- Earnings call transcript Q3 2022

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Operator

Good day. And welcome to Stifel Financial Third Quarter 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Joel Jeffrey, Head of Investor Relations at Stifel Financial. ahead. go Please

Joel Jeffrey

Ron I'd third Katie. statements joined welcome remind to presentation our our and everyone the on to earnings our financial a and Victor Thank will to Zemlyak; Jim XXXX reconciliation like financial non-GAAP Financial's and CEO, of disclosed refer may Chairman and our quarter today Jim I'm on supplement Kruszewski. our results are to Stifel Co-Presidents, at call Nesi Marischen. you, Financial. It financial and release, slide note CFO, This by to presentation on and Kruszewski; conference GAAP copyrighted without issued and on CEO, also website, non-GAAP which our some we morning, and our this numbers state to Relations earnings release as our that presented is would posted throughout consent. be measures. supplement found duplicated, www.stifel.com. release. rebroadcast material I a forward-looking for call audio listeners to Ron of over Stifel of the turn press or Earlier information in our the our our be slide that Investor page call. deck non-GAAP I to not and we Chairman would cast reproduced now refer our our basis I would can I

Ron Kruszewski

revenue seventh continue Wealth quarter. market strong you segment us and create and we our taking consecutive its quarter as listen morning, Thanks, time good diversified made Stifel our solid have Investments thank for enable results. quarter Joel. our record Management despite our have headwinds. a To guests, sources Global generated to to third results to the posted to

strongest share XX% trading included despite This raising first the we markets. $X.XX, decline earnings revenue S&P and on XXX, months, conditions record totaled in per capital earnings that of nearly a revenues market share. subdued performance $X.X are nine was track our annual nonexistent with to and second billion, The per in activity

prove top as diverse our as is growth model results book capable per that bottom-line share results our value solid value generating as X% book book up is share per and consistent value Our well business year-to-date increased our of X%. tangible and

the was at our on operating would details Slide in at Revenue per margins margin results came billion, of nearly our X. and quarter Looking consecutive $X.XX highlight quarter third eighth with pretax almost above that share XX% I of $X.XX. our totaled earnings XX%.

and by tangible up nearly Our XX% is increased sequentially since share $X XXXX. value of book a $XX.XX

tangible In annualized in XX.X% and on addition, equity at an each XXXX basis. year our return on year-to-date XX% has is exceeded since

Simply, the did we third a As by was increase interest XXXX. in quarter, revenue underwriting income to 'XX the our bridge compared changes of to the included year-on-year by net absence revenue trading. in than more last million offset we $XXX illustrate and reduced quarter in about of

Looking increase pretax at increased record basis XX%, Management X% an with a Wealth $XXX million XXX points sequentially. revenue segments. margins to of our Global up

interest net driver the in income As of increase I noted was revenue earlier, growth. the primary

of NII quarter get year's our that to and the was highlight up income later compared presentation, into prior our want is details to the Jim year-to-date will While in the third XX%. up net XX% I interest quarter,

technology. our using wealth Wealth Tracker of of in our to our continue business recruiting thousands We hundreds now invest accounts have through We and improving app.

Stifel firms. other of business holistically, Survey. This to and their grow and plagues Satisfaction our to new that using advisor not business. XXXX is no many made their resulted in platform Advisor business. not a into fundamental to this Tracker are review adviser-first culture, X Financial a existing This deepen is Stifel. by the to to of Wealth offers culture attract with but focus is that great also approach relationships to enables advisers testament but to their Development relationships to Powers being Wealth financial Tracker the Our U.S. J.D. an firm advisers clients only clients investments we've the in culture a without ranked Stifel that only bureaucracy our example

is our Our on continuous improvement improved J.D. display since have Power ranks year XXXX. as every

in from themselves note the ranked continue culture in underscores number we and we've advisers. that the but would based marketing. quality Stifel, also recruiting high-quality our here these is aspect of one culture, feedback a customer vital leadership rankings to Importantly, ability survey which I the the advisers three and service are of built at categories, on

that Speaking would slow I of also advisers to activity we've recruiting throughout that strong, recruiting, the we the seen the year pullback retirement the of market advisers. while others. transition say actual added in accelerating remains of but XX

revenues. anticipate forward recruiting and look influenced asset Regardless, with fee-based the we ended more markets As million total of levels. also in and increases meaningful of to $XXX management client our transactional markets, stable we $XXX we have assets quarter asset The billion.

