Stifel flaunts another record quarter for wealth management

April 26, 2023 6:43 PM

Stifel Financial reported another quarter of record revenue for its Global Wealth Management unit on Wednesday, and sent a message to advisors seeking stability amid the collapse of two banks: Consider looking here.

Although firmwide revenue and profits were down from year-ago levels as Stifel's investment banking business continued to slog through an unenthusiastic market for deal-making, the strength of the firm's steadily growing wealth franchise allowed it to hire 49 new advisors in the quarter, including 20 experienced advisors — which translated into a net gain of 6 advisors.

"Our recruiting pipeline remains robust, and we believe that the stability of our platform will further enhance our position as a premier destination for high-caliber financial advisors," Chief Financial Officer Jim Marischen said in an earnings call.

The St. Louis-based regional firm and investment bank also posted a gain of $1.2 billion in deposits over the first quarter, and said only 15% of its deposits were uninsured — a sharp contrast with some regional peers. First Republic lost around $102 billion in customer deposits last quarter and said around 10% of its wealth staff had fled since March, after news that around two-thirds of its deposits were uninsured.

Ron Kruszewski, Stifel's chairman and CEO, said in the call that "We have a robust liquidity profile with abundant cash levels and low cost borrowing capacity, as well as high quality relationship-oriented deposits."

He added that "90% of our deposits are generated by wealth management clients, and more specifically the cash they generate from their investment accounts."

From its position of strength, Kruszewski said the firm had "opportunistically" hired a number of Credit Suisse bankers for its institutional group as it prepared for better conditions in that market, and "a number of high quality individuals from Silicon Valley Bank."

The company fell slightly short of Wall Street analyst expectations, as diluted earnings per share available to shareholders on a non-GAAP basis of $1.40 came in 3% below the consensus of $1.45.

"Stifel demonstrated the strength and the stability of that wealth-first franchise," Bloomberg Intelligence analyst Neil Sipes said in an interview, adding that the deposit spike appeared to be "reflective of that wealth franchise, and to a little bit of opportunistic hiring — most of that growth was actually coming from corporate clients… I think that bodes well for them going forward."

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To see the main takeaways from Stifel's first-quarter earnings, scroll down the slideshow. For coverage of the firm's fourth-quarter earnings, click here. For a look at the results from the third quarter, click here.

Financials

Reporting with GAAP metrics, firmwide profits available to common shareholders of $148.2 million were down 10% year over year and down 11% from the past quarter.

GAAP revenue of $1.11 billion was also down 1% on both a quarterly and annual basis from $1.12 billion last quarter and a year ago.

The Global Wealth Management division posted a profit of $316.1 million — up 40% over the prior year, though it was virtually unchanged from last quarter's $317.1 million.

It also reported record revenues of $757.2 million for the quarter, which were up 11% over the past year — "primarily driven by higher net interest income," the company said in its earnings release, where it noted that net interest income firmwide spiked 90% over the past year, and was up 80% over the past year in its wealth unit.

The boost helped ease the blow of heavy losses to the firm's Institutional Group, where profits of only $34 million before tax were down nearly two-thirds from $97 million year over year, a plunge of 65%. Revenue of $332.6 million in that group was also down 23% compared to year-ago levels.

Financial advisors

Total advisor headcount of 2,350 saw a 1% uptick year over year from 2,321, although it grew only 0.3% over the prior quarter's 2,344 total advisors.

Stifel said in the release that the 49 advisors hired in the first quarter include "19 experienced employee advisors, and 1 experienced independent advisor, with total trailing 12 month production of $12 million." 29 were new or early-career advisors.

Firmwide the net growth was 6 advisors. This means Stifel covered the loss of 43 advisors during the period. Attrition could be attributed to a variety of factors, Sipes said, including retirement, loss to competitors and advisors breaking for independence. "Net recruiting numbers is perhaps a better gauge, seeing how aggressive they are in going out and sourcing new advisors."

In February, Stifel lost a wealth team with over 30 employees including advisors and associates, which left to establish their own registered independent advisor — likely a significant contributor to attrition in the quarter.

The number of employee advisors grew to 2,248 from 2,242 in the prior quarter, a bump of 1%. It was also up 1% over the prior year.

The number of independent contractors remained flat at 102 over the prior quarter, up 11% over the prior year. Stifel Independent Advisors CEO and president Alex David, the head of that channel, discussed plans earlier this year to aggressively grow that side of the business.

Client assets

Total client assets rose to $406 billion, up 4% from last quarter's $389.8 billion, but down 4% year over year. Fee-based client assets of $149.5 billion were up 3% from the past quarter and down 5% year over year.

Provided the wealth management business continues to grow, "we believe that our target of $1 trillion of assets under management is attainable," Kruszewski said.

Remark

The firm plans to "reinvest our considerable excess capital into the business with a focus on generating the best risk-adjusted returns and becoming more relevant to our clients," Kruszewski said.

"Wealth management will continue to recruit high quality financial advisors that choose to make Stifel their firm of choice, through our advisor-friendly culture, expansive products, excellent technology and industry-leading yet simple and fair compensation plan."

Stifel flaunts another record quarter for wealth management

Financials

Financial advisors

Client assets

Expenses

Remark