Stifel Financial (NYSE:SF) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Stifel Financial Corp reported strong financial performance for Q1 2026, with net revenues of $1.48 billion, up 18% from the previous year, aided by a non-recurring gain from the sale of Stifel and Independent Advisors.
Earnings per share increased to $1.48 on a GAAP basis, significantly improving from last year’s results impacted by a $180 million legal accrual.
The company emphasized its strategic focus on AI investments to enhance client relationships and productivity, while maintaining a cautious outlook on potential risks from geopolitical tensions and interest rate uncertainties.
Global Wealth Management and Investment Banking saw record first quarter revenues, with strong advisor productivity and advisory revenue growth being key contributors.
Stifel Financial Corp highlighted a conservative lending philosophy, avoiding aggressive structures and maintaining minimal exposure to problematic credit situations, while expressing confidence in its 2026 outlook given current risk assessments.
The company addressed technological advancements like AI and their implications on business models, emphasizing the importance of human judgment in advisory roles despite automation trends.
Stifel Financial Corp’s restructuring in Europe contributed to improved margins, with further cost reductions anticipated, while maintaining a global advisory focus and leveraging U.S. capital market capabilities.
Full Transcript
Joel Jeffrey (Head of Investor Relations)
Good morning and welcome to Stifel’s first quarter 2026 earnings call on behalf of Stifel Financial Corp. I will begin the call with the following information and disclaimers. This call is being recorded. During today’s presentation we will refer to our earnings release and financial supplement, copies of which are available at stifel.com Today’s presentation may include forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Stifel Financial Corp. does not undertake to update the forward looking statements in this discussion. Please refer to our notices regarding forward looking statements and non-GAAP measures that appear in the earnings release. I will now turn the call over to our Chairman and Chief Executive Officer Ron Kruszewski.
Ron Kruszewski
Thanks Joel. Good morning and thanks to everyone for joining us. In the first quarter we delivered very strong performance. Net revenues of 1.48 billion were up 18% from a year ago. That includes a non recurring gain from the sale of Stifel Independent Advisors which closed in February, which was partially offset by interest on a legal judgment. We’ve excluded both from our core results. Excluding the SIA gain, revenue grew 15%. Either way, it was a record first quarter and regardless, it’s a growth rate comparable to the best firms on the Street. Earnings per share were $1.48 on a GAAP basis and $1.45 on a non GAAP basis compared to 33 cents last year. That’s a significant improvement. So I want to be transparent. Last year’s results were impacted by 180 million legal accrual, which was unusual to say the least. Adjusting for that, eps was up 32%. On a comparable basis, our annualized return on tangible equity was nearly 25%. We expect 2026 to be a good year and the first quarter reflects that. Yet the environment has become more uncertain against a backdrop of escalating geopolitical risk. Energy prices have risen, credit spreads have widened and interest rate uncertainty has increased. The wildcard remains a conflict in Iran and its potential impact on energy prices, inflation and ultimately growth. But I’d like to note that unlike some of our larger peers, Stifel’s business model isn’t built around trading volatility. We have a trading business, but it’s client driven and relationship oriented, not structured to capitalize on market dislocations. Delivering these results in a volatile quarter tells you something important about the durability and diversification of what we’ve built. Our growth was broad based global wealth management delivered record first quarter net revenue driven by record asset management revenues and growing advisor productivity. We also generated record first quarter investment banking revenue, producing a record first quarter for our institutional business. Our firm wide pretax margin was more than 22% reflecting continued robust wealth management margins coupled with an institutional pre tax margin of nearly 20%. It is noteworthy that this metric improved nearly 1300 basis points from last year, benefiting from both revenue growth and our international equities restructuring. Jim will provide more detail on that. Look, if the risk I cite remain within a range of market expectations, we are confident in a strong 2026. That confidence is grounded in something more than one quarter. Let me put these results in the longer context. Stifel is a company that both grows and understands the concept of return on invested capital. We’ve scaled revenue from about 100 million in 1996 