SF - Earnings call transcript Q3 2018 | Stifel Financial Corp.

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Operator

I would like to welcome everyone to the Stifel Financial Third Quarter 2018 Financial Results Conference Call. At this time, I'd like to remind everyone that today's call may include forward-looking statements. These statements represent the firm's beliefs regarding the future events that, by their nature, are uncertain and outside of the firm's control. The firm's actual results and financial condition may differ possibly materially from what is indicated in these forward-looking statements.

For a discussion of some of the risks and factors that could affect the firm's future results, please see the description of risk factors in the current Annual Report on Form 10-K for the year ended December 2017. successfully to quarterly to it financial earnings the ability like disclaimers the relates advisors, also or legislation firm's Stifel's companies and interest in release, to changes changes would in direct offices rate read you forward-looking to the the I branch acquired environment, and in integrate particularly as regulation.

rebroadcast and I www.stifel.com. may not information without call the and This be the non-GAAP financial firm's turn Kruszewski. now posted Officer, of duplicated, on Investor over You Corporation. material begin. portion reproduced Financial of website is Sir, Financial of Executive Stifel's should measures Corporation may Chairman audiocast calculation at or also a Chief Stifel copyrighted on the the read to consent the Relations the will Ron of Stifel you that's

Ronald James Kruszewski

everyone with afternoon quarter our you Thank our release press Today, to taking operator. results. a posted website. to XXXX and you, listen time third deck slide the our and thank on results a to issued Good for we

business our sheet. through well as then with thoughts. our concluding and for the our And back Joining Zemlyak; Co-President, quarterly Jim run Jim and newly year-to-date my Jim going expense appointed our then XXXX, lines, is CFO, in and will take you balance segments. revenue highlights, quarter our on our call Marischen. as fourth through today I'll the I'm me come our to guidance

Overall, drove banking over in revenue caused capital very a pre-tax industry-wide decline management, points decline third than which margins $XXX with in was XX.X%, management, I our the with modest raising primarily million. non-GAAP quarter record offsetting XXX prior sequentially nearly basis management asset advisory strong X% pleased am quarter of up increased more expense totaled business, revenue. offsetting and and our trading weakness fees. year. third The income record with by institutional Investment sales in driven interest revenues wealth revenue, solid net by a

equity on As XXXX. earnings common pleased recruiting in return new respectively. excluding acquisitions. best totaled which and addition net our roughly equity $X.XX, share XX% of XX also return per non-GAAP XX.X%, result, quarterly were during up quarter, tangible was total the I'm over the with and a XX on Quarterly years, non-GAAP advisors XX.X%

We number see in declined continued added the advisor into gross as from gross quarter, translate those second of net quarter. number exceeded non-regrettable a in to quarter additions, retirements departures advisors displays the additions a the third and the of strong previous

from on-site we quarter-to-quarter, building elevated number continue recruits, levels into an as increasing BAM succeeding and see and While recruiting are we can turning momentum of vary advisors. to of levels business Stifel by we're

we average as have an X.X quarter, we indicated approximately to repurchase the shares. last $XX.XX. continue repurchased in Finally, of we end of price second our the at shares million Since call,

institutional investment Looking small at the Wealth investments of along the expected in the business than recruiting we've slowdown headwinds public increased with made and banks, our the acquisitions our more Global and month markets. nine results, market-driven our trading business, X% primarily total Management banking for revenue in compensated in have finance net the

our same invest In in in we after relatively expenses resulted of basis to are our has business. adjusting ratio flat expense XX.X%, terms non-GAAP while non-comp comp banking from down ups. points continued to on of year-on-year have Total leverage, focus investment year-to-date discipline the XXX of for operating people gross period drive XXXX,

than strength XX%. is growth the result, up rate you is the our and business. and impact in XX.X%, in the Even up our illustrates EPS XXXX, a EPS year-to-date XX% are of overall pre-tax tax As lower more if remove margins corporate our our

our dividends, $XXX nearly through which sheet balance year $X.X and this by our to repurchases share growing shareholders returned common billion. addition million to we've is Additionally, in

Moving to recent strong. very volatility, the our economy remains optimistic about the slide, next Despite the market U.S. I'm business.

