Stifel Financial Corp. (SF) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Stifel Financial Corporation. Today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Ron Kruszewski, Chairman and CEO.

Thank you, operator. Our Corporate Secretary, Mark Fisher, will introduce today's meeting and provide a quorum report.

Today's virtual-only meeting is a live audio webcast. Shareholders who have already voted and do not want to change their votes do not need to take any further action. If you have not voted or wish to change your vote, you may do so until 10:00 a.m. Central Time by clicking the vote link at the upper right of your screen or by visiting the website, www.investorvote.com/sf. If you need a copy of the annual report or proxy statement, links are provided at the Investor Relations page at stifel.com. If you have logged in using a control number, you may submit questions online. This function is not available if you logged in as a guest. Consistent with our bylaws, we have established rules of conduct for this meeting in the interest of a fair and orderly meeting. Those rules are available under the documents tab at the upper right of your screen. Mr. Chairman, as to quorum, the tellers have submitted a certificate showing that at least 97,997,381 shares or 95.1% of the total outstanding shares of common stock of the company are represented at this meeting. A quorum is present.

Thank you, Mr. Fisher. I call the meeting to order and welcome our shareholders to this annual meeting. The directors and the officers of our company, in addition to myself, attending today's meeting are Directors, Adam Berlew, Maryam Brown, Michael Brown, Robert Grady, Maura Markus, Thomas Weisel and Michael Zimmerman. And senior officers James Zemlyak, Co-President; Victor Nesi, Co-President; Mark Fisher, General Counsel and Secretary; Jim Marischen, Chief Financial Officer; and David Sliney, Chief Operating Officer. Joining us today from KPMG are Andrew Espe, Bryan Witry, Megan Reardon and Matt Cushman. KPMG is being recommended to you as our independent auditing firm for this fiscal year. We will now begin the formal business of the meeting. In accordance with the bylaws of the company, I am acting as Chairman of the meeting, and Mark Fisher is acting as Secretary. I appoint Jim Lashover and Michael Buckley as tellers to tabulate the votes at this meeting. An affidavit of the mailing of the notice of this meeting to all shareholders of record on April 7, 2025, will be filed with the minutes of this meeting. The previous annual meeting of shareholders was held on June 5, 2024. The minutes for that meeting have been made available to you under the documents tab at the upper right of your screen. I will deem these minutes accepted without objection, unless a shareholder or proxy objects by e-mail to Stifel, [email protected] on or before June 18, 2025. Item 1 is the proposal of Directors for election. Our company's Board of Directors has proposed that the following individuals be elected at this annual meeting as directors, each to serve for a 1-year term or until a successor has been duly elected and qualified: Adam Berlew, Maryam Brown; Michael Brown, Lisa Carnoy, Robert Grady; James Kavanaugh , Ronald Kruszewski, Maura Markus, David Peacock, Thomas Weisel and Michael Zimmerman. This proposal has been duly submitted to the shareholders for a vote. As reflected in the notice of this meeting, we have 2 additional proposals before you. Item 2 is approval of an advisory resolution on executive compensation, sometimes referred to as say-on-pay. The Board of Directors has recommended that shareholders approve this item. Item 3 is the Board's proposal that shareholders ratify the Board's selection of KPMG as independent auditors for the fiscal year ending December 31, 2025. The Board of Directors has recommended that shareholders approve this Item 3. These items have each been duly submitted to our shareholders for a vote. I now recognize the representatives of KPMG and invite them to address this meeting. Is there any statement that you would like to make?

Not at this time, Ron. Thank you.