to roughly 6 billion today and we’re targeting $10 billion in revenue and 1 trillion in client assets. We grow and we grow the right way. That long term philosophy also informs how I think about some of the questions dominating every earnings call so far this season. For each one, I want to tell you what Stifel is doing and share my observations about what I’m seeing in the market around us. The first is AI. Across Deepa, we’re seeing real benefit from our AI investments. The technology enables our advisors, our investment bankers, our commercial lenders and support teams to work faster and smarter. In every case, we’re working to enhance client relationships with AI, keeping our professionals at the center of the value proposition. The opportunity here is significant. We are in the early process of linking our data to these new tools and there is a lot of work ahead. But the early results give me confidence that we’re on the right path. But I’d be less than candid if I didn’t raise a concern about frontier models like Mythos that are becoming an entirely new category of technology. As recently as a few weeks ago, I’m not sure any of us really fully understood what Mythos was, possibly even those that created it. And the next version, as I understand it, is already in development. Models this powerful increase capability on both sides of the table for those defending and for those who would do harm. And if you ask me what our industry needs to get right before anything else, the answer is Cyber, not just for Wall Street. This requires a national response. I have consistently said that this is an issue of national security. The second is credit. At Stiepel, our lending philosophy has never been built around chasing yield. We treat lending as a relationship oriented business, not a volume driven growth engine. The headlines this season involved specific credit situations. First Brands, Tricolor, Medallia, where aggressive structures, weak collateral monitoring and and in some cases fraud drove the losses. Depot had essentially zero exposure to any of them. As an aside, the more recent concern has been about liquidity in private credit vehicles. Some funds are limiting withdrawals and we’re seeing secondary market participants offering liquidity at significant discounts to nav. It reminds me of the scene in It’s a Wonderful Life where Potter is trying to buy Bailey Billingham loan shares at $0.50 on the dollar during a run on the bank. The underlying assets haven’t changed, but when everyone rushes for the exit at once, the gates come down. That’s a structural issue. The third consistent question surrounds software loans. I read the predictions that every software loan is essentially worthless given AI disruption. To put some numbers to Stifel, our software loan exposure is approximately 500 million on a $43 billion balance sheet. Not a material number. But the more important point is that we have reviewed our software exposure carefully. And while there are always normal pockets of stress, we don’t see the broad credit issues that the headlines suggest. The fourth is legislation and market structure. Two questions are dominating this debate, right? Stablecoin yield and tokenized equities. Let me tell you where Stiepel stands on both. On stablecoins, we will offer them. But in my opinion, if a stablecoin pays yield, that’s a deposit subject to capital requirements, aml, BSA and the full framework of bank regulation. Or if the yield comes from investing the underlying funds, then it’s a money market fund. Follow those rules. Legislation should not create a third option that avoids both. On tokenized equities, we will build the capability to offer, settle and trade them. But in my opinion, the regulatory framework should follow the underlying asset. A tokenized Apple share is still Apple stock. Every rule that applies to that stock, disclosure, best execution, settlement, finality, investor recourse applies to the token. The technology changes the delivery, it doesn’t change the obligation. And for those who say this is about protecting the incumbents, if that was true, we wouldn’t be building the capability at all. But we are building this capability. The principle is simple. A deposit is a deposit, a security is a security. Custody is custody. Nearly a century of Investor protection wasn’t built to apply only to some participants. The technology doesn’t change that. I’ve discussed AI and software disruption, credit markets and legislation and market structure. In each case. I wanted you to understand both where Stifel stands and my observation about what’s happening around us. Over the last 30 years we have shown a consistent ability to adjust to economic and technology change. Global Wealth Management is growing, our institutional pipelines are strong and our investments in the innovation economy through venture lending and deposit generation are paying dividends. Bottom line. What I see is a firm that is very well positioned. So Jim, please take us through the numbers.
