Good morning, and welcome to Raymond James Financial third quarter fiscal 2021 earnings call. This call is being recorded and will be available for replay on the company investor relations website. I will now turn it over to Kristina Waugh, Vice President of Investor Relations at Raymond James Financial. Please go ahead.
Thank you. Good morning, 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, 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 the prepared remarks, the operator will open the line for questions. Please note, certain statements made during today's 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, anticipated results of litigation and regulatory developments, 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 statement 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, 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 non-GAAP measures to the most comparable GAAP measures may be found in the schedules accompanying our press release and presentation. With that, I'm happy to turn the call over to Chairman and CEO, Paul Reilly. Paul?
Good morning. Thank you, Kristie. I'm actually joining you today from Chicago, where we've had a number of day meetings with some of our top independent advisors. It's great to see both their success during the pandemic and their excitement as we move forward. It's kind of hard to believe now, it's been over 16 months since the pandemic, and we're just starting to see the light at the end of the tunnel with the distribution of vaccines. Now the spread of Delta variant reminds us that we could be dealing with this one way or another for quite some time. Fortunately, our economy has really proven to be resilient and creative, quickly adapting to these changes, which has facilitated the recovery of our economy, the stock market over the past year. Similarly, our advisors and associates have been just simply amazing.
I'm really proud of what they've been able to do, enabling Raymond James to achieve these record results for the first nine months of fiscal 2021. Why don't we move on to slide three with our quarterly results. The fiscal third quarter was another strong quarter with several, I guess, many records. The firm reported record net revenue of $2.7 billion, net income of $307 million, and earnings per diluted share of $2.18. Excluding the losses on extinguishment of debt of $98 million and $7 million of acquisition-related expenses, adjusted quarterly net income was $386 million, and adjusted earnings per diluted share were $2.74, both records. The increase in quarterly net revenue was largely driven by record asset management and related administrative fees and record investment banking revenues during the quarter.
Adjusted net income growth was due to the aforementioned higher net revenues, along with a loan loss reserve release in the quarter compared to a provision for credit losses a year ago. Annualized return on equity for the quarter was 15.9%, and the adjusted return on tangible common equity was 22.2%. Really an impressive result, especially in this near zero rate environment and given our strong capital position. Move to slide four, We'll see that the quarter ended with record total client assets under administration of $1.17 trillion, which were up 33% on a year-over-year basis and 7% sequentially. We also achieved record PCG assets and fee-based accounts of $617 billion, a 9% sequential improvement, which will benefit the fourth quarter, and record financial assets under management of $191 billion.
We ended the quarter with record 8,413 financial advisors, that's net increases of 258 over the prior year period and 86 over the preceding quarter. Advisor recruiting has been robust even in this very competitive market. Over the prior four quarters, financial advisors with approximately $325 million of trailing 12 production and nearly $53 billion of assets at their prior firms affiliated with Raymond James domestically. As for our net organic growth results in the Private Client Group, we generated domestic PCG net new assets of nearly $69 billion over the four quarters ending in June 30th, 2021, representing more than 8.5% of domestic PCG assets at the beginning of the period. Remember, this is net of client fees.
This trend has accelerated throughout the 12-month period, with the past two quarters reaching an annualized rate over 9%. So far, this fiscal year is shaping up to be very strong in terms of advisor retention, as well as attracting new advisors to the Raymond James platform through our multiple affiliation options. In fact, we are on track for a record year of advisor recruiting in fiscal 2021. We remain focused, though, on providing a superior platform to support advisors and their clients, and also helping advisors grow their practice, and it's resonating well in the market. Advisors are attracted to our leading technology solutions, as well as our advisor and client-centric cultures. Let's move on to slide five. The Private Client Group generated record quarterly net revenues of $1.7 billion and pre-tax income of $195 million, an 11.5% pre-tax margin, reflecting significant operating leverage over the past year.
Quarterly net revenues grew 3% over the preceding quarter, predominantly driven by higher asset management and related administrative fees, reflecting higher assets and fee-based accounts, which will also provide a tailwind for the fourth quarter. The Capital Markets segments generated quarterly net revenues of $446 million and pre-tax income of $115 million, driven by record investment banking revenues and a continued very solid fixed income brokerage revenue performance. The strong result reflects the significant investments we've made to strengthen our platform over the last 10 years. We are continuing to make investments, including the recently completed acquisition of the consumer-focused M&A advisory firm, Financo, and the announcement of the acquisition of Cebile, a leading private funds placement agent secondary market to private equities.
