part of that is earnings. But the other reason is just really the shrinking of the corporate balance sheet, too. As cash has come up the balance sheet, that ratio went up without really a lot of changes. We're still committed to it. We're committed to the $1 billion target, as Paul mentioned in his remarks, that we wanted to do the $1 billion this year. We got partially there this quarter, and we know we have to get more aggressive to hit that, but we're -- that's our plans. In terms of other capital, we'll always say if the great -- a great acquisition showed up tomorrow and it required a lot of capital, would we use it instead of buybacks? Possibly. Is this accretive? Advantaged? Don't have one, so I don't -- theoretical question. But if it did, we'll always balance what's the best use of the capital. But our plans right now is to focus on our commitment to hit that $1 billion target.

And the next question comes from the line of Jim Mitchell with Seaport Capital (sic) [ Seaport Research Partners ].

Paul, maybe on just the NII thoughts. If you think about average Fed funds, it could be up. If you look at the forward curve, it could be up close to 90 basis points in the first quarter versus the fourth. But then you have sort of this mix shift in deposits. You have higher spot NIM going into the first quarter. So how do we think about NIM and NII in the first quarter? And how you're thinking about the trajectory? You kind of mentioned you want to grow NII. Can you do that consistently? Or do we -- should we expect the negative mix shift starts to hurt NII growth after 1Q? Just trying to think whether it's 1Q or full year, whatever you want to want to give us.

Obviously, there's, Jim, a lot of variables that kind of go into that. But as we look into our fiscal second quarter, I mean, we're entering in with a spot rate of 3.5% for the bank's NIM -- for the Bank segment. And so that's before any additional benefit from further rate hikes potentially. And so -- and we have grown the bank's portfolio of 2%. Their assets have grown 2% sequentially. So net-net, when you sort of think about the fact that there's 2 fewer days in the second quarter than the first quarter, we still believe we will be able to grow net interest income overall in the second quarter. And that may -- that will likely be offset by a decline -- partially offset by a decline in the BDP fees just because the balances are down. Probably, the average balances sequentially will probably be down 20% to 25% as we've put up a greater proportion of the funds to the Bank segment. But again, we'll have a higher spread on those balances. We're entering in with a spot rate of 3.2% versus the average yield that we earned during the quarter -- first quarter of 2.7%.

I think also is we'd have to really hustle on raising high-cost deposits, which could be significant enough to have a huge impact on that number in the shorter term. But obviously, if the cash dynamic and sorting continues, that will start impacting as we raise. So we'll just have to see how that goes.

Right. Okay. And maybe just as a follow-up, on admin comp and PCG was up, I think, 21% year-over-year, 7% sequentially. Is that a new run rate? Or is there some intersegment? Because I did notice that the comp and benefits line in Corporate, Other was down 20-plus percent. Was there some kind of shifting of those kind of costs among segments? Or is that just a higher upward pressure in that line?

Yes. Jim, I would tell you that the first quarter comparisons to the fourth quarter are always a little bit noisy just because in the fourth quarter, we're always trying to adjust the bonus and benefit accruals to reflect the actual results for the fiscal year, and then we sort of reset those accruals in the first quarter. So I think last year at this time, it was like an 11% increase in PCG admin comp as an example. . So there's some -- there's a lot of noise comparing the sequential -- year-over-year, of course, we have acquisitions. We have the Charles Stanley acquisition for the full quarter this year in PCG as well as just kind of overall growth of the business in the PCG business. With that being said, in the second quarter, we do have the impact of the payroll tax reset as we enter the beginning of the calendar year. And then we also will see the impact of the salary increases that have become effective on January 1. And those salary increases this year were significant. As we always have done, we always want to share in the success of the firm with our associates who make that success possible. And particularly in this inflationary environment, given our record results in the fiscal year we did, we were generous in passing on salary increases to our associates. And that will be reflected fully in the second quarter.

And the next question comes from the line of Kyle Voigt with KBW.

[ Give you a ] question, just given the forward curve and market expectations now for the Fed to begin cutting by year-end 2023 and into 2024, I was wondering if you could help us think about deposit betas through a declining Fed funds environment. And I think during the last rate cycle, the adjustments on yields are the betas on the way down for the first few cuts in 2019, relatively high and help support the bank NIM. I guess is it fair to look back towards that last cycle as a good guide for how you would kind of match your deposit rates this cycle as well?

