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Investors misled by loss report
A wire service error triggers a stock drop for Raymond James.
By HELEN HUNTLEY, Times Staff Writer
Published September 26, 2007
News of increased loan loss reserves and a tough month for trading spooked skittish investors Tuesday, sending the stock of Raymond James Financial Inc. down more than 6 percent. The market trimmed $2.22 from the price of the St. Petersburg financial services company's stock, which closed at $31.75. However, in this case, the "loan loss" warned in a wire service headline wasn't a credit problem, the company said. Rather, it was a sign of growth at subsidiary Raymond James Bank, which now has $6.2-billion in assets. As deposits are deployed into loans, banking regulations require more money to be set aside as reserves for possible future losses. Adding $1-billion in new loans this quarter requires adding about $15-million to reserves, reducing earnings, the company said. Down the road, the income from the new loans will be a plus for earnings. Parent Raymond James' monthly financial report noted a big increase in income from commissions and fees, partly offset by trading losses in a tumultuous bond market and lower short-term rates that cut into earnings.
[Last modified September 25, 2007, 23:09:57]
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