We are excited to welcome Sunaina and her team to the Raymond James family when we close Cebile, currently expected to be in the fiscal fourth quarter. The Asset Management segment generated record net revenues of $225 million and record pre-tax income of $105 million. These results are primarily due to the growth of financial assets under management, driven by equity market appreciation and net inflows into fee-based accounts in the Private Client Group, partially offset by the modest quarterly net outflows of Carillon Tower Advisers following a solid quarter of net inflows in the fiscal second quarter. Turning to the bank, record net loans of $23.9 billion grew 13% over the prior year, and 4% sequentially. This growth was primarily driven by the strong growth of securities-based loans to PCG clients of more than 50% and 14%, respectively.
This is a loan category we continue to see good opportunities for growth and attractive risk-adjusted returns. Raymond James Bank generated quarterly net revenues of $169 million and pre-tax income of $104 million. Quarterly net revenues declined 5% compared to a year ago quarter, primarily due to the impact of lower short-term interest rates. Sequentially, quarterly net revenue grew 6% as higher asset balances offset the modest compression in the bank's net interest margin during the quarter. Pre-tax income growth year-over-year was primarily due to the loan loss reserve release in the quarter compared to a provision for credit losses a year ago period. The credit quality of the bank's loan portfolio remains healthy, as Paul Shoukry will cover in more detail in his remarks.
Looking at the fiscal year-to-date results on slide six, we generated record net revenues of $7.07 billion during the first nine months of fiscal 2021, up 20% over the same period a year ago. Despite the losses on extinguishment of the debt this quarter, we still generated record net earnings per diluted share of $6.92 for the first nine months of 2021. Adjusted net income was $1.06 billion, up 73% from the net income in fiscal 2020. Given all the unique circumstances, I think it's also worth comparing our results so far in fiscal 2021 to fiscal 2019, a very strong year for Raymond James. When comparing the first nine months of fiscal 2021 to the first nine months of fiscal 2019, net revenues have grown 24%, net income has grown 27%, and adjusted net income has grown 35%.
Truly spectacular results, particularly given the zero interest rate environment this fiscal year. Moving to the fiscal year-to-date segment results on slide seven, the Private Client Group, Capital Markets, and Asset Management segments all generated record net revenues and record pre-tax income during the first nine months of the fiscal year. These results reinforce the value of our diverse and complementary businesses. Before I turn the call over to Paul, I wanted to highlight a separate announcement we made this morning. We announced our firm's intention to make an offer for the entire issued and to-be-issued shares of capital of a U.K.-based Charles Stanley Group at a price of GBP 5.15 per share, or approximately GBP 279 million, the U.S. equivalent. We've admired for a long time, has a tremendous reputation, a 200-year heritage, and a talented pool of wealth managers and professionals.
The two firms share a common and increasingly rare client-centric approach, where the primary client relationship is held by the individual wealth managers. Raymond James subsidiary in the U.K., RJIS, has operated in the U.K. for over 20 years under strong leadership and has experienced exceptional growth. This combination with Charles Stanley would provide the opportunity for further accelerated growth in the U.K., the second-largest English-speaking wealth management market. Charles Stanley has nearly 200 wealth managers and GBP 27.1 billion in client assets, bringing our total U.K. assets to over GBP 40 billion. Additionally, Charles Stanley multiple affiliation options would give Raymond James the ability to offer affiliation choices consistent with our models in Canada and the U.S., and greatly accelerate the growth of the RJIS newly launched employee affiliation model while building on its market-leading independent contracting and investment management services businesses.
As I mentioned, the announcement today is our intention to make this offer. We expect the offer to be made in approximately a month. Regulations issued by the U.K. Takeover Panel limit what we can further say at this point, but we will provide updates as more information is made available. Now for a more detailed review of our third quarter results, I'm going to turn it over to Paul. Paul?
Thanks, Paul. I'll begin with consolidated revenues on slide nine. Record quarterly net revenues of $2.47 billion, grew 35% year-over-year. 4% sequentially. Record asset management fees grew 8% sequentially, commensurate with the sequential increase of fee-based assets in the preceding quarter. Private Client Group assets and fee-based accounts were up 9% during the fiscal third quarter, providing a tailwind for this line item for the fourth quarter. Consolidated brokerage revenues of $552 million grew 14% over the prior year. Declined 7% from the record set in the preceding quarter. Institutional fixed income brokerage revenues remained solid, albeit down from the record set in the preceding quarter. Brokerage revenues in PCG were up 22% on a year-over-year basis, but down 6% sequentially due to lower trading volumes, as well as a large placement fee in the preceding quarter.
