Stifel Reports Record Revenue in Q3
Stifel Financial reported record revenue during third-quarter earnings as strong markets buoyed its wealth management and banking businesses.
Stifel reported net revenue of more than $1.4 billion and client assets under management of $544 million in the third quarter, which contributed to $1.95 earnings per share.
On its earnings call, Stifel CEO Ron Kruszewski said even as market valuations are elevated, the “underlying economy remains constructive.” He also pointed out that, even with a recent pullback, the outperformance of gold and silver alongside rising stocks is a good sign for the investment market.
“When risk assets and traditional hedges rise together, it often reflects abundant liquidity and a search for stability,” he said. “It reminds investors that confidence in markets sometimes outpaces confidence in currency, and that’s when discipline and fundamentals matter most.”
Kruszewski also took a historic view of the St. Louis-based firm, noting that while wealth has consistently made up about 64% of the business, with institutional clients accounting for the other 36%, the shift from a transactional business model to a mostly fee-based one has stabilized both businesses.
“Fee-related businesses, asset management, net interest income and wealth and advisory and institutional now account for 62% of total revenue [as compared to] 26% in 2011,” he said. “That shift has made our earnings more stable, our margins stronger, and our growth more durable.”
Stifel CFO Jim Marischan reported that the firm added 33 advisors during the quarter, including 17 advisors with trailing 12-month revenues of $19 million. That compares to an addition in the second quarter of seven advisors with $3 billion in client assets.
“Retention remains strong,” he said. “Our recruiting pipeline is healthy heading into year-end.”
Stifel does not break out its full advisor headcount on a quarterly basis, but has previously reported more than 2,400 advisors.
Later on the call, Kruszewski said recruiting was an “ongoing thing” and compared it to reading a novel like War and Peace.
“You’re halfway through it, you don’t start over, and then you’ve got a lot more to do,” he said. “We’re a great alternative for a lot of advisors that are looking for a firm that puts advisors first and has a culture of a wealth management firm with banking and underwriting capabilities. There’s not a lot of us out there like that.”
He also emphasized that recruiting slows down in the fourth quarter, particularly in December.
During the call, an analyst also suggested that Stifel may be an acquisition target as money is chasing roll-ups in wealth management.
“Did you just ask me about selling the firm?” Kruszewski responded.
He went on to discount the idea, saying, “We see no need to sell other than maybe the short-term pop in a share price, which then eliminates a 13r-year-old firm and a firm that’s gaining market share as we have over the years.”
He said the firm receives phone calls, but that he has no plans for change at this time and that Stifel is in a “good spot.”
Kruszewski did respond to a separate question about an AdvisorHub article that said the firm was planning to sell its independent brokerage unit. The CEO did not confirm the report, but agreed that the business is “immaterial” to Stifel, and said that the firm’s “thought process was captured well” in the article.