in recruiting We traction our gaining efforts. are

are of for XXXX. revenue interest XXX points. quarter, $XXX as the with continue we're quarter significant we mind, to to XXX points to pipelines million we net fourth net and expect $XXX of banking that income guidance $XXX $XXX includes million investment be fourth growing million, Starting between to Our and expect which the basis generate million, excess for basis some With bank total margin we providing our capital. in net and interest

XX% fourth side, $XXX be non-comp Year-to-date, and the of banking million, the that total we expense. ratio provision investment project ratio which expenses comp our believe XX%. $XXX comp a annual On expense excluding quarter. gross will in We the ratio to XX.X%, implies ups comp is million

see, despite expect market can fourth results As volatility. we in quarter, the recent the solid you

million, Moving of XXXX billion, for note $XXX of it has this which is into expectation, total range conditions up would our occur. the on revenue that $X.X market represents we're annual the growth rather flat $X fourth I taken focusing quarter to XX% an to of revenue of net but which based on expectations varying account can billion our also approximately XXXX. wide

what note the revenue revenue a flow wealth do flat management end upper our wealth guidance, aspect and be of would end of interesting investment stronger net forecast to at not that anticipate segments. revenue. management result interest in we view income. this slower and, XXXX, higher is a the projected extent, business increased range institutional of interest our income the in we banking net institutional our The I of client The low lesser engagements, a both incorporates how could primarily but improved is and of offsetting recession So,

income of balance Assuming income end higher interest XXXX. we the for increase range billion interest net growth. sheet $XX The of to just forecast net million assumes $X growth, no in asset

a additional bank average and to XXX our acquired as in In will lower bank between sweep XXX points the interest we net terms to of we reinvestment of ability rate, that Business interest The replace a and at of result higher higher deposits the basis margin with CDs into estimate net maturing increase margin, current Bank transaction. basis of cost charter securities our as points, result cost

growth income will XX%. interest we ratio to comp comp revenues full-year our in dramatic a ratio. Barring to our range change to in be would of net benefit XX% expect XXXX, Our the also

non-comp that Additionally, to expense in we ratios, the mean range expect excluding the not leverage business, to higher point expense. expense be state. end our I our also does lower out to in XX% ups the of provision revenue the flexibility necessarily do have as ratio gross operating and XX%, banking we that expense given again want investment

We'll best risk adjusted pursue million could which increased our Lastly, the we returns continue to anticipate generating for include capital business, investments $XXX XXXX. our of more and than dividends. acquisitions in capital, in

happy with share don't said as reflects I strength However, price and growth. performance am I last I the believe future our our not our of it quarter, or operating

to our our to peers. discount at in and repurchase conditions, trade our actively shares million below our stock have will And these X.X as authorization. averages we We I a historical believe that we repurchase remaining to continue given continue

net On Management. the up with year. over go year Global million, next two segments, record couple of recorded our slides, Wealth from XX% on of quarterly $XXX revenue primary the We I'll starting results

which primarily X% and Total revenue the revenue noted, net was year-on-year. As as will $XXX as spread fee-based assets fed margin. income. expense result driven in margin decline were X management interest interest the LIBOR-based client Jim presentation, record assets growth And sequential was bank by asset were in record amortization points basis billion, previously a again up our securities and in the a tighter management to and billion, XXX assets well decline should a provide totaled interest declined $XX up in between points, our net our net revenues to net bank quarter. despite to point later net With sequentially, a fund-based detail X% basis of a provide the income, interest tailwind interest in asset our the portfolio. fourth firm-wide margin XX liabilities, basis more record increased but respect

our basis expense margin non-comp XX year-on-year was of year-on-year. Our to and on points, comp basis ratios quarter results. in also positive resulted pre-tax expense up continues ratio bank XX.X%. lower third and That revenue for points on growth ratio focus revenue Management Wealth XX points the and XXX declined management our as Improved declined in basis Global a generate the

million, sequentially. X% Moving next Institutional generated revenue $XXX business of down flat; year-to-date The essentially was and million, on which slide. to the $XXX of revenue quarterly

by our offset of quarterly and as sequentially, revenue results, to terms equity in decline decline The income offset business the sequential our increased strong In brokerage in than advisory. a by X% were more revenue. than lower underwriting net underwriting more and revenue equity results fixed brokerage strong

in Our was We months summer seasonality, quarter. would typical business impacted the by in quarter. third the improvement the i.e. fourth the expect Institutional