Account service fees of $161 million increased 20% year-over-year and 1% sequentially, largely due to higher average mutual fund balances. Record consolidated investment banking revenues of $276 million grew 99% year-over-year and 14% sequentially, driven by record M&A revenues and strong debt and equity underwriting results. Our investment banking pipelines remain strong, we would be pleased if fourth quarter revenues came in around the average of the quarterly revenues generated over the first three quarters of the fiscal year. That would've been about $260 million on average. Of course, this line item is inherently difficult to predict. Other revenues of $55 million were up 25% sequentially, primarily due to $24 million of private equity valuation gains during the quarter, of which approximately $10 million were attributable to non-controlling interests, which are reflected in the other expenses.
Moving to slide 10. Clients' domestic cash sweep balances ended the quarter at $62.9 billion, essentially flat compared to the preceding quarter and representing 6.1% of domestic PCG client assets. As we continue to experience growing cash balances and less demand from third-party banks during fiscal 2021, $8.6 billion of the client cash is being held in the Client Interest Program at the broker-dealer. Over time, that cash could be redeployed to our bank or third-party banks as capacity becomes available, which would hopefully earn a higher spread than we currently earn on short-term treasuries. On slide 11, the top chart displays our firm-wide net interest income and RJBDP fees from third-party banks on a combined basis, as these two items are directly impacted by changes in short-term interest rates.
The combined net interest income and BDPs from third-party banks of $183 million were up slightly compared to the preceding quarter, as modest NIM compression was offset by growth in client cash balances and higher asset balances in Raymond James Bank. It's still down significantly from the peak of $329 million in the second quarter of fiscal 2019, really highlighting the remarkable results we have been able to generate despite near zero short-term interest rates. In the lower left portion of the slide, we show net interest margin, or NIM, for both RJ Bank and the firm overall. We continue to expect the bank's NIM to decline to just around or just below 1.9% over the next quarter or two. The average yield on RJBDP balances with third-party banks declined one basis point to 29 basis points in the quarter.
We believe this average yield will remain around this level for the rest of the fiscal year, but there will likely be downward pressure in this yield in fiscal 2022, especially in the back half of the fiscal year, if banks' demand for deposits don't improve from current levels. Moving to consolidated expenses on slide 12. First, our largest expense, compensation. The compensation ratio decreased sequentially from 69.5% - 67.2%, largely due to record revenues in the Capital Markets segment, which had a 57% comp ratio during the quarter, and the benefit from the private equity valuation gains, which do not have direct compensation associated with them. Given our current revenue mix and disciplined manage of expenses, we remain confident we can maintain a compensation ratio lower than 70% in this near zero short-term interest rate environment.
As I've said over the past few quarters, we could outperform that just as we did in the fiscal third quarter with Capital Markets revenues at or near these levels. Non-compensation expenses of $425 million increased 18% compared to last year's third quarter, and 53% sequentially. Primarily driven by the $98 million loss on extinguishment of debt, acquisition-related expenses, the non-controlling interest of $10 million in other expenses related to our private equity valuation gains, and higher business development expenses. As we discussed last quarter, we successfully executed a debt offering in the fiscal third quarter to take advantage of the low rate environment and significantly extend the maturities of our existing balances.
We raised $750 million of 30-year senior notes at 3.75% and utilized the proceeds in cash on hand to early redeem our next two senior notes that were maturing in 2024 and 2026, effectively resulting in the same amount of senior notes outstanding. This resulted in $98 million in losses associated with the early extinguishment of those notes, but in doing so, locked in very low rates for 30 years while significantly extending the duration and stability of our funding profile. Overall, our results show we have remained focused on managing controllable expenses while still investing in growth across all of our businesses in ensuring high service levels for advisors and their clients.
Excluding the debt extinguishment expense, we do expect non-compensation expense to continue picking up over the next few quarters as hopefully travel, recognition trips, and conferences continue to resume, and we continue to increase our investments in technology and high-quality service levels for our growing business. We would eventually expect loan loss provisions associated with net loan growth as well. Slide 13 shows the pre-tax margin trend over the past five quarters. Pre-tax margin was 15.6% in fiscal third quarter of 2021, and adjusted pre-tax margin was 19.8%, which was boosted by record revenues, the loan loss reserve release, and still relatively subdued business development expenses. At our Analyst and Investor Day in June, we outlined a pre-tax margin target of 15%-16% in this near 0% interest rate environment.