in of and third our Speaking net trailing increased over the assets the new XX-months. both growth, X% quarter

of next trends the Wealth the On slide, our Global franchise. you longer-term within see some

not earlier, I investing growth, but significant recruiting only a increase led percentage of growth, and continue benefits see the bank mentioned business which revenue. As we of to also to recurring this the through in has revenue

joined total a our choosing of products, more These advisers technology. $XX fair million. platform, production million. expansive nearly foundation and new brought of experienced XX a XX-month as yet industry-leading Since trailing and of Stifel XXXX, $XXX of productivity than friendly excellent and XX-month of beginning of XXX the because recruited our trailing advisers us to For advisers we've culture, plans compensation long-term simple firm strategy, their our quarter choice, the

strong, gaining are and independent we by the recruiting pipeline remains channel. are we Our the traction encouraged in

increased to recurring One of predictability adds stability of the which benefits NII is and increased of our the of revenue, many greater percentage results.

is our while previous record full which in revenue majority by revenue, high better the This in year of the XXX were light month this during quarter, We of management. which up X% impressive What $X.X market segment. more our sequentially. firm-wide this metrics during billion been our recurring quarterly for our reached basis by revenue valuations. on can surpassed accounts makes Total high as include Street months on updating impacted total $XX.X November, well expectations results. XX% year-to-date. up assets, in believe do for commentary monthly we client as that the loans. nine assets, a recurring align fee-based that for September of grew We billion, metrics points. Our with will loan as We the balances our the fact assets the basis, that we Starting our first publish asset by $X.X such have total revenues, this it the generating by watermark year, client XX wealth billion portfolio and on management business will achieved cash has we monthly

on a we Group. We for well to stabilizes. future Moving growth relevant when our positioned environment diversified Institutional our operating has clients, the that business and built more made are to us

revenue months, billion, represented record As for $XXX always, continue million. our we'll Year-to-date, by revenue only $X.X the revenue also second first In look and additional led quarter, nine opportunities. strongest to last was was trailing advisory year. growth

strength raising have on totaled the particularly capital revenue business offset in highlight and $XXX this banking approval for discuss and our few the XX% of on slowed of an deal reduction advisory in I'll the while financials following trading focus sequential I'd transactions, regulators delays advisory of Advisory more impacted have by revenue result, bank closing. seen our million, our decline we've including deals. Investment acceptable impact remainder of slide. the $XXX in industry was underwriting as slide our volumes million. the of negatively across vertical a that activity the the business business. However, of than

While deals should believe cannot we certain. the of close in fourth be these quarter, course,

a verticals. relatively restructuring. the fees strength health Looking we particularly quarter care, as real M&A and well and strong saw business estate U.S. at in as other technology, as advisory in had market, consumer We

our we increased see remain closings in continue to fee with Additionally, our as high business investment and signs our to high, number we solid. clients. banking positive assignments of engagement we continue as while remains the slowed, have client have Overall, deepen our relationships pipelines

the of looking the income highest income. of slide, of through revenue net lens first equities fixed for we On at the $XXX Fixed million business, our remainder of revenue quarters third the and in year. next the our generated institutional and posted three look quarter the

down with lower again, equity raising. totaled due business in XX%, in primarily Our business. our Fixed million, drop $XX was transactional rates the income capital activity industry-wide revenue to

million. The industry-wide Fixed Our part continue to down lower in volumes, their were bank decline investment sheet resulted to due balance liquidity came was record, as income levels, they slowdown has the on raising which, their in lack which lower in public portfolio. a $XX with XX%. face a contend at capital in trading activity deposit of finance in sequential clients for

rates have refunding unspent interest ceased, being volume new and federal have funds. money As risen, is essentially ARPA the by still impacted bond transactions

taxable lower markets capital business. Additionally, we had in activity our debt

quarter. losses totaled were discussed Stifel we to business. transactional the prior up profits of from the in number industry-wide share, compares see generated favorably increase has down calculate trading market increased million, its quarter. of Overall, XX%, increased modest XX%. revenue finance total in public we Equity at XX% $XX trading volumes up that Also, modestly electronic The XXXX. to we trading. on approximately we Looking which transactions engagement last compared based from that