Thank you. Later in the meeting, I will recognize anyone wishing to ask questions of the representatives of KPMG. As already stated, shareholders who have already voted and do not want to change their votes do not need to take any further action. If you have not voted or wish to change your vote, you may do so at any time prior to 10:00 a.m. Central Time by clicking on the vote link on the upper right of your screen or by visiting the website, www.investorvote.com/sf. Before hearing the results of the balloting, I will deliver remarks on the company as is our custom. So look, on the cover of this year's annual report is our headquarters overlooking the St. Louis Skyline. It's a powerful reminder of how far we've come. Stifel is now a global firm. Our people collaborate across borders, connecting clients to opportunity on every continent. And yet our roots in St. Louis matter more than ever because no matter how far we expand, we stay true to the values we were founded on in 1890, which is trusted advice, client-first thinking and the belief that safeguarding someone's wealth means treating it as if it were our own. Stifel's 2024 results tell the story of a firm in motion, resilient, ambitious and future focused. It was a record-breaking year that showcased the power of our diversified business model. We achieved net revenues of $4.97 billion, the highest in our firm's history. Non-GAAP earnings totaled $756 million. That's $6.81 per share, up 46% from last year. Stifel generated return on tangible common equity of 22.7% on a non-GAAP basis. Our share price rose 56.4% in 2024. Strong financials meant strong cash flow, allowing us to repurchase $243 million in common stock and return another $232 million through dividends. Thanks to our scale and strong capital position, we raised our dividend by 10% from $1.68 to $1.84 per share. To put that in perspective, our annualized dividend has grown from just $0.26 in 2017 to $1.84 today. What's next? Well, more of the same. Our long-term goals are clear, $10 billion in revenue and $1 trillion in client assets, what we call 10 and 1. These aren't endpoints, they're milestones. And given our growth history, we view them as modest targets on our way to becoming the premier wealth management and middle market investment bank. Before diving into business performance, let's take a quick look at the economy and markets for '24, the landscape we really navigate every day. In 2024, the U.S. economy proved resilient, growing at 2.8% despite stubborn inflation and tighter financial conditions. Consumer spending stayed strong, backed by jobs and wage growth even as the business environment slowed. Inflation cooled, but stayed above the Fed's 2% target, ending the year at 2.8%, right where the Fed expects it in 2025. In terms of rates, the Fed held firm, keeping rates in restrictive territory. Meanwhile, the 10-year treasury yield moved between 3.8% and 4.7%, ending near 4.1% as markets began to price in possible cuts at the end of the year. Overall markets saw a mixed backdrop. In 2024, equities were strong, led by the mega cap tech and AI names. The S&P 500 rose 23.3% and the NASDAQ jumped 28.6%, thanks to a 48% gain in the MAG 7. But at the end of May 2025, the S&P and NASDAQ are just really basically flat for the year, while Magnificent 7 is up slightly. On an equal weighted basis, the S&P gained just 10.8% last year, showing how concentrated the rally really was last year. Bonds wrestled with higher yields early on, but quality fixed income recovered as the outlook shifted. Meanwhile, gold, private credit, real estate and crypto drew fresh investor interest. Globally, markets face cross currents, diverging monetary policy, geopolitical tension and renewed U.S.-China trade friction. As 2025 began, trade war headlines took center stage, raising stagflation concerns, which is higher inflation and slower growth. The 10-year treasury hovers today around 4.4%, balancing strong inflation data with signs of slowing growth. Post election, equities rallied on policy optimism, but that momentum faded amid concerns over trade, taxes and, of course, the Fed's direction. So far, the Fed has held steady, signaling patience. And yes, there has been volatility in the market. But from our perspective, it is still a healthy market and a healthy economy. Recent U.S. tariffs mark more than a policy tweak. They signal a rethink of global trade order that's been in place for nearly 80 years. And the markets took notice, reacting more sharply than they did to Russian invasion of Ukraine. Today's most consequential conflicts, they seem that they're often waived with a pen, not a bayonet. For decades, global trade was anchored in Brent and Wood's principles, which were open markets, multilateral rules, shared prosperity, and it worked, especially for the U.S. But that framework is shifting. Security, self-sufficiency and strategic independence now drive policy. The world is growing more fragmented. And while some rebalancing is needed, we can't forget that free-flowing capital, waiver and goods have fueled modern economic progress. We meet these changes with focus, not fear, because success will belong to those who stay agile, informed and disciplined. And just like global trade, our industry is being reshaped by technology, changing how we serve clients and uncover opportunity. Shifting back to our company performance. 2024 was a record year for Global Wealth Management. Revenue reached $3.3 billion, up from $3 billion in 2023. The results speak to the strength of our adviser-focused model and the resilience of our platform. In particular, asset management revenue jumped 18%, thanks to better markets and steady inflows. Recruiting was another bright spot. In 2024, we welcomed 100 financial advisers, including 34 experienced employee advisers and 12 independents, representing $37 million in annualized production. Top talent continues to choose Stifel for our culture, our resources and our long-term focus. We also acquired part of B. Riley's traditional wealth business, adding 36 advisers and $4 billion in assets in early 2025. We ended 2024 with more than $501 billion in assets under management, officially crossing the $0.5 trillion mark and moving steadily towards our goal of $1 trillion in assets under management. That milestone reflects the combined power of recruiting, organic growth and market performance. For the second year in a row, Stifel was ranked #1 in adviser satisfaction in the J.D. Power study and also took the top spot in leadership and culture, products and marketing and operational support. This recognition comes straight from our advisers, a clear sign of their pride in calling Stifel their firm of choice. Stifel Bancorp closed the year with more than $31 billion in assets, maintaining a conservative risk profile while expanding support for our wealth and investment banking platforms. Our banking franchise continues to drive results and strengthen client offerings. Smart rate and strong commercial deposits helped us maintain balances and avoid the cash sorting issues others faced. With more floating rate assets, we stabilized our net interest margin, positioning us for future growth. Our $21 billion loan book continues to grow. In 2024, Stifel Bank & Trust also helped 4,000 families with home financing and grew our securities-based loan portfolio to over 10,000 people, all while earning high satisfaction scores. Our venture and fund banking business saw deposits jump 83% to $4 billion with $2 billion in new loan commitments across 125 clients. Stifel Trust grew to $6.5 billion in assets fueled by more clients naming us as their successor trustee. And through our donor advice and legacy funds, clients granted $55 million to 10,000 nonprofits. Stifel Charitable now manages over $500 million in client giving. 