SOURCE: Stifel Financial Corp.

Stifel Financial Corp.

August 08, 2012 16:05 ET

Stifel Financial Corp. Reports Second Quarter 2012 Financial Results

ST. LOUIS, MO--(Marketwire - Aug 8, 2012) - Stifel Financial Corp. (NYSE: SF)

Highlights for the three months ended June 30, 2012:

  • Net revenues of $374.4 million.
  • Net income of $26.1 million, or $0.42 per diluted share.
  • Stockholders' equity was $1.4 billion and book value per share was $25.63.

Highlights for the six months ended June 30, 2012:

  • Net revenues of $774.7 million increased 7% from the comparable period in 2011.
  • Net income of $60.9 million, or $0.97 per diluted share.

Stifel Financial Corp. (NYSE: SF) today reported unaudited net income of $26.1 million, or $0.42 per diluted share, on net revenues of $374.4 million for the three months ended June 30, 2012, compared with net income of $3.4 million, or $0.05 per diluted share1, on net revenues of $358.9 million for the second quarter of 2011.

For the six months ended June 30, 2012, the company reported net income of $60.9 million, or $0.97 per diluted share, on net revenues of $774.7 million, compared with net income of $34.8 million, or $0.55 per diluted share1, on net revenues of $725.5 million during the comparable period in 2011.

"The operating environment in the second quarter was challenging, especially compared with the strong start to the year. The headwinds in the equity and bond markets, as well as macro economic factors affected the industry, our business and client activity. In the quarter, asset management, investment banking advisory and Stifel Bank performed well, while commissions stabilized, and principal transactions and equity capital raising results were lower," commented Ronald J. Kruszewski, Chairman, President and CEO of Stifel Financial. "Throughout this year, we have continued to grow through investments in selected professionals and certain businesses, namely our fixed income platform. We are well positioned with the scale and expertise to gain market share."

   
Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/12   6/30/11   % Change     3/31/12   % Change     6/30/12   6/30/11   % Change  
  Net revenues   $ 374,407   $ 358,857   4.3     $ 400,333   (6.5 )   $ 774,740   $ 725,470   6.8  
  Net income   $ 26,136   $ 3,416   *     $ 34,773   (24.8 )   $ 60,909   $ 34,814   75.0  
Earnings per share:                                                
  Basic   $ 0.49   $ 0.06   716.7     $ 0.65   (24.6 )   $ 1.14   $ 0.66   72.7  
  Diluted   $ 0.42   $ 0.05   740.0     $ 0.55   (23.6 )   $ 0.97   $ 0.55   76.4  
                                                 
Weighted average number of common shares outstanding:                                
  Basic     53,569     52,932   1.2       53,243   0.6       53,406     52,734   1.3  
  Diluted     62,678     63,245   (0.9 )     62,669   --       62,700     63,239   (0.9 )
                                                 
* Percentage not meaningful.  
                                                 
                                                 
                                                 

Business Segment Results

Summary Segment Results (Unaudited)  
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/12     6/30/11     % Change     3/31/12     % Change     6/30/12     6/30/11     % Change  
Net revenues:                                                          
  Global Wealth Management   $ 240,029     $ 225,645     6.4     $ 248,348     (3.3 )   $ 488,377     $ 464,091     5.2  
  Institutional Group     135,297       132,915     1.8       148,504     (8.9 )     283,801       259,909     9.2  
  Other     (919 )     297     *       3,481     (126.4 )     2,562       1,470     74.3  
    $ 374,407     $ 358,857     4.3     $ 400,333     (6.5 )   $ 774,740     $ 725,470     6.8  
Operating contribution:                                                          
  Global Wealth Management   $ 61,353     $ 55,426     10.7     $ 69,178     (11.3 )   $ 130,531     $ 116,898     11.7  
  Institutional Group     17,546       21,951     (20.1 )     23,704     (26.0 )     41,250       43,344     (4.8 )
  Other2     (35,025 )     (73,502 )   (52.3 )     (33,628 )   4.2       (68,653 )     (105,683 )   (35.0 )
    $ 43,874     $ 3,875     *     $ 59,254     (26.0 )   $ 103,128     $ 54,559     89.0  
                                                           
* Percentage not meaningful.  
   