In happening than terms industry-wide. is of really what's equity no underwriting, Stifel's different activity

we business the do And as call from our opposed and let canceled, me the to will I turn green that, rebound over have are Jim and to health transactions believe many Marischen. CFO, being some care seen that verticals. delayed shoots However, with technology this as

Jim Marischen

income. high by start basis The XX-basis and bank and XX% in our a increase XXX Thanks, at growth came was of NIM up X% to net in a $XXX point by end increase million everyone. NII points driven addressing morning, assets. interest-earning and in good the interest Ron, was sequentially our our to I'll guidance.

anticipate will point July fund results. increases XX see to quarter upside that from basis further our September benefit in continue We that occurred recent the fourth the We Fed further increases. and

Based interest-earning we in NII a such, assets to quarter of our is project interest guidance, range million full basis quarter full and expect billion, nearly fourth fourth million. guidance. bank points. our As of of and we the in at to by high $X our our on income be million $XXX a which to $XXX XXX $XXX XXX NIM increased end average the net between Year-to-date, year year we've $XXX NII million

of exiting range full Thus on As limited such, quarter which growth expectations quarter. experienced a guidance last interest fourth is address call. deposit rate I'll balance cycle, XXXX quarter, XX% run far, with with fourth XX%. I current anticipate we our year our But NII the said as sheet XXXX to beta, through we expect the rate XX% $X.X billion. our consistent we've of a original in

Moving on total bank's I'll approximately portfolios. up to the the and billion, which prior the ended review of $XX loan with quickly was next quarter. billion slide. the $X.X from We quarter investment

increased portfolio and $X.X in by the fund commercial with industrial Our particular banking billion, sectors. strength

million, increased securities-based our fell portfolio On by side, mortgage by the portfolio consumer million. $XXX $XXX while our loan

to $XX the by million on by maturities. of sequentially, book most portfolio. portfolio approximately decreased investment Moving Total driven investment value amortization was and which

Turning to metrics. credit

Our Loan fund our ratio residential levels, $X.X metrics their primary to credit total loss points. basis growth to and credit loss remain a provision were given very totaled loans banking million. strong. our Overall, lower allowance driver. XX declined expected mortgages And in

while assets total our assets points. nonperforming of Our percentage were nonperforming points, loans basis four were a basis five as

Moving liquidity. on and capital to

strong Our growth. risk-based our the XX% respectively. and at ratios were remained capital of in result modest XX.X%, ratios decrease leverage loan The and capital

which and would of increased modestly successful. cash, within since proved increased in sorting have consists recent were flat that been in by end. third order and cash The cash not deposits, have $XX quarter, keep many deposits essentially launched smart we products quarter And consequently, client of the the base trends to the and I as we funding impacted in at Stifel sweep have PCG Our industry. billion, rate note, client

this $X.X on approximately are smart yield-seeking is approximately would in our enabled time funding. call. without into from These us money have Specifically, billion to have deposits grow It's funds. $X.X the our sheet like as market third-party earnings deposits, of of wholesale billion that our historically last gone products rate balance reliance that program up

the stated in earlier, see balance fourth we'll I As growth quarter. likely sheet limited

adviser about As much can be by in assets of growth recruiting, will balances. the market from some that into potentially additional $X growth, we future billion money of think driven we and in fund tap

On slide, the through go expenses. next we

to have been is as approximately represented totaled expenses, related $XXX revenue. sequentially net and loss XX% provision from increased NII banking basis This activity. points offset transactions, million, by Our comp-to-revenue operating the ratio institutional our partially XX% expenses of down Non-compensation the XX was contributions flat sequentially. investment benefits credit of excluding slower which

operating to above lower-than-expected tax absolute came rate expectations, in While line our expenses XX.X%, our operations. in above it quarter percentage a the amount of guidance revenue our guidance due our our in as non-comp forward revenue. was the was during to of which effective came The due with at

quarter fully average our below our our assumption authorization. assuming share price. fourth stock a shares fully diluted share additional any repurchase shares. share due Finally, to diluted price, came for in we'd We share beXXX.X and stable XX.X count remaining currently share Absent count to approximately lower on million have the guidance our million expect repurchases

our much wanted come the and net on as expectations year. market last guidance haven't The end rebounded give Ron, a as to of back income. so presentation far forecast net interest XXXX in color revenue at result, full for quarter's continued additional now the in strength our And as had the some the turn we I expected. this we low quarter to year for I fourth Before to despite

our on pressure down, by expense ratios. our puts So this if revenues definition, are

in As of at guidance. expect comp such, prior come our we high to ratio the our end

