Stifel Financial Q2 2025 Earnings Report

Stifel Financial EPS Results

• Actual EPS: $1.71
• Consensus EPS: $1.65
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $1.60

Stifel Financial Revenue Results

• Actual Revenue: $1.28 billion
• Expected Revenue: $1.25 billion
• Beat/Miss: Beat by +$38.31 million
• YoY Revenue Growth: +5.40%

Stifel Financial Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 9:30AM ET

Stifel Financial (NYSE:SF) Corp., a financial services and bank holding company, provides retail and institutional wealth management, and investment banking services to individual investors, corporations, municipalities, and institutions in the United States and internationally. It operates in three segments: Global Wealth Management, Institutional Group, and Other. The company provides private client services, including securities transaction and financial planning services; institutional equity and fixed income sales, trading and research, and municipal finance services; investment banking services, such as mergers and acquisitions, public offerings, and private placements; and retail and commercial banking services comprising personal and commercial lending programs, as well as deposit accounts. It participates in and manages underwritings for corporate and public finance; and offers financial advisory and securities brokerage services. The company was founded in 1890 and is headquartered in Saint Louis, Missouri.

Stifel Financial Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Stifel delivered Q2 net revenue of $1.28 billion and core EPS of $1.71, its strongest second quarter on record with a 22% return on tangible common equity.
• Positive Sentiment: Global Wealth Management achieved its best Q2 ever with record client assets of $517 billion, fee-based assets of $206 billion, and added 82 financial advisers in the quarter.
• Positive Sentiment: The Institutional Group grew revenue 7% year-over-year, drove record fixed income revenue, and saw investment banking rebound late in the quarter with $233 million in IB revenues beating guidance.
• Neutral Sentiment: Stifel completed the acquisition of Bryan Garnier to refocus European operations on advisory and investment banking, incurring $28 million in restructuring charges to streamline sales and trading.
• Positive Sentiment: Management expressed confidence in a strong second half, reaffirmed full-year 2025 guidance, and highlighted improved market momentum and deal activity across its businesses.

Presentation

[Operator]

Day, and welcome to the Stifel Financial Second Quarter twenty twenty five Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead.

[Joel Jeffrey, SVP - IR at Stifel Financial]

Thank you, operator. I'd like to welcome everyone to Stifel Financial's second quarter twenty twenty five conference call. I'm joined on the call today by our Chairman and CEO, Ron Kraszewski our President, Jim Zimlak and our CFO, Jim Marishan. Earlier this morning, we issued an earnings release and posted slide deck and financial supplement to our website, which can be found on the Investor Relations page at www.stifel.com. I would note that some of the numbers that we state throughout our presentation are presented on a non GAAP basis, and I would refer you to our reconciliation of GAAP to non GAAP as disclosed in our press release.

[Joel Jeffrey, SVP - IR at Stifel Financial]

I would also remind listeners to refer to our earnings release, financial supplement and our slide presentation for information on forward looking statements and non GAAP measures. This audio cast is copyrighted material of Stifel Financial Corp. And may not be duplicated, reproduced or rebroadcast without consent of Stifel Financial. I will now turn the call over to our Chairman and CEO, Ron Przyczeski.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Thanks, Joel. Good morning, and thanks to everyone for taking the time to listen to our second quarter earnings conference call. On our last earnings call back in April, I noted that uncertainty around tariffs and the so called big beautiful bill had created headwinds for the market. But I said then that if we got clarity on these issues, conditions could improve quickly. That's exactly what happened.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Investor sentiment improved significantly in the last two months of the quarter as greater clarity on tariff and tax policy emerged. The S and P 500 rallied a thousand points since our last call, fueling record client assets in wealth management and sparking a rebound in M and A and capital markets activity. As a result, we exited the quarter with far more momentum than we started the quarter with. If conditions hold, we're positioned for a strong second half. Our second quarter results included a very challenging April, yet we still delivered over $1,280,000,000 of net revenue and $1.71 in core EPS, which was the best second quarter in our history and return on tangible common equity of 22%.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Our balanced model continues to deliver across market cycles. Global Wealth Management posted its strongest second quarter ever with record client asset levels and higher net interest income. Our institutional business was resilient with a 7% year over year revenue increase, record fixed income revenue and a late quarter pickup in investment banking. In Global Wealth, Stifel ranked number one overall in the J. D.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Power Advisor Satisfaction Study for the third straight year and was ranked number one in five of the six categories measured as follows: compensation, leadership and culture, operational support, products and marketing and technology. That recognition reflects our commitment to adviser support. It's not just a cultural point. It's a recruiting advantage. This was our strongest recruiting quarter since 2015 with 82 new advisers added, including 36 through B.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Riley and 21 experienced advisers, $51,000,000 in trailing twelve month production. Strategically, we completed our acquisition of Bryan Garnier, a European boutique investment bank with deep expertise in health care and technology. As Jim will discuss later, this acquisition supports our broader effort to reposition our European operations, deemphasizing sales and trading while expanding our focus on advisory and investment banking. Combined with ongoing efficiency initiatives, this positions Europe to contribute more meaningfully to the firm's long term profitability. Moving on to the numbers.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Our record second quarter net revenue grew 6% year over year with gains across the board except for a modest decline in advisory. Commissions and principal transactions rose 11% with gains in both Global Wealth and Institutional. With respect to Investment Banking, the quarter started very slowly in April but ended strongly. Asset Management revenues rose 6%, reflecting both market appreciation and improved organic growth. Net interest income was up 8% on higher interest earning assets and lower funding cost.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Our compensation ratio was 58%, consistent with the high end of our full year guidance as we continue to improve compensation conservatively. Operating pretax margin was 20.3%, and operating EPS was $1.71 up 7% from last year. Before I turn the call over to Jim, I'll walk through our two core business segments and why we're optimistic about the rest of 2025 and beyond. In wealth management, we continue to gain momentum. Ranking number one overall in J.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