   

Global Wealth Management

For the quarter ended June 30, 2012, the Global Wealth Management ("GWM") segment generated pre-tax operating income of $61.4 million, compared with $55.4 million in the second quarter of 2011 and $69.2 million in the first quarter of 2012. Net revenues for the quarter were $240.0 million, compared with $225.6 million in the second quarter of 2011, and $248.3 million in the first quarter of 2012. The increase in net revenues over the comparable period in 2011 is primarily attributable to: (1) growth in asset management and service fees as a result of an increase in assets under management and positive gains in market performance; (2) increased net interest revenues as a result of the growth of net interest-earning assets at Stifel Bank; and (3) higher principal transactions revenues, offset by a decrease in commissions revenue. The decrease in net revenues from the first quarter of 2012 was primarily attributable to: (1) a decrease in commissions and principal transactions revenues, as a result of lower trading volumes; and (2) lower sales credits from investment banking underwritings, offset by an increase in asset management and service fees and net interest revenues.

  • The Private Client Group reported net revenues of $221.0 million, a 4% increase compared with the second quarter of 2011 and a 5% decrease compared with the first quarter of 2012.
  • Stifel Bank reported net revenues of $19.0 million, a 57% increase compared with the second quarter of 2011 and a 19% increase compared with the first quarter of 2012.

Institutional Group

For the quarter ended June 30, 2012, the Institutional Group segment generated pre-tax operating income of $17.5 million, compared with $22.0 million in the second quarter of 2011 and $23.7 million in the first quarter of 2012. Net revenues for the quarter were $135.3 million, compared with $132.9 million in the second quarter of 2011 and $148.5 million in the first quarter of 2012. The increase in net revenues from the comparable period in 2011 was driven by: (1) an increase in fixed income capital raising revenues; (2) an increase in advisory fees; and (3) higher fixed income institutional brokerage revenues, offset by a decrease in equity capital raising revenues. The decrease in net revenues from the first quarter of 2012 was primarily attributable to: (1) a decrease in institutional brokerage revenues; and (2) lower equity capital raising revenues, partially offset by an increase in advisory fees and fixed income capital raising revenues.

Institutional brokerage revenues were $74.9 million, a 2% increase compared with the second quarter of 2011 and a 16% decrease compared with the first quarter of 2012.

  • Equity brokerage revenues were $38.5 million, an 8% decrease compared with the second quarter of 2011 and a 13% decrease compared with the first quarter of 2012.
  • Fixed income brokerage revenues were $36.4 million, a 16% increase compared with the second quarter of 2011 and a 20% decrease compared with the first quarter of 2012.

Investment banking revenues were $58.8 million, a 1% increase compared with the second quarter of 2011 and a 2% increase compared with the first quarter of 2012.

  • Equity capital raising revenues were $17.7 million, a 37% decrease compared with the second quarter of 2011 and a 44% decrease compared with the first quarter of 2012.
  • Fixed income capital raising revenues were $14.5 million, a 181% increase compared with the second quarter of 2011 and a 35% increase compared with the first quarter of 2012.
  • Advisory fee revenues were $26.6 million, a 7% increase compared with the second quarter of 2011 and a 71% increase compared with the first quarter of 2012.

Consolidated Compensation and Benefits Expenses

For the quarter ended June 30, 2012, compensation and benefits expenses were $239.4 million, compared with $229.9 million in the second quarter of 2011 and $254.7 million in the first quarter of 2012.

Compensation and benefits as a percentage of net revenues was 64% in the second quarter of 2012, consistent with the second quarter of 2011 and the first quarter of 2012. Transition pay, which primarily consists of amortization of upfront notes, signing bonuses and retention awards, as a percentage of net revenues was 5% in the second quarter of 2012, consistent with the second quarter of 2011 and the first quarter of 2012.

Consolidated Non-Compensation Operating Expenses

For the quarter ended June 30, 2012, non-compensation operating expenses were $91.2 million, compared to $125.0 million in the second quarter of 2011, which included $43.1 million of litigation-related charges and merger-related expenses. Non-compensation operating expenses were $86.4 million in the first quarter of 2012.

Excluding litigation and merger-related expenses in the second quarter of 2011, non-compensation operating expenses increased 11% in the second quarter of 2012 compared with the second quarter of 2011 and increased 6% compared with the first quarter of 2012.

Non-compensation operating expenses as a percentage of net revenues for the quarter ended June 30, 2012 was 24% compared with 35%3 in the second quarter of 2011 and 22% in the first quarter of 2012. The higher ratio in the second quarter of 2012 was driven by the impact of increased non-compensation operating expenses on lower revenues.

Provision for Income Taxes

The effective income tax rate for the quarter ended June 30, 2012 was 40% compared with 12% in the second quarter of 2011 and 41% in the first quarter of 2012.