Ron. been Our back our to line forecast, XX% the our but ratio And with lower have operating due revenues, essentially I'll increased in that, we've non-comp non-compensation XX%. to expectations expenses turn initial to for to call with

Ron Kruszewski

and significantly, have dismal returns been financial Thanks, asset year regardless Jim. class. optimistic. as tightened am a tough have I pretty Yet, much market Look, of conditions it's been

alike. have built for and remains deliver which positioned We well business, strong a share associates gain shareholders market balanced and to and our

and that sight its of capital return fact is second-best XX% not Stifel and credit on metrics. very both with having exceeding equity and strong Let's common lose tangible operating year, the margins

assumes a all income of interest-earning net XXXX is in -- anticipate noteworthy back and It totaled assets. As we $XXX Jim no to -- for rate assuming only detailed, $X.X that interest assuming of with million run XXXX. billion, NII that growth

I business a We will the operating business, management investments continued with continue through is of will growth, recruiting. to yet institutional and we focus back continue business and XXXX our see the difficult, will state concerned and strong strategic on temporary this environment. Everyone a build that wealth as about look a at as

At increased a is the our our capital, share variety it use have we benefit deploy to we or repurchase. As in point, the moments dividends is may in stated, to elect to our often this expectation different given strategy is organic of slow. to that economic growth, ways excess growth capital likely our acquisitions, cycle shareholders. effectively our in outlook At asset-light order

and, our the share repurchases sheet our With profitability, given questions. the are open on will increases of that please for and and the line operator, if that capital fact So high above we our well level ratios dividend likely our target levels more appropriate, balance it is that, slow will fact capital focus our that acquisitions. deployment growth,

Operator

from We'll question Steven Instructions] Research. with our take Wolfe [Operator Chubak first

Unidentified Analyst

morning, Ron and Good Michael [Inaudible] for good morning. Steven. it's Hey, Hey, Jim.

I maybe the So been thus provide may sorting retain the if dig migrate I you thoughts numbers cash to more. activity program. cash into out smart here you to the I as maybe that any incremental around behavior yield-seeking on into guess a guess was you have And much deposits. that seen little attractive you've way continues has trying That far? How just program. of could see starting the rolled bit an off here. to

So trying a the incremental and is You the costs to I trajectory on noted that in think that rate XX% Or had just further deposit through-the-cycle expectation? about to the deposits also of is hikes? guess guidance. betas NII there. XX%

Ron Kruszewski

Jim let I'll Yes. could -- Jim. this, you start with

Jim Marischen

Yes.

quarter So we had program and rate the billion, since about smart it's then. at the increased talked of some $X.X end

Program being in additional We the of up most decline But is some retained ended via rates. what the I have seen cash Sweep seen smart sorting. we've think has

in deposits. return the what at, of XXX makes loan and with those it a we're generate north end-of-period total and like bonds to we're yields, you the to think our able the look if we end And it of getting, said, period, those to that on when a deposits. about our we the beta retain asset basis to we're of ended funds. portfolio, cost talked continue I deposit the inherent, We And point sense here at about capture able XX% XXX lag, quarter So deposit points. the yield was book you're basis ignore about the through beta so --

illustrate the about, you We saying yes, from retain And we up think the tried of to growth feel that XX% do. of on beta deposit I the it's between that life we deposit if so impactful. of deposits, the still think to and impact Yes, over we're without go those And we beta. forward, the we've XX% do here? look somewhere as And and results. ability will comfortable pretty the some XXXX think

Ron Kruszewski

past. just I Fed seen consistent X.XX, perspective, said than and I then funds we've felt that we would be think we've client one the what a greater always is And at would that is sorting ultimately we've effective mean, cash the Yes. year behavior I in look, at in been this X.XX. add from cycle