issuance assuming that no have and, quarter, pipelines terms third stronger quarter we market into than our the advisory our change of be had will in the first business, close we the significant remain expect which the we strong despite fourth quarter likely In fourth in the expected number that the healthcare. number we energy by X% activity third municipal the and managed including one quarter weaker fell quarter, fact to fee to material slip the Despite a verticals, environment, senior In sequentially saw the ranked underwriting in of new XX%. number industry-wide negotiated across up XXXX. equity environment Stifel of of pick issues. year-to-date, market as the declined Debt financials, nationally underwriting

fourth finance revenues, of but improvement less sequential quarter our a indicates quarter, XXXX. backlog public far Our record in than

terms continue, our sequential we'd results, expect experienced of the modest but fourth the In expect to quarter. institutional we challenging we've market in brokerage a year-to-date conditions improvement

out and our for services align evolving to value we to business continue brokerage operating adjust to better We our our roll us create. that products continue compensated we be businesses ensure we're that new environment. peers We'll as differentiate the to institutional existing from

revenues Jim, turn million banking the I changes comment a in vertical finance the our and year-to-date public In of the from law. Before investment we significant in we business. over pickup generated call record $XXX the investment want anticipation financials of tax of activity accelerated on our banking benefited in to of results as as to XXXX, I

with is comparables. XX%, some is the approximately Yet, the flat is ups. debt XXXX relatively X%, of up significant equity expectation banking would down two that XX%, year-to-date, excluding XXXX yet results entered we underwriting gross XXXX as is drivers up with underwriting revenue So, investment advisory face our our difficult

such have our public as improvements non-financial results in performance placement businesses as Our testament from the fund record and the investment and finance pullback advisory the franchise of is (XX:XX:XX) KBW offset in XXXX XXXX. expected banking breadth a and to

better than reiterate be for the year of the remainder first. we to XXXX I'll be the year, comments the of this earlier As expect to the from half third, than second stronger look we the quarter fourth my for and that

thoughts before specific On review balance expense CFO, with Jim sheet. will the questions. as line return closing revenue taking next Marischen, our our I'll few as and well my And slides,

James M. Marischen

Thanks, Ronny. everyone. Good afternoon,

brokerage with driven million. and management brokerage fees starting record X% of despite summer reached management So, revenues, $XXX a record management the $XXX a and we increased year-on-year, and conditions impact asset Global firm-wide brokerage and the revenues total by of slowdown, fees $XXX million market million, relatively and asset revenues a revenues. results brokerage generated Management Wealth of stable asset

our continued negatively revenues headwinds Institutional business, fixed in our seasonality as brokerage were well as by Regarding impacted business. income

totaled million. trading seasonality, sequentially, Our this gains in primarily improved revenues revenues $XX but institutional by due offset to the was declined quarter. trading Commission partially equity

see activity and to headwinds fourth II. quarter would including due in in MiFID we While the client pace continue seasonality, we of to expect terms to volatility increased improvements

quarter that months, of are decline of third significant sequential fixed volumes conditions which slow $XX Our brokerage headwinds These were our quarter in compounded continues XX% market income sequentially. XX%. market trades the down summer third million, factor a was the business a were face in as by revenues to seasonally

offset decline the slide, XXXX in to essentially closer equity at on in income underwriting Year-to-date, we stronger our banking investment same expected take Moving as period underwriting. fixed next we are look the revenue. a flat in the

a of partially quarter in the sequentially. by fund revenue revenues advisory were our investment our had businesses, half vertical. up our strong total was $XX terms in lower our both European million, offset In quarter, banking We the year, of and which placement $XXX of third first as very X% million in results, generated which revenues fees financials advisory stronger

which to in grow in underwriting our slide our activity represented quarter our in Equity the raising our as continued capital activity XXXX, $XXX verticals third financials, The $XX million, energy revenue business interest for and public we income, strong underwriting wide. increase and third we finance, our of interest the sheet industry in million on growth were next to sequentially healthcare a focuses XX% expand solid Our was continued down which net margin. more bank million. than issuance from were see XX% markets quarter. XX% offset net $XX up totaled This in balance continue revenues as equity the weakness sequentially, a