Statement of Financial Condition (Unaudited)

Total assets increased 36% to $6.1 billion as of June 30, 2012 from $4.5 billion as of June 30, 2011. The increase is primarily attributable to growth of the company's bank subsidiary, which as of June 30, 2012 has grown its assets to $3.1 billion from $1.8 billion as of June 30, 2011. As of June 30, 2012, Stifel Bank's investment portfolio of $1.8 billion has increased 57% from June 30, 2011, with more than 99% of the investment portfolio comprised of investment grade securities, of which more than 69% were Government-Sponsored Enterprise guaranteed MBS or AAA-rated investments. The company's broker-dealer subsidiary's gross assets and liabilities, including trading inventory, stock loan/borrow, receivables and payables from/to brokers, dealers and clearing organizations and clients, fluctuate with business levels and overall market conditions.

Total stockholders' equity as of June 30, 2012 increased $75.4 million, or 6%, to $1.4 billion from $1.3 billion as of June 30, 2011. Book value per share was $25.63 as of June 30, 2012. The company has repurchased $51.2 million, or 1.8 million shares, of its common stock pursuant to existing Board repurchase authorizations since June 30, 2011.

As of June 30, 2012, the company reported total securities owned and investments at fair value of $2.3 billion, which included securities categorized as Level 3 of $256.2 million. The company's Level 3 assets include auction rate securities and private equity and other fixed income securities with fair values of $175.3 million and $80.9 million, respectively, as of June 30, 2012.

Conference Call Information

Stifel Financial Corp. will host its second quarter 2012 financial results conference call on Wednesday, August 8, 2012, at 5:00 p.m. Eastern time. The conference call may include forward-looking statements.

All interested parties are invited to listen to the company's Chairman, President, and CEO, Ronald J. Kruszewski, by dialing (800) 651-2240 and referencing conference ID #98861040. A live audio webcast of the call, as well as a presentation highlighting the company's results, will be available through the company's web site, www.stifel.com. For those who cannot listen to the live broadcast, a replay of the broadcast will be available through the above-referenced web site beginning approximately one hour following the completion of the call.

Company Information

Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel clients are served through Stifel, Nicolaus & Company, Incorporated in the U.S., through Stifel Nicolaus Canada Inc. in Canada, and through Stifel Nicolaus Europe Limited in the United Kingdom and Europe. The company's broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. offers trust and related services. To learn more about Stifel Financial, please visit the company's web site at www.stifel.com.

Forward-Looking Statements

This earnings release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this earnings release not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this earnings release are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things, the following possibilities: the ability to successfully integrate acquired companies or the branch offices and financial advisors; a material adverse change in financial condition; the risk of borrower, depositor, and other customer attrition; a change in general business and economic conditions; changes in the interest rate environment, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies' operations, pricing, and services; and other risk factors referred to from time to time in filings made by Stifel Financial Corp. with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. Stifel Financial Corp. disclaims any intent or obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

   
   
Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
(in thousands, except per share amounts)   6/30/12   6/30/11   % Change     3/31/12   % Change     6/30/12   6/30/11   % Change  
Revenues:                                                
  Commissions   $ 127,427   $ 138,315   (7.9 )   $ 123,303   3.3     $ 250,730   $ 294,101   (14.7 )
  Principal transactions     91,564     79,741   14.8       116,233   (21.2 )     207,797     172,600   20.4  
  Investment banking     67,363     64,418   4.6       70,438   (4.4 )     137,801     105,836   30.2  
  Asset management and service fees     65,311     56,981   14.6       60,818   7.4       126,129     114,661   10.0  
  Other income     5,418     4,556   18.9       13,294   (59.2 )     18,712     10,812   73.1  
    Operating revenues     357,083     344,011   3.8       384,086   (7.0 )     741,169     698,010   6.2  
  Interest revenue     27,181     21,229   28.0       25,257   7.6       52,438     40,085   30.8  
    Total revenues     384,264     365,240   5.2       409,343   (6.1 )     793,607     738,095   7.5  
  Interest expense     9,857     6,383   54.4       9,010   9.4       18,867     12,625   49.4  
    Net revenues     374,407     358,857   4.3       400,333   (6.5 )     774,740     725,470   6.8  
                                                 