Jim
Thanks Ron and good morning everyone. Before I jump into the financial results, I’d remind everyone that the EPS numbers are reported on a split adjusted basis following our 2-for-1 stock split that was effective in late February of this year. Turning to the results, total non GAAP revenues of 1.44 billion was right in line with consensus estimates. Investment banking was the primary upside driver, exceeding expectations by $8 million or 2% as a number of transactions closed late in the quarter. Advisory revenue was the primary driver of the beat. Transactional revenue came in 1% below expectations but increased 7% from the prior year. I’ll cover the components in more detail when we get to the institutional segment. Asset management revenue was modestly above consensus and increased 12% from the prior year and was driven by market appreciation and net new asset growth. Net interest income came in at the lower end of our guidance and $3 million below consensus. I’ll cover the details and the second quarter guidance when we get to the global wealth management section, but to highlight the miss to consensus expectations was driven by lower corporate or non bank net interest income expenses were well controlled and benefited from the strategic actions Ron referenced earlier. Both our comp ratio and non comp expenses came in below consensus. The effective tax rate was roughly 23%, slightly below both guidance and consensus due to improved profitability from our non US operations. Turning to Slide 4 Global Wealth Management generated $932 million in net revenue, the strongest first quarter in our history and essentially in line with last quarter’s record. Results were driven by record asset management revenue and growth in net interest income. These results are particularly strong given the sale of SAA reduced our transactional and asset management run rate for two months during the quarter. We ended the quarter with total client assets of $539 billion and fee based assets of $220 billion. Excluding the SIA impact, total client assets and fee based assets were essentially flat sequentially. Despite the equity market decline as net new asset growth was in the low single digits and was offset by market depreciation, our recruiting pipeline remains robust though activity is episodic and dependent on changing compet market dynamics. Over the last 12 months we’ve recruited trailing 12 month production totaling approximately $80 million, which does not include the impact that recruiting has on net interest income. Our client driven balance sheet continues to enhance both earnings consistency and client engagement. As I mentioned, net interest income came into the lower end of our guidance due to slower loan growth as market volatility impacted fund banking late in the quarter more than offsetting growth in residential mortgages, securities based lending and C and I loans. Non bank interest income, particularly within corporate interest and securities lending was approximately $3 million lower than originally forecast. For the second quarter we expect net interest income in the range of 280 to 290 million dollars. Client cash balances increased meaningfully during the quarter. Suite balances increased by more than $670 million while non wealth client funding increased by nearly $1.2 billion, reflecting strong momentum from our Venture Group third party money fund balances increased by nearly $200 million. We have significant funding to grow our loan book. While loan growth in the first quarter was slower than originally forecast, we’ve already seen fund banking activity pick up in April and we are maintaining our full year guide of up to $4 billion in asset growth. Turning slide 5 our institutional group posted its strongest first quarter in our history. Revenue was $495 million up 29% year over year driven by record first quarter investment banking. Investment banking revenue totaled $341 million up 44% year over year, coming in slightly above our recent guidance due to a number of transactions closing late in the quarter with a particularly meaningful contribution from our new partners at Bryant Garnier. Advisory revenues increased 59% to $218 million with continued strength in financials, industrials, consumers and healthcare. Equity capital raising was 67 million, our second strongest first quarter result with increased issuer engagement led by health care industrials and energy Fixed income underwriting of 50 million was up 9% year over year driven by increased public finance activity and higher corporate issuance. We remain the number one negotiated issue manager in public finance by deal count with nearly 15% market share and are also seeing increased success in larger par value transactions. Investment banking and advisory pipelines remain very strong. That said, the pace of realization will depend on the geopolitical and economic factors that Ron mentioned earlier including energy prices, credit spreads and interest rate uncertainty. We continue to anticipate a strong 2026 transactional revenue increased 4% year over year, driven by a 12% increase in fixed income revenue reflecting increased client activity from market volatility. Equity Transactional revenue was down 7% entirely reflecting the European restructuring. Excluding that impact of a $9 million year over year decline due to those restructuring efforts, our core equity transactional business grew by 10%. This was also the primary driver of the nearly 1300 basis point improvement in our institutional pre tax margins year over year. While we’ve made significant progress in our non U.S. operations, the first quarter benefited from some larger advisory fees and results will not be linear over the remainder of the year. Moving on to expenses, our comp ratio of 57.5% was the high end of our full year guidance and down from 58% a year ago. We are certainly conservative in our comp accruals early in the year and will continue to look for leverage as the year progresses. Non compensation expenses totaled 293 million, up 8% year over year. After excluding the illegal accrual from the first quarter of 2025, our operating non comp ratio was 19% and was at the midpoint of our full year guidance. The declines in our comp and non comp ratios benefited from the strategic actions referenced earlier and we remain confident in our full year guidance. Turning to Slide 7, our capital position remains strong and provides meaningful strategic flexibility. The Tier 1 leverage ratio increased to 11.4% and the Tier 1 risk based capital ratio rose to 18.7%. Based on a 10% Tier 1 leverage target, we ended the quarter with nearly $560 million of excess capital. I’d also highlight that we have thoroughly reviewed the new proposed capital rules. Based on our review, Stifel would obtain some relief across risk based capital requirements, but these rules would have no material impact on our Tier 1 leverage capital. Finally, we repurchased 2.8 million shares during the quarter and have 10.2 million shares remaining under the current authorization. Assuming no additional repurchases and a stable stock price, our fully diluted share count for the second quarter is expected to be approximately 163.1 million shares. And with that, Ron, back to you.
Ron Kruszewski
Thanks Jim. I want to close by saying that I’m generally excited about where Stifel is headed. We have a strong business, an experienced team and a model that has proven itself in good times and in challenging ones. The environment is uncertain. I said that at …
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