D. Power isn't just a badge, it's a recognition of our foundation which drives results. Since 2020, we've added nearly 800 financial advisers with $420,000,000 in trailing twelve month production. Recruiting accelerated in 2025. In the first half alone, we brought in 66 experienced advisers with $63,000,000 in production.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

That includes a major team from B. Riley and 30 organic groups with $43,000,000 in production, many in the $1,000,000 plus category. For perspective, in all of 2024, we added 50 experienced advisers with $37,000,000 in production. These highly productive advisers bring more client assets, and those assets are increasingly fee based, which drives more stable recurring revenue from asset management and net interest income. We ended the quarter with record total client and fee based assets of $517,000,000,000 and $2.00 $6,000,000,000 respectively.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

The sequential increases were due to stronger equity markets and strong asset inflows, including the advisers from B. Riley. I'd note that our net new assets improved each month during the quarter, with annualized June net new assets coming in around 5%. Looking ahead, we're confident in continued growth. While recruiting can vary from quarter to quarter, we expect a strong second half with new advisers transitioning clients to our platform.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Our clients continue to hold over $15,000,000,000 in money fund money market funds and $6,000,000,000 in short term treasuries, providing potential liquidity source for Stifel deposits. Now let me move to the institutional group. Total revenue for the segment was $420,000,000 which was up 7% from the prior year. Firm wide investment banking revenues totaled $233,000,000 driven by year on year and sequential increases in capital raising revenues. Fixed income underwriting revenue was $54,000,000 and increased 18%, sequentially driven by a solid increase in public finance activity.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Stifel continues to rank number one by the number of negotiated issues led as sole or senior managers. Equity capital raising totaled $46,000,000 in the quarter. The market effectively shut down for six weeks following Liberation Day with only a handful of pipes and advisory linked deals. Activity returned mid May alongside tariff relief, and we entered the third quarter with meaningfully stronger conditions. While industry wide ECM fees were in line with the 2024, the mix shifted.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Financials and fintech were strong. Health care was down more than 50%. We're seeing early signs of a broader IPO recovery and follow on activity remains sponsor driven, with private equity continuing to lead issuance. As M and A paths narrow, late stage private placements, continuation vehicles and IPOs are increasingly being used to create liquidity. Advisory revenue was 127,000,000 We continue to get a strong we continue to get strong contribution from financials despite the increased volatility early in the quarter.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

In the second quarter, we also got solid contributions from industrials and industrial services. We are also seeing improvement in health care and technology. And overall, the accelerating activity levels bode well for the second half of the year and into 2026. Now taking a step back and looking back at our acquisition of KBW now more than ten years ago, we made a deliberate decision then to preserve the KBW brand within Stifel. That integration has been a resounding success with nearly all of the original KBW Investment Banking managing directors still with KBW Stifel.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

The sustained focus and successful integration have helped us build a franchise with deep expertise and long standing client trust. That commitment is now paying off. In 2025, we've advised on 84% of total disclosed bank and thrift deal value, an extraordinary market share and a testament to the strength of our platform and positions us as the first call in bank M and A. Bank M and A, frankly, is accelerating, the strategic needs for larger banks to combine is also increasing. Given the improved market dynamics, we expect the trend to continue, and I'm confident in our ability participate and lead at every level.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

