STIFEL FINANCIAL CORP Q4 FY2024 earnings call

• 2024 was an exceptionally strong year with record net revenue, driven by Global Wealth Management's record year and institutional segment rebounding. - Global Wealth Management recorded record client assets and transactional activity. - Institutional segment had second-highest annual revenue, with over $360 million increase in revenue. - Implemented Smart Rate product, saw growth in commercial deposits, and net interest margin stabilized. - Board authorized a 10% increase in common stock dividend. - Added eight total advisers in the fourth quarter, including four experienced advisers with trailing 12-month production of $8 million.

Global Wealth Management revenue was a record $865 million in the fourth quarter, with pretax margins totaling 37% on record asset management revenue and being the second-highest quarterly transactional revenue. The institutional segment had total revenue of $478 million in the fourth quarter, up 33% year-on-year. Full year institutional revenue was $1.6 billion, up 30%. Global Wealth Management contributed 63.6% of the total net revenue ($1.36 billion) in Q4 2024, while the institutional segment contributed 35.2%.

• Total net revenue guidance for 2025 is $5.25 billion to $5.75 billion, with operating revenue targeted at $4.15 billion to $4.55 billion. - Net interest income guidance for 2025 is $1.1 billion to $1.2 billion, driven by balance sheet growth. - Expense guidance: compensation ratio 56% to 58%, non-compensation operating ratio 19% to 21%. - Anticipate leverage on the compensation ratio in 2025 due to expected increase in revenue line items.

• Regulatory changes could impact the business. - Market volatility may affect revenue and margins. - Episodic legal and provision expenses can impact non-comp expenses. - Credit risks associated with loan portfolios and economic conditions.

Q: Mike Brown from Wells Fargo Securities asked about organic growth in Global Wealth Management and catalysts for advisers to move.

A: Ron Kruszewski said recruiting is a long-term game with ebbs and flows, but 2025 is expected to be a better recruiting year, and Jim Marischen mentioned the B. Riley transaction could add advisers.

Q: Devin Ryan from Citizens JMP asked about operating leverage in the institutional segment and loan demand.

A: Ron Kruszewski and Jim Marischen discussed that institutional segment margins should normalize around 20%, and loan demand is expected in areas like fund banking, venture lending, retail lending, and securities-based lending.

Q: William Katz from TD Cowen asked about normalized provision and tax rate.

A: Jim Marischen discussed that provision expense is affected by macroeconomic forecasts, and tax rate is expected to be around 20%-21% with stable stock price.

Q: Alex Blostein from Goldman Sachs asked about non-comp expense growth.

A: Ron Kruszewski and Jim Marischen said non-comp expenses have variable components tied to revenue and are consistent, with episodic legal expenses impacting the numbers.

Q: Steven Chubak from Wolfe Research asked about FIG business performance.

A: Ron Kruszewski and Jim Marischen discussed that FIG business is benefiting from normalized yield curve and capabilities put in place, with trading gains being episodic.

Q: Brennan Hawken from UBS asked about advisory productivity and IPOs.

A: Ron Kruszewski said advisory results may not correlate with public data as they do more private deals, and he views broken IPOs as a natural progression but wants healthy capital raising.

Q: Michael Cho from JPMorgan asked about advisory productivity and recruiting pipeline.

A: Ron Kruszewski discussed disciplined recruiting based on return on investment and competitive landscape, and that the recruiting pipeline is strong but competitive.