As we experienced during the first nine months of the fiscal year, there's meaningful upside to our margins when Capital Markets results are strong and improving macroeconomic trends lead to releases of our allowances for credit losses. On slide 14, at the end of the quarter, total assets were approximately $57.2 billion, a 2% sequential increase reflecting solid growth of securities-based loans at Raymond James Bank. Liquidity and capital levels are very strong, with cash at the parent of approximately $1.56 billion, a total capital ratio of 25.5%, and a Tier 1 leverage ratio of 12.6%. We have substantial amount of flexibility to be both defensive and opportunistic. The third quarter effective tax rate of 20.3% benefited from non-taxable gains in the corporate life insurance portfolio. We would expect that tax rate to be around 21% in the fiscal fourth quarter, assuming a flat equity market.
Slide 15 provides a summary of our capital actions over the past five quarters. In the third quarter, we repurchased 375,000 shares for $48 million. As of July 28th, $632 million remains available under the current share repurchase authorization. As Paul Reilly will discuss, our priority continues to be deploying capital to grow our businesses. Lastly, on Slide 16, we provide key credit metrics for Raymond James Bank. The credit quality of the bank's loan portfolio remains healthy, with most trends continuing to improve. Non-performing assets remain low at just 12 basis points of total assets, and criticized loans declined sequentially. The bank loan loss benefit of $19 million reflects an improved outlook for economic conditions and higher credit ratings on average within the corporate loan portfolio.
Due to reserve releases and loan growth during the quarter, the bank loan allowance for credit losses as a percent of total loans declined from 1.5% - 1.34% at the quarter end. For the corporate portfolio, these allowances are higher at around 2.4%. We believe we're adequately reserved, but that could change if economic conditions deteriorate. Now, I'll turn the call back over to Paul Reilly to discuss our outlook. Paul?
Thank you, Paul. Overall, I'm very pleased with our strong results for this quarter, which top many records, and did so in spite of the persistent challenges of the global health pandemic and near zero short-term rates. As for the outlook, we remain well-positioned entering the fourth fiscal quarter with records of many of our key business metrics. Strong pipelines for financial advisor recruiting and investment banking. In the Private Client Group, results will benefit by starting the fourth quarter with a 9% increase of assets in fee-based accounts. With the strong recruiting pipeline, we are on track for a record fiscal year of recruiting as prospective advisors across all of the affiliation options have continued to be attracted to our platform, including the leading technology solution our advisor group. These recruiting results are primarily strong given the very competitive market for experienced advisors.
In Capital Markets segment, the investment banking pipeline remains strong, and we expect solid fixed income brokerage results driven by demand from depository client segment. However, keep in mind, there is still an economic uncertainty due to the ongoing pandemic that could impact these results. In the Asset Management segment, if equity markets remain resilient, we expect results to be positively impacted by higher financial assets under management. Active asset managers continue to face structural headwinds. However, we are pleased to see positive net flows on a fiscal year-to-date basis for Carillon Tower Advisers. We hope that the one benefit of increased market volatility is that it reinforces the value of our high-quality asset active managers. Raymond James Bank should continue to grow as we have ample funding and capital to grow the balance sheet.
We'll continue to focus on lending to PCG clients through securities-based loans and mortgages. We will continue to be selective and deliberate in growing our corporate loan and agency-backed securities portfolio. As we look further ahead, we remain focused on the long-term growth. As we've outlined at our recent Analyst and Investor Day, those key growth initiatives include driving organic growth across all of our core businesses, continue to expand our investments in technology, and sharpening our focus on strategic M&A. Today's announcement of our firm's intention to make an offer for Charles Stanley Group demonstrates our focus on these initiatives and our commitment to deploy excess capital over time. We believe this acquisition stays true to our long-standing criteria for acquisitions of first being a good cultural fit, a good strategic fit, and makes financial sense for shareholders, and something we can integrate.
I also want to, once again, take a moment to thank our advisors and associates. They've been amazing at being able to provide excellent service to their clients through these difficult times. I'm very proud to be a part of this special Raymond James family. Thank you all for attending. With that operator, Tommy, I'm going to turn it over to you for questions.
Thank you very much. If you'd like to register a question, please press the one followed by the four on your telephone. You'll hear a three-tone prompt to acknowledge your request. If your question has been answered, to withdraw your registration, you press the one followed by the three. Using a speakerphone, please mute your handset before entering your request. Once again, on the phone, for any questions or comments you may have for today, it is the one four on your telephone keypad. One moment please, for our first question. We'll get with our first question on the line from Manan Gosalia from Morgan Stanley. Please go right ahead with your question.
Hi, good morning. I was wondering if you can dig in a little bit into the Charles Stanley Group acquisition? Can you just talk us through maybe the rationale for the acquisition? Why expand in the U.K. versus the U.S., and maybe what the synergies are with your current business there?