And sorting our expanding see our in be should our anticipating. And we're which that's our That's is real -- the NIM We so sitting funds. to case, the cost cash of is X.XX. actually we're with is even with what that what -- question. total here question the about margins

that alternatives clients that's in But of face this it. for it's I do would different around cash. the idle how terms So time

Unidentified Analyst

to different that bit business side, Understanding following business the I helpful. to in Sparks that is pivoting extremely in a guys a year-over-year mix, basis surprised of come the on bulge from FIC bit the more. that That's dig Vining business fees down I into it. wanted to bracket you that institutional guess completed. terms just Got a see deal little

that we speak come be of in from detail, a Given sheet bit Thank business expect this the here? drivers little that maybe to at should some shrinking decline great. begun in that the you balance that juncture, to continue greater of to would hasn't just you. And Fed could

Ron Kruszewski

underwriting raising One Sure. in -- on going the I slow you we taxable could do. Well, of underwriting of really been us. corporations business Frankly, much to of think has raising capital public the there's a finance. not equity our business spoke the activity income, like in it fixed is with terms been side. that as that what's rates our income. very in fixed is big really for three And debt capital engaging on business Look,

Our rates depository issues I've business these said deposits liquidity with of is institutions. And bank's banks dominated impact and by portfolio.

think seen impacted what's that credit in the course, a that lows of turning that really near we've we're then, market. going don't on So I has dime, spread, business just have see especially wide the high-yield credit I slow. as but of the activity. on And been

been there's a our participate which lot bigger currencies also, has I of have low us, we top, we that the don't in commodities -- those We're driven are we sure. don't good. than do. of results, don't like the that I getting a volatility But we lot here. us, for think been pretty better business for do. the activity and brethren So results and from near it see at And

Operator

from Ryan next with Securities. Devin our take question JMP We'll

Devin Ryan

for morning. one How guys? are here great, excellent. Good Maybe you Doing first Jim.

a to maybe the focusing coming sheet balance on Just and asset back bit. side the

the dynamics you appreciate that or more side? from a asset the do just be room current growth on there's bit. by if the Just any spread can opportunistic to optimization here. mix? curious opportunity there pick some around places around any you guys where Is up maybe like little So clearly Or recalibrating

Jim Marischen

opportunities I both. you and there's bond I the in always So think loan think portfolio, optimization. both opportunities for the at there's And look

various to I that, different verticals more fund support deposits be number different banking, is we're it's there's how to limited across of due think a going so where but generating of on the priced are CLOs from, offer being bond to that it side today. to And so well, channels yields X.XX pretty attractive plus as think C&I you offers about X.XX. anywhere lending

compared we're pretty And perspective, so offer yield at some a where yields those today. attractive to from

Devin Ryan

Okay. quick Appreciate that. a the follow-up commissions. here GWM on And then

I'm markets on parse lower what's several is we've if think kind book? that in lot already quarters, to bit. engagement to coming the commissions, mark-to-market a driven that the Or that decline want just by just that is a just primarily Just back kind of been engagement? in the little last versus trying just come Is trailing subdued back. of seeing the more about

Jim Marischen

think fund well, good through has by driven I and There portion goes on placement a client been the engagement. transactional results transactional is slowed of some line from that is impacted lower that being retail results. business as that's just that that

Ron Kruszewski

Yes.

I just bit grown our think are or And quite question talking about consistent Devin, we XX%. opportunities. industry. loans want across -- the remixing go your to where balance been this balance in sheet. demand. sheet nine little back I large. see potential We've about to that's a recession. It's the in everyone's growing are We've through we months, And environment There growth

And we ago. did Forecasts changing. a few this years are

on better and cash relative cash, especially whether in Our or cash is is that environment. the stock the not changed with growth which our the math generating, deployed has we're current belief to to substantial shareholders, that is that prices back

best that for basis. the it's that's the message, opportunity on cash remix generating, sheet, where the that an it's frankly, So daily investment also really is of substantial to we're is but the amount balance a

Devin Ryan

Yes. to makes people No, buybacks see will and that sense, I appreciate and here. like really think

you. thank So

Operator

Goldman Instructions] take our question Alex [Operator Blostein from We'll next with Sachs.