2024 was the Institutional Group's second best year ever, $1.6 billion in revenue, up 30% from 2023. The rebound was broad-based with strong gains in capital raising advisory and transactional revenue. Investment Banking led the way, $973 million in total revenue, including $577 million in advisory, which was up 24% and $396 million in capital raising, which increased 59% over '23. Stifel was named U.S. Middle Market Equity House of the Year by IFR for the fifth time in 10 years, recognized for reopening the IPO market and leading league tables. Institutional Sales and Trading brought in $608 million, up 19%, including $393 million in fixed income, which was up 27% and $215 million in equities, which increased 7%. We partnered with Marex to offer prime brokerage capabilities and our electronic trading team launched a momentum signal with real predictive power for our trading clients. Xcel honored 6 analysts and 8 teams across Stifel and KBW, a testament to the depth of our equity research. And with the acquisition of CB Resource and Finance 500, we became a market leader in CD originations and expanded our analytics suite for community banks. For the 11th straight year, our public finance team ranked #1 in municipal bond underwriting in terms of number of transactions with a 15.3% market share in negotiated transactions. In fast-moving markets and rapid tech shifts, the human side of our business matters more than ever. That's why we launched One Stifel, a firm-wide push to bring more of our connected capabilities to every opportunity. One Stifel isn't just a slogan. We're backing it up with real investment in training, recruiting and leadership development. It's about raising both our IQ and our EQ and delivering a unified client-first experience across every part of the firm. From families to businesses to communities, when opportunity arises, Stifel shows up with the people, the insight and the resources to help. Last year, I said I was optimistic about AI. This year, I'm even more confident, not just in what it could be, but in what we're already doing. We spent 2 years preparing with a careful, deliberate approach. We're not chasing shiny tools. We're building a smarter, stronger enterprise. AI isn't a gadget. It's a long-term catalyst, and we're using it to serve clients better, boost productivity and manage risk. Our AI strategy, which I do want to talk about, has 3 tiers: First, secure tools for all associates to boost productivity. Next, we'll look at specialized AI in key areas like research, banking and client service. And finally, custom solutions using our proprietary data and expertise. AI is already reshaping industries, and it will touch every part of Stifel. One breakthrough that we are focused on is AI agents, systems that think, adapt and act to enhance how we serve clients. But I want to emphasize that these tools, in our opinion, will augment, not replace the relationships that drive our firm. Our goal, faster answers, deeper insight and more personalized service, all in support of our client-first mission. In 2024, we continued enhancing Wealth Tracker, now reaching over half of our client accounts. New features help clients better organize and manage their financial lives, making Wealth Tracker a more powerful and personal tool. We launched a new document center for easy access to statements, tax forms and trade confirmation. And with secure sharing, clients can now store and exchange key documents directly with their advisers. We launched Stifel Discover, a personalized content hub delivering curated insights in a clean, intuitive format. We also integrated Zelle, giving clients fast, secure peer-to-peer payments within Wealth Tracker. Together, these upgrades make Wealth Tracker a leading platform for digital financial management. Our growth goals are clear, $10 billion in revenue and $1 trillion in client assets. Doubling is nothing new for Stifel. We've done it 5 times in 28 years, and we're well on our way to #6. These goals reflect not just ambition, but confidence in our people, our strategy and our track record. Since 1997, our revenue has compounded at 17% annually. From January 1, 1997, to our highest stock price this year, Stifel shares are up 8,144% or 81x, outperforming the S&P, which was up 7x and Microsoft, which is up basically 72x over the same period. In the last 5 years, our stock is up 185%, again, ahead of Microsoft's 179% and the broader market of 82%. This isn't about a moment. It's a pattern built on strategy, discipline and a culture that rewards performance. As we've scaled, we've gained operating leverage, a 20.5% average pretax margin and a 23.4% return on tangible common equity, both well above what we achieved in the 2005 to 2009 period. The path forward won't be linear, but our approach is steady, keep investing in people, clients and trust-based relationships. Do that and the growth will follow the Stifel way. The path ahead is ours to lead, and we're ready. To our clients, shareholders and associates, I say thank you on behalf of me and my partners. Your trust defines our success and our future. Thank you. I now ask the secretary to read any questions that may have been asked of me or representatives of KPMG.

Mr. Chairman, there were no questions.

Okay. Thank you. I now ask the secretary to report on balloting and to state whether any other business is properly before this meeting.

Mr. Chairman, each of the following has received a majority of votes cast to serve as Director of the company for a 1-year term or until a successor has been duly elected and qualified. Adam Berlew, Maryam Brown, Michael Brown, Lisa Carnoy; Robert Grady; James Kavanaugh, Ron Kruszewski, Maura Markus, David Peacock, Thomas Weisel and Michael Zimmerman. Proposal contained in Item 2, which approves the advisory resolution on executive compensation, sometimes referred to as say-on-pay, has received a majority of votes cast and has been approved. Item 3, a resolution ratifying the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2025, has received a majority of votes cast and has been approved. Mr. Chairman, I'm aware of no other business properly before this meeting and have no reason why this meeting may not now be duly adjourned.

Well, that being so, I declare that the meeting is now adjourned. Thank you.

This concludes the meeting. You may now disconnect.