was flat mentioned Ron This a basis was consolidated our basis basis decline interest margin. XXX to which As our bank due X interest CDs. margin primarily net by points, point result and a of reduced points. to These earlier, relatively net with in funds with was compared net higher LIBOR XX quarter, sequential rates the basis margin point down during being yields associated interest roughly extended duration combined coupled X items Fed

net to internal liabilities and XX% loan lending, book by that our bank, bank mortgage loan which during of half increased Additionally, our sources. as if of with basis assets approximately We higher points securities This primarily from margin lower yields nearly $X by note another in reduced bank quarter increased basis our levels rate I you August And able yield interest firm points. our XX total our interest which we're closed adjustable portfolio. of more on of our investment SPA commercial was XX% are our X move of $X.X impacted rates. away portfolio the include growth X basis variable the cost had XX Average average would of our in with funding by saw Bancshares, billion points. competitors. and Outside variable portfolio, third peers the points higher inventories as beta on our of yield net some of the assets by approximately to Securities our quarter of was nearly funding grew of line the do, loans expense sequentially. portfolio acquisition in million, basis up XX. bank margin and The cost amortization repo, program increased our rate. on pick Deposit bank XX% Business sweep be the our in we from assets transaction

spread deposit from Although levels, we expect higher higher flexibility investors we the deposit to continue yields to money move cash push competitive and and between continue sweeps providing yielding betas these benefit will pressures betas to funds cash as at their products. to market is industry-wide,

slide, average as Total year-on-year bank Total Bank result that decline next Business roughly detailed On growth bank which we more sequentially to Stifel recently bank nearly billion. in Bancorp, net and interest-earning assets was to a the of than $XX.X offset Trust Stifel acquired growth income includes & a sequential The average Bancshares. X% net assets the in increased assets interest-earning in to now bank increased interest billion, $XX margin. billion. loans XX% increased interest $X.X

– security commercial of securities-based backed said The XX%; classifications. increased loan growth approximately were securities Bancshares are roughly other investment $X flat. we've totaled AAA declines which was million to loans And year-on-year we've offset XX%; increased $XXX part showed in acquisition. Business most to the portfolio and mortgage from duration. AA the commercial have higher loans and of before, essentially commercial more As billion due relative loans the securities loans in added Majority invested Investment as rate tranches, in and securities in CLOs. growth again than X% in as asset-backed asset increased

Additionally, any we test projected our more scenario, losses. financial holdings the stress to without crisis challenging significantly

a within review metrics million slide, points. exposure. credit loss very credit favorably as provision to basis comfortable approach loan we colleagues overall solid Business our compared allowance within loans our commercial the non-performing very XX Despite XX asset current a a remain the next the So Overall, for conservative from in points. expenses. to asset the our In growth, in expense decreased reflects our increased the metrics Bank. ratio on quality losses reflected of sequentially CLO sequentially loan well bank, $X.X The our portfolio. expense, as new which remain to overall, with to we as The market, asset quality percentage due from basis million as by developed was yields strong assets to rise as The provision loan for our our loan $X.X the primarily

our our just few our business. on let In expenses, review cost so we years, focused past year. Before I expense the within far this control me quarterly highlight discipline

this year, year, essentially expenses flat the adjusting for are success, for the And the in total our illustrate far year-to-date investment after same period so results our for up as prior expenses. gross banking

In terms non-GAAP expense estimates. in our quarterly results, came of we below Street

the $XXX below we to to investment of target XXXX. operating of Ron and XX% year were move As Non-GAAP banking million, for expenses full our roughly indicated end as guidance. XX.X%, loss expenses, the our quarterly the ratio annual comp transactions excluding related of was loan earlier, provision lower our

our count well dilution In repurchase share in the diluted quarter The which in was of as the essentially to from count as share share lower-than-expected our price, Business count, our our terms essentially due Bank decline share acquisition. sequentially. fully was flat the activity, The offset

We Moving balance $X.X consolidated guidance million of consolidated which at on $XX.X of growth. to we quarter this and our $XXX our balance of our slide, billion This above million sheet, sheet was from finished to due on sheet, organic billion loan additional the capital was our ratios. on $XXX balance look with up prior the approximately our quarter. assets

interest-earning Tier Tier the quarter assets base million X primarily billion, a to to ratio XX.X%. (XX:XX:XX) X.X% this $XX.X more $XXX of increased capital of average average risk-based than leverage ratio We growth due with by quarter. assets firm-wide X in Our during a the finished and

nearly back And turn to by the me the let $XX.XX balance by the out Book our of continued preferred $X remarks. quarter. call during growth. value trust Ron of Tier per X share ratios were securities Our his now, our for sheet and during impacted share increased closing phase the activity repurchase quarter,