Yes, we're still having a hard time being exactly right on what the deposit betas are in this up cycle. So certainly, trying to predict what it will be in a different cycle is very difficult to do. It'd be based on the competitive environment and a lot of other dynamics that apply at the time. For example, in the last rate cycle, we had surges and cash balances because it was due to the pandemic. And so when rates were cut, we obviously had a -- did not have a funding need per se. We actually had cash that we had to figure out how to place. That may not be the case next time rates decrease. I don't think you can compare different cycles just because each one is so unique. So most people are sort of guessing that the deposit betas on the way down will be symmetrical to what they've been on the way up. I guess that's a good guess, but we really don't know.

Okay. And then just maybe a follow-up just on the net loan growth in the quarter. Just wondering if you could help us understand some of the dynamics by loan bucket. And I know we'll see some more [ infills within the Q ], but it looks like demand for SBL has been a bit weaker. And so it looks like you're seeing decent demand for mortgages, even with the tough backdrop. So just given the rest of this year or this fiscal year, I guess, where should we expect more of the loan growth to really come from? And should we kind of expect that slower SBL demand to persist near term?

Yes, we actually do provide the line-by-line end-of-period loans in the supplement, so it's kind of buried in there. I know we provide a lot of materials, but there is some more detail there. But you are right, the SBL balances declined sequentially. And that was due to, frankly, a lot of repayments as the interest rates went up dramatically over the last 3 to 6 months on those lines. And so residential mortgages went up. A lot of that was due to mortgages that were in process even before the quarter. As you know, mortgages take a while to go through the underwriting and closing process. So as we said earlier, we don't know really what the dynamic is going to look like going forward. It's going to be based on client demand. We do expect until the rates settle out and clients get used to whatever the new norm is, we do expect headwinds for growth across all loan categories, both floating and fixed really, because the fixed coupons are up as well, although we don't do much in the way of fixed. But certainly, mortgages is a category that -- borrowers are still getting used to 5.5% to 6.5% across the industry when it was just 3% to 3.5% 1.5 years ago. So it is a pretty dramatic change in a pretty short period of time.

And the next question comes from the line of Brennan Hawken with UBS.

I know you've touched on this a couple of times, but I'm still a little confused, and so I'd love to ask a follow-up. Paul -- sorry, Paul Shoukry, you speak about the liquidity in the balance sheet often, and we can certainly see your liquidity on the asset side. And so I guess I'm not 100% clear as to why -- what the impulse is to raise higher-cost funding through this enhanced yield program when you could simply allow for some of the assets to run off, especially the stuff that's easily replaceable like securities. So could you maybe clarify that for me? And then also, we've seen some competitors launch similar products in the last few quarters, and that has led to a pretty strong mix shift in favor of the higher cost funding. Do you have any estimates or any rough idea about how much mix shift to that type you'll see in your own deposit base?

Yes, so to your point, Brennan, we are kind of continuing to let the securities portfolio run off. A lot of that growth over the last 2 years is really accommodating client cash balances on the balance sheet. And so we really built that up well beyond our liquidity targets at Raymond James Bank. So the answer is really kind of all of the above when it comes to funding. We're doing that. We're also, as Paul said, making sure that we're prepared on many other fronts when it comes to funding. The enhanced yield savings, we're starting with a relatively small amount relative to our overall funding needs. But the point that Paul was bringing up is that we just want to make sure that we have all of these sources turned on and make sure that they're working, so we understand what the ability -- capabilities are, the demand is, et cetera. We learn from it. And then to the extent that we need to drive more balances through various levers, then we have the ability to do that. But it's hard to do that if you don't have it even turned on.

I don't know of other institutions that don't have CDs, enhanced wealth. They've been aggressively raising money. Because of our floating rate balance sheet and our unusually high liquidity in -- both on our balance sheet and client cash, we haven't had to, and that's been part of what's driven a lot of the earnings. So -- but we could assume that we'll have enough and it'll last forever or we can start the programs in case they continue to run off more than the industry expects, and we'll still be well funded. So the reason we're starting it is just in case. And if we need more, we'll accelerate it. So it wouldn't be prudent to wait until all of a sudden, we really need it, and we don't have any of the programs in place. Most -- there's many other firms that have needed it, and they've been very aggressive because they didn't have that flexibility. We've had the flexibility. But we're certainly going to -- as we always, we look to the long term, and we're going to have it in place and ready to go. And the only way you know you have it in place is when you're executing it and actually collecting deposits and everything is working well. And then you dial it up or you dial it back if you need it, so...