There's not a lot we can say right now except the strategic rationale is that we believe we can grow in all of our markets, and we certainly have the capital to grow in the U.S., Canada, and the U.K., and believe in all three of those private wealth markets. We've been in the U.K. market at the Raymond James, RJIS for 20 years, and we've had very good growth, but we're, I'd say, undersized, and our employee channel is really nascent. Charles Stanley brings first a culture identical to us. It's stewarded by the Howard family for generations. I think the fourth generation's in the business. Has the very same value of client-centric, advisor-centric culture, and has multi-channels.
The combination gets us at GBP 40 billion and really gives us the mass to utilize a lot of the things they've done well and to continue to grow that business and really give us the base to make a difference. It's not saying we're not choosing it over the U.S., Canada, or the U.K. We believe in all three of those markets, and when we find these rare opportunities to acquire a 200-year-old firm that has a great brand, a name that matches our culture, we're going to act. We believe very strongly in it, and I think it will really help our business.
Great. I know you can't say that much given the regulations, anything you can say on the financial details, revenues, pre-tax margin, maybe how much capital you're utilizing from the acquisition? I can sort of see from their disclosure that it's about $240 million or so in revenues and a 10% profit margin. I'm also assuming that there's synergies and additional investments that you are thinking about. Is there any more color you can give on that?
I would just say that not a lot. You can see the public information on their current revenues and base, and we do plan to invest in the technology of that business, and we think combined, we'll be able to be at a much better place to do that. They've got a very good back office and strong technology. Outside of the details, we really can't get into any more details right now. But we will make them available as soon as we can.
Got it. Anything on the capital that you're utilizing for the acquisition?
Yeah. I would tell you, in our regulatory filing, we basically said that we have sufficient cash on hand to fund the acquisition. The regulatory filing also discusses a loan note offering that would be possible. That's fairly common in the U.K. As discussed in the filing, it has a nominal interest rate of about 10 basis points, which can change over time with short-term rates. Obviously, with the overall consideration of less than $400 million, we have $1.6 billion almost of cash at the parent company. As we discussed earlier on the call, we have a $1 billion target. We have sufficient cash at the parent company to fund the acquisition without any capital actions beyond that.
Great, thank you.
Thank you very much. We'll get to our next question on the line from Bill Katz with Citigroup. Please go right ahead.
Okay. Thank you very much for taking the questions. I guess maybe start with, Paul, as you think about, maybe both you guys, just in terms of getting to that Tier 1 leverage ratio, how does this acquisition sort of fit in against that? Maybe stepping away from that, as you sort of commented on that the primary focus area is growth, should we assume that the bank growth will be the primary driver to driving down that Tier 1 leverage ratio over time? Thank you.
I think you're going to see in all sorts of ways that you saw the announcement today. We are looking at other opportunities to expand the business. Again, we can never predict these. Many of these we've known people for years and before they're interested in selling. Our strategic M&A has really sharpened and our opportunities have really sharpened. I don't know if deals will happen again, but if we can find opportunities that expand our business, we've said that's our priority.
We also plan to grow the bank to the extent we can. Within that, we've used share repurchases when we can. I think we're still going to focus on opportunities to grow our business, which includes strategic M&A, and also continue to grow the bank. The level of the bank growth and our aggressiveness probably depends first on economic opportunities, but also how much capital we're able to deploy through other opportunities. We'll balance that out.
Okay, that's helpful. Then maybe just a follow-up question. I don't know if you could unpack, Paul, your comments on the NIM about maybe a little bit under the 190 over the next couple of quarters and maybe on the sweep side where you sort of called out the second half of next year. Can you maybe ring-fence what might be expiring or coming up for contract renewal as we sort of think about the timing next year? Thank you.
Yeah, Bill, we're kind of just essentially reaffirming our guidance on the NIM at right around 1.9% that we provided last quarter. Over the next quarter or two, obviously depends somewhat on asset mix and the growth of the agency MBS portfolio, which we've essentially decelerated over the last quarter just given where rates are. We would expect to come in right around that 1.9%, give or take a couple basis points over the next quarter or two. As far as the yield on the BDP balances with third-party banks, there's a significant portion of our deposits that mature contractually over the next, I would say, 6 - 12 months. Right now, the sort of market rate for new deposits, if you can even get capacity, is much lower than the 30 basis points or the 29 basis points that we're currently earning on average.
Remember, if the yield on those deposits aren't attractive with those third-party banks, we have the capital flexibility going back to Paul's comments earlier to bring those cash balances on the balance sheet and invest in other assets. I don't think it's as easy as a formula of just assuming that those balances reset at a lower yield off balance sheet because depending on what we can earn off balance sheet, it may be more compelling to bring it on balance sheet and invest in other assets at the bank, securities and/or loans.