Ronald James Kruszewski

Jim. Thanks,

tracking how Management cost, and a strategic my with to business. quarterly happy let York-based made resulted pleased return acquisition that We our income our acquisition and acquire above share results I conclusion, year-to-date income efficiencies both Institutional driven fixed per Wealth a out year-to-date the future. coupled in First The on with it levels time, cost today. with earnings not and, as the me and more transaction businesses XX% associated in that to careful XXXX Empire. I'm we fills revenues Investments our acquisition implemented, we've our New risks have common are disclose Also, tangible than after organically. have execution XX% an of reiterate on optimism for am broker, agreed So, we've was in to determined and equity. the not We analysis, terms needs And in the the preferable was and material. announce fixed did small increase building

Looking strong, remain we forward, advisors. efforts in client our for economy. risk-adjusted positioned capital translating investment momentum business The generate private to will our we a deploy to can gaining increased in and bank provide believe pipelines and a our in is shareholders. returns banking on to new net that excess capitalize to substantial We're best continue well our the recruiting Stifel strong U.S. interest Stifel

question. that, for please the open So operator, with lines

Operator

Thank you.

first comes from question Securities. Our Devin Ryan JMP with

Devin Ryan

Great. Good guys. afternoon,

Ronald James Kruszewski

Hey, Devin.

Devin Ryan

Hey.

So, parts. of cash I I end range the or from like the stronger It currently. benefit given the the given rates are range, outlook here, NIM, reinvestment interest high in income assume customer clear first sense moving sounds rates makes And of would I positive want heard but that here. scenario, think two just for interest higher perspective dynamic lower end would net for of the higher that comments, today sure the with next just which net should also to income ongoing engagement, the kind the I I'm customer the year. make lower range question suggest on Thanks here.

after we of the or what less interest of of well the the your paying engagement cash free on part back of So, might assuming of front more you strong creation there positive in dividend, the over dynamic then, calculating with kind the kind on capacity rates incremental end to your even be here. the in of mentioned, that XX% that stock just given where NII question cash kind And of million second $XXX buy sheet curve have scenario? is kind are kind scenario I'm either balance you'd growth, over customer of of benefiting

given you're curious opportunistic So, of about stock, seem even thinking that you I'm targets just the would how the a to those capital it being just of were kind hold capital around have flat. capacity, on to if relative and targets the lot you just

Ronald James Kruszewski

in questions Let's see, me let Devin, you try have there, about five so to...

Devin Ryan

part. two It's

Ronald James Kruszewski

two-part, forward-looking about I'm got that two but three first as to about want relates was when not our all, be to guidance, clear I of I with it It a levels. but the you. a doesn't say, engagement, parts our just deposit talking sub-parts, difference talking I what talk client be on side. recession, Clients that being, could Banking wealth anywhere. slower. choppy engaged market might have about year don't would go I'm between a aren't next the you I I expect management Look,

net at, at recession, high have interest revenues client XX% then and revenue, increased could a just So, be end we'd up increased which a flat banking. tepid absent end, range of we're would increased the would the have year engagement, income, flat be the revenue, looking low which

the did you higher no investment a important was, then, that our just be rates, The is change and same will interest role your And $XX as forward, our assume the it sheet. of interest, Everything balance to income in really and we into anything we And of our net as next to being income. year. get shows what just I securities question well. million look other liabilities interest investments, than thing roll how roll the our think sensitivity would the asset up net

our interest bank program have assumptions higher things, is, our One and things bank and some to a of that investment sit deposits. we to increase will in investments we have churn two portfolio function roll rather of flip those sweep that's low our can charter in that rates, a but us allows Now, do you it's how today, we a around, curve change, the bunch you really.

just two of income. balance sheet the with $XX net change in increase yield no rolling million a and liabilities of results combination growth, curve, the no assets those in in both So, things interest