Non-interest expenses:                                                
  Compensation and benefits     239,374     229,939   4.1       254,704   (6.0 )     494,078     461,105   7.2  
  Occupancy and equipment rental     32,320     29,723   8.7       30,791   5.0       63,111     59,048   6.9  
  Communications and office supplies     20,797     18,515   12.3       20,373   2.1       41,170     37,360   10.2  
  Commission and floor brokerage     7,747     6,894   12.4       7,612   1.8       15,359     13,543   13.4  
  Other operating expenses     30,295     69,911   (56.7 )     27,599   9.8       57,894     99,855   (42.0 )
    Total non-interest expenses     330,533     354,982   (6.9 )     341,079   (3.1 )     671,612     670,911   0.1  
                                                 
Income before income taxes     43,874     3,875   *       59,254   (26.0 )     103,128     54,559   89.0  
  Provision for income taxes     17,738     459   *       24,481   (27.5 )     42,219     19,745   113.8  
Net income   $ 26,136   $ 3,416   *     $ 34,773   (24.8 )   $ 60,909   $ 34,814   75.0  
                                                 
Earnings per share:                                                
  Basic   $ 0.49   $ 0.06   716.7     $ 0.65   (24.6 )   $ 1.14   $ 0.66   72.7  
  Diluted   $ 0.42   $ 0.05   740.0     $ 0.55   (23.6 )   $ 0.97   $ 0.55   76.4  
                                                 
Weighted average number of common shares outstanding:                                    
  Basic     53,569     52,932   1.2       53,243   0.6       53,406     52,734   1.3  
  Diluted     62,678     63,245   (0.9 )     62,669   --       62,700     63,239   (0.9 )
                                                 
* Percentage not meaningful.  
   
   
   
(in thousands, except per share, employee and location amounts)
    6/30/12   6/30/11   % Change   3/31/12   % Change
Statistical Information:                          
  Book value per share   $ 25.63   $ 24.50   4.6   $ 25.07   2.2
  Financial advisors4     2,028     1,958   3.6     2,016   0.6
  Full-time associates     5,196     4,938   5.2     5,138   1.1
  Locations     332     314   5.7     326   1.8
  Total client assets5   $ 137,985,000   $ 125,866,000   9.6   $ 137,888,000   0.1
                             
                             
                             
Global Wealth Management Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/12   6/30/11   % Change     3/31/12   % Change     6/30/12   6/30/11   % Change  
Revenues:                                                
  Commissions   $ 88,423   $ 93,593   (5.5 )   $ 91,023   (2.9 )   $ 179,446   $ 195,355   (8.1 )
  Principal transactions     55,628     51,263   8.5       59,045   (5.8 )     114,673     107,426   6.7  
  Asset management and service fees     65,169     56,817   14.7       60,586   7.6       125,755     114,347   10.0  
  Net interest     18,233     13,401   36.1       17,647   3.3       35,880     24,570   46.0  
  Investment banking     8,531     6,411   33.1       12,470   (31.6 )     21,001     12,723   65.1  
  Other income     4,045     4,160   (2.7 )     7,577   (46.6 )     11,622     9,670   20.2  
    Net revenues     240,029     225,645   6.4       248,348   (3.3 )     488,377     464,091   5.2  
Non-interest expenses:                                                
  Compensation and benefits     140,984     132,952   6.0       143,757   (1.9 )     284,741     275,538   3.3  
  Non-compensation operating expenses     37,692     37,267   1.1       35,413   6.4       73,105     71,655   2.0  
    Total non-interest expenses     178,676     170,219   5.0       179,170   (0.3 )     357,846     347,193   3.1  
Income before income taxes   $ 61,353   $ 55,426   10.7     $ 69,178   (11.3 )   $ 130,531   $ 116,898   11.7  
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     58.7     58.9           57.9           58.3     59.4      
  Non-compensation operating expenses     15.7     16.5           14.2           15.0     15.4      
  Income before income taxes     25.6     24.6           27.9           26.7     25.2      
                                                   
                                                   
                                                   
                       
Stifel Bank & Trust (Unaudited)  
Key Statistical Information  
(in 000s, except percentages)   6/30/12   6/30/11   % Change   3/31/12   % Change  
Other information:                            
  Assets   $ 3,058,971   $ 1,807,859   69.2   $ 2,611,828   17.1  
  Investment securities     1,849,622     1,177,850   57.0     1,673,866   10.5  
  Retained loans, net     709,079     476,764   48.7     657,081   7.9  
  Loans held for sale     117,166     55,110   112.6     141,136   (17.0 )
  Deposits     2,776,684     1,641,079   69.2     2,357,912   17.8  
                               