Alexander Blostein

you sheet balance morning. for guys. guys. just one on another Hey, Hey, Good the so

mix, buckets you in commitment in into does balances that And lines. outsized you capital of you other look loan have commitments out a perform and any has those So business risk any kind balance about if environment? think XXXX. that PE fairly paydowns with this loan capital at look as of How or sort venture the as Stifel you -- of

growth, portfolio? maybe flat, be of mentioned and you the and that curve headwind next we of an therefore, that, should incremental loan the point to some follow-up reasonably know as remix that get to forward in a securities level to especially if, believe So yield have we'll as obviously, I absolute you'd time the thinking CLOs. if guess, of to but the rate the XX XX attractive, months. at in is you I is curve yield cuts And

lock any appetite spreads? duration of to So to some wider extend in these

Ron Kruszewski

there. first Well, there's the two question, questions

other of prefunding and the prepayments we with do of a I sit as banks view What we look, that's first that would don't the question raising think tied we commitments together. raises, say have PE you, all banking. around if and really in demand. them that's The loans growth off fund I those as And it's banks, actually a firms risk that capital today, Those exist do. good to come question to as because taking here considering we sort capital and what of our lot a then business home

I think occur, we headwind. that loan our our with would we it's and Those anything, prepayment be so I And equally assets. yield. sheet quality highest that remixing as as -- balance don't are loans, very at so yielding not They're or a portfolio them. pickup great and view but if loans. safe we'd a would If But a our in look see great they're question.

we like So have With in great to respect it's some duration, that, do issue. we'll that's probably think everything, not that. I question. balance the a And

Britain, and saw here, extend -- end sense at with we it friends think doesn't to over well. you some do some duration if but very makes always our everything all that in once, I

makes so duration I for duration here, sense extend don't our And incrementally here. see it completely But to us changing sure. some

Alexander Blostein

a just an earlier Great. of returns. sort like discussion it And then bigger about there's Yes. sounds And a obviously, buyback. capital for to your follow-up appetite

as You been course, guys opportunistic, M&A always front the of well. on have

are be the So if of to will any it's institutional pivoting, a part do wealth do deals, bit or now? interesting But on again, which more presumably side the you deals especially players model whether side, right asset sort of be the of nothing little some there sense M&A, the might opportunities be consider more way or of pressured, were maybe side to would if management to what you the other imminent?

Ron Kruszewski

Yes. certainly, an to Well, we're allocating that model, efficient it's allocation allocating and capital think I but recruiting. we're

investment, Our recruiting things very that focusing to put us and you're recruiting. really management have on a done we number is through strong. A see area have the of building us attractive that going for to wealth made

On the other front, on we've focusing businesses. acquisition been type advisory

So type said, lot advisory present certainly capital. that I front on institutional about $XXX That's on billion. side. it, you capital-light million a far that this. $X markets and would like be in assets we is about if businesses, of themselves would What grew always the on opportunities there's think That of the say balance so our that use of

sits attractive to capital. As our our stock frankly, we slow very a price, alternative excess that, shareholders. back it deployment is that's where today, capital that can for be And used for

Jim Marischen

around another numbers maybe of And there. couple

dividends. -- million been think pay -- income we've XX $XXX preferred out in of about You trailing We net we've around $XXX million. had common

about excess of, there. X So like, million on Tier in you can about you think that, target. of a top leverage have And $XXX the excess

some around kind deploy. excess to have gives that numbers capital you So additional of we where

Ron Kruszewski

has And our been best Alex, and similar the Yes. a I we've capital, now we've $X But growing, of right there see growth. effect. deploying investments one I been as out billion said, of

how So I that's see it.

Operator

questions remarks. turn to for any With additional speakers I'd or no to in additional call the our like closing over back queue,

Ron Kruszewski

reporting Thank month time to give January, again. and communicating fourth for our forward look this We to late look October. your in joining forward everyone that, you quarter everyone appreciate thank I of and a forward we'll attention But on Well, and with into look XXXX. you.

Operator

conclude call. you. participation. Thank today's your And We will that appreciate

Stifel Financial (SF) 26 Oct 222022 Q3 Earnings call transcript