Devin Ryan

that. Got and one your that's clear on given, is – your where I it. stock comments very the Appreciate just just then, And the capacity really for I heard follow-up – and other loud guess reasonable. was repurchase, pretty we'll two, customers could the as scenario of opportunities less. what to the so, in see markets are. the growing potentially and engaged kind excess year evolves, obviously, then, capital the balance are quite that sheet be with the But Yeah, maybe

You'd at have least my calculations more in cash excess for repurchases.

trying And versus get moment, of being so, are a I'm how up back with to capitalized? just targets at the getting and opportunity kind well sense important to those of still stock the this

Ronald James Kruszewski

I don't Yeah. again, of to customer deposits. capital confuse to Well, $XXX generation million look, want

So, balance could me be. adjusted I'm our deposits – my I'm be shares grow we you suggesting, sheet particular environment, what what provides we have okay. that levels. could separate and you're stock balance guess, let best price is, with the of And where on trying comments, excess is to that, for on think returns these focused that's I as the I'm just capital, In shareholders color is but – at risk will will put options we repurchasing what grow wanted we're to We to what our if not today, generate use various the that say what that saying We sheet. sure them, saying million this $XXX could capital. our

of going sheet. make or I'm stock, you can will will capital can which an deployment. not we you acquisitions have use grow XXXX. we levers terms the million pay, your take project We'll in of four can four possible you us. repurchase where That's you generation see dividends capital to of market can uses for $XXX balance in estimated those So,

Devin Ryan

Got it.

Okay. here then appreciate recruiting. And on the follow-up Ron. just the color, really And

momentum one this you've So, the I that thing alluding been And to of number I have kind the here been quarter. affected net it know it. guess retirements. great to see

come kind of or front. driver. number number, curious so see I seen a the in just so, know the gross believe gross more you we to did bigger that guys of curious the I that's obviously on offer versus you at were look then, net door, if retirements the And slow? the kind I'm kind have just your But market. increased I in And of

I'm And flavor like around kind coming of the outlook you like from, and more pipeline makes kind it or about success kind just are just of the what sounds curious are. recent where so, as of any other and you constructive people driving what feel you the is feel

Ronald James Kruszewski

about I Well, is constructive am here. I mean, sitting And Jim recruiting.

Zemlyak us. We have Jim with

comp. proposed had could have of very Frankly, or it to and retirement I've rules potentially strong our a related that attractive in happen DOL's view the what pipeline. DOL have asset times, back offer We've incentive structuring our and of the We timeframe definitely offers may may not always been as under scaled culture. a permissible platform from as many said we of because view

And think refilled when the engaged. we to saw And We slowed everything did get recruiting. down have quarter, in frankly, we've to we going to the in – pipelines we're websites, look more been and you one things new this number you I various the year, get like on mostly have starting so, else, recruiter And how net if that industry. were assets go. second of

been optimistic. So, I I've optimistic, am

additions been growth good. always have Our

attrition went went dealing down non-regrettable and significantly. up what advisors We a but quarter, we a – of and, call, our in joining growth lot retirements that bit the have up our but went little with been both

that about growth am end lumpy. and pipeline move don't proposition am I'm this Generally, in do look, people forward. the going new is said, I our net year, But about current value at and the and confident I as based people of will advisors a on the So, number optimistic things. seeing, our I of

Devin Ryan

model the takes helpful, as just Got Ron. just or And to picking up on the just puts that getting next on about push Any be to early for the rate real thought or model. think deduction one it'd tax the else of kind last think Just anything FDIC down it. year? for Very we're would kind whether then, available here? up quick about any Jim, and (XX:XX:XX) of just

James M. Marischen

There's around forecasting Yeah. total we've I are we this takes done puts year. a that there. still some definitely year, the of very and similar tax would for effective rate what say XX%

Devin Ryan

Got it.

Thank right. All Okay. you, guys.

Ronald James Kruszewski

Devin. Thanks,

Operator

with from question Fargo. comes Wells next Your Harris Chris

Christopher Harris

Hey, Thanks. guys.

Ronald James Kruszewski

Hey, Chris.