Okay, thank you both.
Thank you very much. Once again, as a reminder on the phones, if you'd like to ask any questions or comments, please do so now by pressing the one followed by the four on your telephone keypad. Once again, it's one four for any questions or comments. We'll get to our next question on the line from Steven Chubak from Wolfe Research. Go right ahead.
Hey, good morning. I had a follow-up to Bill's earlier question. You cited the continued pressure on the bank NIM, consistent with the trend we've seen in recent quarters. Just given the very strong loan growth, particularly in the SBL channel and already low securities yields, I was hoping, Paul, that you could unpack what the primary driver of the NIM compression from here. Relating to the third-party sweeps, what's the break-even level or spread where you might look to sweep third-party cash more aggressively to the bank as you face that repricing or that pricing headwind into back half of next year?
I would tell you, Steve, that the primary driver of the NIM compression, because most of the short-term rates are reflected in sort of the yields of the various asset categories. Most of our asset categories are floating in nature, so they reflect the kind of rate environment that we're in. Most of the NIM dynamic going forward is really going to be driven by asset mix. For example, this quarter, we grew securities-based loans on a net basis, $700 million, which was just truly fantastic growth. 14% sequentially, over 50% year-over-year. Those are fully secured with marketable securities and help strengthen the relationships between advisors and their clients in the Private Client Group. We love that asset. That yield is 2.22% on average in the quarter, whereas the corporate loans are in the 2.5%-2.6%, and they have been growing.
We've resumed growth there, but not to the same extent as SBL. Just by the change in mix to sort of the lower risk categories like securities-based loans, that's going to put downward pressure on your NIM, all else being equal. As far as the break-even analysis, I wish it was that simple. There's a lot of variables that go into that. To bring it on balance sheet obviously uses capital, and then you have to essentially take either duration and/or credit risk to earn a higher yield.
That higher yield changes week to week, depending on the latest Fed announcement. One thing is certain, if we don't have the capacity off balance sheet or the capacity is at very low rates, then the bringing it on balance sheet certainly looks more attractive on a relative basis. That's something that we have the capital and the appetite to do if necessary.
Understood. Okay. For my follow-up, Paul, just on some of the non-comp commentary that you provided. You noted that non-comp expenses should grow as T&E picks up. Ultimately a good problem to have. If I look at the non-comps this quarter and I back out the non-controlling interest piece, the reserve release, the clean number is about $330 million. It's slightly above that $1.3 billion annualized run rate you had spoken to in the past. Just given some of the drivers of non-comp growth you cited, how should we be thinking about the pace of growth from here? Maybe can you give us an updated run rate or jumping-off point as we think about the non-comp trajectory for the next couple of quarters?
Yeah, Steve. Unfortunately, still a lot of uncertainty there, business development being 1 prime example of that. I would say the $1.3 billion jumping-off rate, I want to say that our quarterly revenues at that time were somewhere around $1.7 billion-$1.8 billion. I don't remember exactly when that was, but we're at $2.5 billion now. Just the business is a lot bigger now. There's a lot of expenses that are directly associated with the size of our business, whether it be sub-advisory fees that support the Asset Management business, whether it be FDIC insurance expense, which supports the bank branches, branch expense as we continue to recruit more advisors. We've done a couple of acquisitions. We just announced another one.
A lot has changed since we provided that $1.3 billion metric which begs the question, when are we going to provide more new guidance and a new threshold? I would say we want to do that as soon as there's more clarity kind of on the go-forward path, particularly for things like business development expense. In fiscal 2019, before the pandemic, that was running at around $200 million for the year, $50 million a quarter. Even this quarter's number of $31 million is well below that, as an example. Loan loss provisions as well, obviously, that is something that's going to be volatile until there's more kind of economic certainty or clarity going forward. As soon as there is more certainty around what these expenses will look like, we will certainly be transparent, as we always are, and try to provide you better guidance.
Thanks. Is it okay if I squeeze in one more? I just wanted to get a view on the organic growth sustainability. Obviously, the 9% that you cited is just a very impressive statistic. It looks like both you and your peers are running well above long-term averages. I was hoping you could just speak to the sustainability of the organic growth as well as what you're seeing across all the different affiliation options.
Part of that depends. The market's been robust and people have been growing and the client engagement's been really good. That can all change with the downturn where clients get fearful and assets often don't grow the same in those environments. If you look at any outlook we see in the short to midterm, it all looks still very, very positive. Again, as I said, I'm here in a meeting with our advisors, and they're all very positive experiencing our top advisors, not just record growth of their businesses, but I can tell you by the questions over two days and watching what they're doing with their practices, they have no thoughts of slowing down either. Again, short to midterm, I think it's sustainable. The recruiting has been good across all the options, which is ironic too sometimes.