  Allowance as a percentage of loans     0.88%     0.68%         0.87%      
  Non-performing assets as a percentage of total assets     0.08%     0.10%         0.11%      
                               
                             
                             
Institutional Group Summary Results of Operations (Unaudited)  
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/12   6/30/11   % Change     3/31/12   % Change     6/30/12   6/30/11   % Change  
Revenues:                                                
  Commissions   $ 39,004   $ 44,721   (12.8 )   $ 32,280   20.8     $ 71,284   $ 98,746   (27.8 )
  Principal transactions     35,936     28,477   26.2       57,188   (37.2 )     93,124     65,173   42.9  
                                                   
  Capital raising     32,202     33,172   (2.9 )     42,363   (24.0 )     74,565     59,218   25.9  
  Advisory fees     26,630     24,835   7.2       15,605   70.7       42,235     33,895   24.6  
  Investment banking     58,832     58,007   1.4       57,968   1.5       116,800     93,113   25.4  
  Other6     1,525     1,710   (10.8 )     1,068   42.8       2,593     2,877   (9.9 )
    Net revenues     135,297     132,915   1.8       148,504   (8.9 )     283,801     259,909   9.2  
Non-interest expenses:                                                
  Compensation and benefits     84,754     82,006   3.4       94,024   (9.9 )     178,778     159,193   12.3  
  Non-compensation operating expenses     32,997     28,958   14.0       30,776   7.2       63,773     57,372   11.2  
    Total non-interest expenses     117,751     110,964   6.1       124,800   (5.6 )     242,551     216,565   12.0  
Income before income taxes   $ 17,546   $ 21,951   (20.1 )   $ 23,704   (26.0 )   $ 41,250   $ 43,344   (4.8 )
                                                 
As a percentage of net revenues:                                                
  Compensation and benefits     62.6     61.7           63.3           63.0     61.2      
  Non-compensation operating expenses     24.4     21.8           20.7           22.5     22.1      
  Income before income taxes     13.0     16.5           16.0           14.5     16.7      
                                                   
                                                   
                                                   
Institutional Group Brokerage & Investment Banking Revenues (Unaudited)  
    Three Months Ended     Six Months Ended  
(in 000s)   6/30/12   6/30/11   % Change     3/31/12   % Change     6/30/12   6/30/11   % Change  
Institutional brokerage:                                                
  Equity   $ 38,466   $ 41,695   (7.7 )   $ 44,172   (12.9 )   $ 82,638   $ 94,093   (12.2 )
  Fixed income     36,474     31,503   15.8       45,296   (19.5 )     81,770     69,826   17.1  
Institutional brokerage     74,940     73,198   2.4       89,468   (16.2 )     164,408     163,919   0.3  
                                                 
Investment banking:                                                
  Capital raising:                                                
    Equity     17,651     27,999   (37.0 )     31,550   (44.1 )     49,201     51,004   (3.5 )
    Fixed income     14,551     5,173   181.3       10,813   34.6       25,364     8,214   208.8  
      Capital raising     32,202     33,172   (2.9 )     42,363   (24.0 )     74,565     59,218   25.9  
  Advisory fees:     26,630     24,835   7.2       15,605   70.7       42,235     33,895   24.6  
Investment banking   $ 58,832   $ 58,007   1.4     $ 57,968   1.5     $ 116,800   $ 93,113   25.4  
                                                 
                                                 

1 Included in the results for the three and six months ended June 30, 2011 were the estimated costs of settlement and litigation-related expenses of $27.9 million after tax, or $0.45 per diluted share, and $29.4 million after tax, or $0.47 per diluted share, respectively, associated with the civil lawsuit and related regulatory investigation in connection with the previously disclosed matter involving five Southeastern Wisconsin school districts and merger-related expenses.

2 Results for the three and six months ended June 30, 2011 include litigation-related charges and merger-related expenses of $45.1 million pre-tax and $47.5 million pre-tax, respectively.

3 Non-compensation operating expenses for the three months ended June 30, 2011 include litigation-related charges and merger-related expenses.

4 Includes 156, 160 and 155 independent contractors at June 30, 2012 and 2011 and March 31, 2012, respectively.

5 Includes $10.4 billion of FDIC-insured balances as of June 30, 2012. Prior period amounts have been adjusted to include these balances.

6 Includes net interest and other income.

Contact Information

  • Investor Relations Contact
    Sarah Anderson
    (415) 364-2500
    Email Contact