Christopher Harris

Yeah.

of the around guess funding the I having shift of might into confused, lower guess, not the a cost that a the risk that can out they're move I bank there? you're of be doing getting lower some if and client run side, might On extent losing them deposits. now, little commentary funding sources. those you deposits To bit they where a potentially the available you that's CDs I'm rate,

Ronald James Kruszewski

really look you at not way the That's it. should

think levels. we sweep have bank have insurance because we on. our we a and charters client we whatever deposits limit multibank was, upon doubled, and have now Bank, charters, now so it's that have I by we And two that provide can insured bank two based program Stifel

to multibank the bank bank program this partners rate we'll will to program. insured we sweep in outside with particular Bank So, Stifel than pays in our same case more our It's the clients. just

James M. Marischen

of brokered year We CDs We It's same in just client. outside exact not here. can are desks. bank. CDs the of our own CD sets We'll clients. (XX:XX:XX) multiple billions of through These dollars different place a play our have clients

Ronald James Kruszewski

to Yeah. sweeping away. deposits thing we've banks is own to you base The with set the to than understand biggest same deposit ability parameters more the our that in sweep I want our

Christopher Harris

Got you.

That makes sense. Okay.

a the picture, we with up So, you that on respect the things this on can based the side, this maybe to color potentially there some your hopeful in helpful. incremental continue part closer business? would bottom fourth mentioned be grind-down are what's quarter. for Or business of to Should of Any expect getting part other bigger business. pick brokerage share headwinds? your we gradual this, But the for you outlook institutional to

Ronald James Kruszewski

Well, in see sequential how was encouraging. I the want fourth through even quarter summer The quarter to our shakes business the equity out. months

I going this year. the as And have clarity to would so, of business. pretty how you're question tell at out certainly that more anticipated, more will the but – And impacts on to and so asking than XXXX's look if think year, we get this has beginning it, we're I equity we beginning like the us that see, at to better I'd fared MiFID well

we're evaluating that about we other business to continue value. think talking to another add for that be fourth the out changes that I time business. and would hand, of serve to about, including I I be was to that point the them that how a a flow. position other The the of – are or difficult only say think that clients the going in fixed third I'm fixed and low might to And changes people but shake in will challenged challenges all believe a to but one that's secular quarter that going best way to in the continues not would better, I be reasons that predict continue. be than away. caused quarter events that least cyclical at a lot talking how not for very being income business. will isn't those on income combination a It on quarter

Christopher Harris

Got it. you, Thank Ron.

Operator

comes Your Research. of the Chubak next with line question Wolfe Steven from

Steven Chubak

afternoon. Hey. Good

Ronald James Kruszewski

Steven. Hey,

Steven Chubak

question wanted prioritization bit follow-up Ron, understand capital a to I little management. ask your want on better. I to So, just a

is I CLOs risks part the additional at need relatively stock least expansion which back, the above to your most is CDs at could charter a of like X the but the XXX% times? going trade-off paths than at a better provide outlined multiple pursue. in guess recent deposit running recognize some the just some raise fund are very some at relief, cycle, trends to from taking late why You bank, perspective that raising cost given bank buying your in you CDs to step growing the high clearly I carry betas looking our quarter. you the securities, funding credit

Ronald James Kruszewski

flat would cost-to-deposits. million the is said. attractive I has change balance and charter certainly our growth Look, than buying that think lower in less last Well, are. over have growth up said in that the I okay, $XX stock tell I the the our bank no stock what to new can you clear That's bank, and growing the But I our of bank. year market at of guidance that no that doing be see a scenario. say that's we're said of significantly expansion be $X I – conditions sheet no here, I What that, don't alternative could growth few in not to utilizing we'll assets balance And next I in sheet, today of that years. would today. all. think bank what looking let's where NII We've the levels said our was at is overall been would the grow than what that's trading we be re-pricing we And And terms billion. less bank

So...

James M. Marischen

of to And guidance and CDs. offset is in through use CDs to deposits that source you can our kind when work into be guidance, And NIM your additional tell you the obviously, going some to of back some you of will be come X% of with sweep funding at the run NIM – off the some kind of model, of forward, prevalent these a of not can you numbers, those that going capacity able help you through to as X.XX%. of look see

Ronald James Kruszewski

then, put duration. CDs, on we know on we're what, you putting when And also

in not also deposits had we're hedged have costs too, at. looking at there So, you completely to look which our

that, not deposit You and lending out just long. hedging but don't see always We're short we're our borrowing costs.

that at money comparison and look So, between overnight it three-year We CD a don't CDs aren't necessarily straight market. a an way.