We got slowed down a little bit a few quarters ago when their employee channel often it's going to hit a record, probably. It's on a pace to hit a record this year even after that very slow start. We're seeing it all across the affiliation options. The pipeline's very strong. I'd say for the short to mid-term, it looks very, very good. Longer term, it depends on the economic viability. The numbers for the economy growth were good this quarter. If that continues and people stay positive, I think it could continue for a while.
That's great color, Paul. Thanks so much for taking my questions.
Thank you very much. We'll proceed to our next question on the line from Gerald O'Hara with Jefferies. Go right ahead.
Great, thanks for taking my questions this morning. Perhaps just kind of stepping back a little bit as it relates to the acquisition, could you give us a little bit more sense as to your ex-U.S. kind of, I suppose M&A strategy and where you think maybe some of the markets that you're most under-penetrated in or perhaps where your offerings specifically would resonate best? Thank you.
Yeah. It depends on the business unit. The focus on the Private Client Group has been in the U.S., Canada, and the U.K. We have unique offerings, I think, more or less in all those markets with the multi-affiliation options. Again, unique in Canada and in the U.K. Charles Stanley was a perfect fit because there aren't many people, not just the cultural heritage, but the multi-channel options. We're focused on the Private Client Group of any type of opportunity in those three markets. We're not really looking to expand in other markets in the private wealth business right now. We just want to focus on growing and competing well in those three markets. It's broader in the M&A category. It's the one business that we do look at global opportunities both from a capital deployment.
The capital for most places is just an office and people versus capital's heavier in the other businesses, and it is a global business. We will continue to look for opportunities. Again, we've been focused in North America, the U.K., and Europe, but we have looked at things in other places. The rest of the businesses have continued to be kind of a North American and U.K. focus. We have plenty of capital to grow. We think we're in strong positions in the U.K. We had a very good practice, but it was small, and we think this acquisition would put us in a very competitive position where we think that'll accelerate the growth. That's been our focus. It continues to be our focus, and we're not looking at other kind of global markets.
Okay, that's helpful. Perhaps one for Paul Shoukry, and forgive me as I'm still a little new to this story, but I think you cited 21% around the tax rate into fiscal 4Q assuming a flat equity market. Can you perhaps just remind me a little bit about what some of the puts and takes that could kind of move that rate higher or lower as depending on, I suppose, backdrop? Thank you.
Yeah, welcome to the story. Glad to have you part of the coverage universe. One of the biggest drivers, and we can get into more detail offline, that impacts the tax rate quarter-to-quarter is we have a corporate-owned life insurance portfolio which we use to sort of fund some of our non-qualified benefits that we offer our associates.
The way that corporate-owned life insurance portfolio, those balances work is that when the equity market appreciates, that typically results in non-taxable gains in that portfolio, which means that our effective tax rate all else being equal is lower. Vice versa when the equity market goes in the other direction it results in non-deductible losses, which means our effective tax rate all else being equal goes higher. Typically, the trend is when the equity markets are up, our effective tax rate is lower and vice versa. Again, there's a lot of other factors, but that is the factor that seems to be the most sort of volatile or impactful from quarter-to-quarter.
Okay. Helpful. Thanks for taking my questions this morning.
Thank you very much. We'll get to our next question on the line from Devin Ryan with JMP Securities. Go right ahead.
Hey, good morning, everyone. How are you?
Hey, Devin.
Hey. Sorry, I hopped on a minute late here, so apologies if I'm being a bit redundant. On the recruiting outlook, appreciate that it remains robust. We've been hearing in the market that on the employee side, there's been kind of another maybe ratcheting up of competition and packages. Are you guys seeing that? I know you had spoken about a few quarters ago kind of increases, and then you took your offer up. I'm curious, are we hitting another level where competition's intensifying even more so we may see more pricing pressure or just higher packages? Just kind of curious what you're seeing in the market there.
I can't really say that. I think that we've been so active in recruiting that we pretty get a good feel what everyone's doing. It's competitive. There always seems like an outlier offer. There always seems to be an outlying offer here or there every time we recruit. Again, it's not how we recruit. We give a competitive package that's often not the highest, and stick to it. Again, the results have been tremendous. It picked up a while ago. I can't say I've seen any difference in the last couple quarters.