The only thing -- only other thing I would add is there's so much concern around mix shift as they -- understandably so, but it's not like the cash isn't moving. We have the best purchase money market fund platform in the industry, as far as I can tell. It's institutional share classes offered to any size client. And so it's not like the cash is moving to other higher-yielding destinations as it should, and the financial advisers help their clients with those type of decisions. So to the extent that we can offer an attractive product on balance sheet that meets -- meet clients' needs, some are still concerned about money market funds, frankly, because they didn't perform very well in the last couple of cycles. So we have to offer an FDIC-insured product, which keeps the funding on the balance sheet and actually earns a better spread than if it goes into some of those other products, it could be a win-win. So that's kind of how we're looking at it as well.

Yes. Sure. Sure. Totally get you on the substitutes being broadly available. And any sense of your expectations for magnitude of how big this program could be?

No, because it really, frankly, depends on the levers that we pull, right? We have levers around the rate we offer, the size or the count that we limit it to, the size of the deposit, et cetera. So as Paul said, most of our competitors have already come out with it and had to be aggressive because in the last couple of years, they deployed almost all of their deposits to fund balance sheet growth. We always said, and we took a lot of criticism for it a year or so ago, that we wanted to keep that cash very flexible. And so we don't have the same acute pressures on funding that they have had over the past 6 months. And so we're able to be more deliberate in sort of figuring out the right balance for clients and for the firm.

And the final question comes from the line of Steven Chubak with Wolfe Research.

I just had one final question on Capital Markets, and more specifically, the profitability or, I guess, lack thereof in the quarter. I recognize one quarter [ does not trend make ]. You did incur the pretax loss in the segment. What I wanted to better understand is given the lack of complex that we saw within the segment itself, how you're thinking about managing expenses and comp if you remain in a challenging investment banking backdrop? It's something -- a question we're getting quite a lot because the pretax margin was strong for the firm. The comp ratio was certainly well managed for the firm overall. And at the same time, you didn't get the positive comp leverage this quarter, and much of that was secured by Cap Market. So any insight you could provide there would be really helpful.

Yes, so I mean the Capital Markets have been difficult for everyone. And the -- part of -- there's a couple of factors. One, it didn't have a good quarter. But secondly, compared to a lot of other firms, we don't have any unallocated overhead. So there are other firms that certainly had lower results, but every penny of overhead is allocated to a segment, so you see a fully loaded P&L, and it's not the case in a lot of other firms, who if they had, might have a little bit of a different answer or a closer answer. It was an off quarter due to, first, both M&A, and we all know what's happening with that slowdown and with underwriting. And the fixed income business -- again, we talked about the cash dynamic at third-party banks. So it was challenging. So we'll do what we always do. First, we have a very variable comp structure that our bonuses -- our basis, although we raised them, are still lower than a lot of places. And we -- as we did 2 years ago, right, we took big pay cuts. You could see them even through the executives the year before this year. So we have a variable comp structure that will take care of that, and then we'll have to just look at the business and make whatever adjustments in those businesses we have to. The good news is corporately, we're actually -- we've been very conservative. Although we've hired a lot of people, we have a lot of open positions, and we're just being less aggressive with hiring and making sure we keep the people we need through these cycles. So we don't go in like the tech companies, way overloaded. And I think in Capital Markets, they're just going to have to look at what businesses are there and what support they need to make those decisions. So I don't -- but certainly, we don't plan any sizable layoff programs that you've read in other firms.

And there are no further questions.

Great. Well, thank you very much. Thanks for joining us. And again, just overall, I don't think too many people are showing record net income to shareholders this quarter, but I think it's a testament to the model and -- but there's a lot of uncertainties going forward. We all know it. We all knew the questions you'd ask, and we're committed on the capital repurchases, with the only contingency if something comes up that we think can drive more shareholder value. And on the cash and cash sorting, good questions. We could run models and give you answers based on them, but our experiences, they all vary from that. So we just -- we're going to raise as much cash as we need to support the business and not raise it if we don't need it. And so far, that served us well. So appreciate you joining the call and talk soon.

That does conclude today's conference. We thank you for your participation and ask that you please disconnect your lines.