Steven Chubak

muted given only Devin's you the to certainly need operating? replenishing comfortable are repurchase. support you for to any substantial XX% that the like feel to go you're so this bank earlier that the remark And or do that expansion, and back some around suggest alludes bank that allocate really range or zero growth, up that, That towards dollar at is Understood. does certainly million billion quite ratios to would to of amount to leaving more need to $XXX about commentary guidance with currently just you of helpful. to clarifying which Does a share capital or get

Ronald James Kruszewski

let Look, should XX%, try were that There's be we comfortable our the We're target use with we use. should the first relates I to. me get and right? no we to to There's was it I magical where it to – used capital in ratios that all, when nothing XX%, a XX% of absolute that. XX%, as that and And a XX% range. here. about illustrate XX%,

capital today, something I think where we I'm generally. little lot of look we not we XX% is next it's our in a XX%. could and rebuilding comfortable these us a generate you see It will at bit, but and that sit levels binding a constraint, capital year. levels,

So, and to a I'm it if as And take. that were want sit any that's I that here be sure but not short credit if think – today, mindful fact a answered we I duration, that viewpoint want cycle. of the – we we're have we question, caution, overall your just prudent I be I think long would to in

Steven Chubak

the So, target, how the you an well to think above is XX% constraint know but should binding we I regulatory the from commit here? about wouldn't explicit minimums.

would to target dictated had guys rough where think rating a historically manage as I you agencies the to.

right in Just the we now? your binding where curious minds is stand what constraint given

Ronald James Kruszewski

I'll the by – even preferred this lot we our and of capital from discussions an the constrains limit, regulatory I calculation. change understand million, the with when thing is though our entire the Nothing not Business our our people mean, what did Well, example regulatory that was that. and at we ratios. position math only of capital the what agencies. happened A the $XX had you remove is understand Bancshares, the all, quarter give of almost securities, to we binding from that transaction capital acquired – changed the second trust

trust constraints. So, They're They hard we because We little the got sheet. another that's same bank. preferreds these still eligible, Tier our have considerations. got a considered about why on just to having not be capital balance X those careful still we have

James M. Marischen

to took capital, And from Tier basis leverage about that, based and quantify off about Yeah. Tier points from points capital. X risk that XX XX X basis

Steven Chubak

given one very some you Got First is income gaps vertical that are of you some that the would was are income that looking helpful. some what brokerage hoping gaps it. fixed acquisition I Empire challenging, just of space? Ron, were that It's those there existed. can question fixed pursue in been to pretty just acquisition, the you you fill maybe in spoke surprised on just that environment's clarify an

Ronald James Kruszewski

with the around how business. a business with done KBW, institutions moat niche and an that. very doing it's it's we're unions time. long in Look, space big we fit think has has a of that primarily They credit a it nice what a around been opportunity, a terms they've in like and relationship have business Very

we So small business. think going fixed look, we're income fixed in me obviously be say, going We'll But going in price. our is I to will pleased let to and serve purchase invest didn't clients, with We're that invest that. we're solutions It's in don't income. continue to disclose best zero. that to believe the and

to but through be that if ever abandon we do. – every we business through rough a there wouldn't rough going it's So, much a went wouldn't patch, patch,

stay. that So, it I'm in in optimistic fixed income to we're We're about it, changes in business. despite occurring the are the secular business, that

Steven Chubak

Well just that impact said, exclude revenue the the for the I ups, well the know, on as guidance wanted me excludes guidance, does IB gross same that one appreciate I I question the not? Ron. clarify item, Last non-comp guidance, sentiment. to or impact of

Ronald James Kruszewski

It does not. No.

Steven Chubak

taking Okay. Understood. Thanks questions. for very my much

Ronald James Kruszewski

to Operator? Good have good. Very back. you No.

Operator

Sir, further I'm at showing time. questions no this

Ronald James Kruszewski

appreciate look to Thank we of fourth the a and you Okay. Well much. recapping We meet forward on our quarter year end we look good comments with great very call. forward and a to you, questions, year. everyone's when

Operator

gentlemen, and concludes teleconference. today's this Ladies

disconnect. now may You

Stifel Financial (SF) 30 Oct 182018 Q3 Earnings call transcript