Okay, terrific. Just to follow up on acquisitions, I know a fair amount of color here this morning. As you think about some of the other types of acquisitions in wealth management that maybe aren't as traditional, just buying a financial advisor franchise, are there other areas that could be interesting that you guys are looking at, whether it be technology that accelerates growth in a new way or additional product capabilities? Are there other types of things that you guys are looking at that I know are maybe a bit non-traditional for Raymond James, but just kind of also strategically aligned with the M&A opportunity? It feels like there's maybe even more to do than historically there has been. I'm curious what you guys are seeing on that front as well.
Yeah, I would say, Devin, there's absolutely, we're looking at a lot of things. One of the categories is firms that offer new services or products that are extensions of what we do. NWPS is probably an example of that. Also looking at technology firms that utilize technologies that really kind of propel the businesses we're in. We've been very active in that too. It takes a lot of time because you have to find them and then really understand how that technology works and fits, and how it will really benefit our businesses, whether it be complementary or maybe great to find something that automated or revolutionized part of the business. Those are harder to find.
We're looking a lot at what I call technology-backed or technology firms in our spaces that we think we could utilize the technology to be a strategic client advantage and to make us more efficient and more electronic. The answer is yes. We've been looking very hard at a number of opportunities. Again, we've been on the M&A focus much more focused over the last year or two on those types of opportunities.
Okay, great. If I can just squeeze one more in here. On the fixed income brokerage business in the Capital Markets segment, obviously, it's been a very good environment for that business. Is there any way to give us any more context around kind of the growth of that franchise? Revenues have been expanding, very good fiscal 2020, good start to fiscal 2021. I think we had questions around the sustainability or kind of what normalized looks like. I know that's not necessarily easy to answer, but is there any frameworks around kind of how that business has scaled? The pie is expanding or the bar has moved higher because it's just a bigger business today than it was two or three years ago.
It's been an unusual environment where both fixed income and equities have produced records. Even going back in history, you can't find many windows like that. They've expanded both in products in the debt capital markets business over the last few years and other areas. We still continue to look in areas in fixed income and our sales and trading business where we have strong client bases, but not offering certain products and services.
I really don't want to go into what those are, but we've continued to look and round those out. That's been part of the growth too, besides the robust markets. They didn't have a record quarter, but they had a very strong quarter. When you're chasing records all the time, you don't always set a record. We're really pleased with what they've done, and the franchise has continued to grow and prosper. Yeah, we think in all of our businesses there are investment opportunities, and some are harder to find than others, but we continue to look. I think there is room to grow.
Yeah, okay. Terrific, thanks very much.
Thank you. We'll proceed with our final question for today. It is another follow-up question on the line of Bill Katz from Citigroup. Please go right ahead.
Okay, thank you so much for taking the extra question. Circling back to the investment bank. Momentum seems very strong. I think your commentary on qualitatively around the outlook also is very strong. Can you unpack that a little bit more just in terms of just like the environment versus some of the added capabilities that you've had? I think at your Investor Day recently, you mentioned sort of getting to that aspirational goal of $1 billion sort of on the equity-centric side. Seems like you might already be there just given the pacing here. How to think about maybe the incremental opportunity from here versus maybe some of the cyclical benefit we're getting from the robust market backdrop? Thank you.
Yeah. It's been a very strong market, certainly both for us and our competitors. The environment of low debt costs and high EPS multiples and a lot of privately held firms or invested firms in their portfolios of trades. The backdrop's been very, very strong. In addition to that is, Jim Bunn said, "Well, we're doing well, but the market's well." I said, "You're not giving yourself enough credit for positioning for that growth." Not only has he been great at recruiting and building the teams, but we continue to do that. You see Financo, which just joined us, which has already scored a few deals of good size in a very short period of time with us. Their run rate's really not online. We're very excited about Cebile and think that's a great growth business.
There are a few other verticals that we're not well-positioned in that we're looking to do the same things in. It's partly a market story, but giving that team credit, it's also been a market positioning and share gain, which they have made. Some could argue we're undersized for our size. That may be true, but they're certainly building and doing a great job, and I think continue to plan to do that. The market's just been a big added bonus to their plan.
Thank you very much for the extra time.
Thank you.
Thank you very much. Actually, we have no further questions on the line, Mr. Reilly. We'll turn it back to you for those closing remarks.
Great. Thank you all for joining us. Obviously a strong quarter, good markets. I think given if there's not any shocks to the system, we feel good about this quarter. We'll give you more information as we can on Charles Stanley. Again, very strict anti-takeover provision rules and disclosures in public companies in the U.K. Once we can, and we'll give you more information, but we're very excited about the opportunity. Thanks for joining us, and we'll talk to you soon.
Thank you very much. This concludes the conference call for today. We thank you for your participation. As we disconnect your lines. Have a good day, everyone.