As to our trading businesses, equity transactional revenue totaled $61,000,000 which was up 16% year on year driven by increased market volatility. Fixed income revenue of $129,000,000 was up 21% year on year with increased contributions from our rate, aircraft and municipal businesses during the quarter. Before I turn the call over to Jim, I want to briefly comment on AI, particularly the promise of agent based models. We view AI not just as a tool for back office automation, but as a platform to enhance how we serve clients, manage data and accelerate insights. We are systemically reviewing workflows across the firm where intelligent agents can amplify our professionals' productivity and decision making.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

We've already seen early wins in areas like investment banking analytics and adviser support, examples where the right AI tools can create real leverage. That said, we're clear eyed about the role of technology. It enhances what our people do. It doesn't replace them. Our business is built on trust, relationships, and judgment.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

AI will help us work faster and smarter, but should not replace the human side of Stifel. Now let me turn the call over to Jim to walk you through the details of our second quarter results. Jim?

[James Marischen, CFO at Stifel Financial]

Thanks, Ron, and good morning, everyone. Our operating results exceeded Street expectations, driven by stronger than anticipated revenue, while expenses remained roughly in line with consensus. Looking at our quarterly revenue, we beat the Street estimate by 4% or $50,000,000 on stronger investment banking and transactional revenue as well as higher net interest income. Investment banking revenue came in at $233,000,000 which is more than $20,000,000 above the guidance we gave in our June operating metrics as we had six transactions that closed right at the end of the quarter that were not in our second quarter forecast. I'd also highlight that fixed income underwriting beat the Street estimate by more than 18% on strong public finance activity.

[James Marischen, CFO at Stifel Financial]

Transactional revenue was 9% above the Street, primarily because of higher institutional fixed income and equity revenue. I note that our fixed income revenue benefited from a gain in our aircraft leasing business. Net interest income was 2% above the street and at the high end of our guidance as we benefited from approximately $4,000,000 of fee income, mainly tied to success fees within our venture banking group. Asset management revenue was 1% below consensus, primarily due to lower third party sweep fees. On the expense side, our compensation ratio was 58%, which was slightly above the street and in line with the high end of our initial annual guidance.

[James Marischen, CFO at Stifel Financial]

Non compensation expenses were roughly in line with the consensus and were at the midpoint of our adjusted non comp operating expense guidance range at roughly 20% of revenues. The provision for income taxes came in above the consensus number, but was within our expected level of 25% to 26% due to non deductible foreign losses. Global Wealth Management revenue of $846,000,000 was a second quarter record as each line item improved from the same period a year ago. Pretax margins were 36%, which was in line with our performance over the past year. During the quarter, we added a total of 82 advisers to our platform.

[James Marischen, CFO at Stifel Financial]

This included 57 experienced advisers with trailing twelve month production of $51,000,000. The 36 FAs acquired from B. Riley were included in the experienced higher total. On slide eight, I'll discuss our bank results. Net interest income of $270,000,000 came in at the high end of our guidance.

[James Marischen, CFO at Stifel Financial]

Firm wide net interest margin increased on higher asset yields and lower deposit costs, which more than offset a modest decline in average interest earning assets. The 12 basis point increase in bank NIM was a function of lower cash balances, higher yields on our loan book, as well as lower deposit costs. As I mentioned earlier, we generated $4,000,000 of fee income. Excluding these fees, we still would have been at the higher end of our guidance. For the third quarter, we estimate net interest income will be $265,000,000 to $275,000,000 Our bank balance sheet remains relatively rate neutral, but we experienced some modest benefit from lower funding costs as we had a slight mix shift in our deposits towards lower cost funding.

[James Marischen, CFO at Stifel Financial]

I'd also note that we anticipate an incremental $1,000,000,000 of loan growth in the 2025. Client cash levels decreased during the quarter due to a $1,400,000,000 decline in smart rate balances and a nearly $460,000,000 decrease in sweep balances. In terms of the decline in smart rate balances, roughly two thirds of the decline occurred in April. And I note that sweep balances improved late in the quarter as June sweep balances increased $300,000,000 Since quarter end, we've seen client cash balances essentially flat. As you can see in the chart, we've also included nonwealth deposits, which primarily include our venture and fund channels.

[James Marischen, CFO at Stifel Financial]

While these are commercial deposits, provide us with an important funding source and reduce the potential impact of the fluctuations within wealth management cash. In the second quarter, these deposits increased $1,100,000,000 and have increased more than $2,200,000,000 year to date as these growth initiatives continue to accelerate. Our credit metrics and reserve profile remain strong. The non performing asset ratio stands at 51 basis points. Our credit loss provision totaled $8,000,000 for the quarter, and our consolidated allowance to total loan ratio was 83 basis points.

[James Marischen, CFO at Stifel Financial]

Moving on to our expenses. As we noted earlier, our comp to revenue ratio in the second quarter was 58. And based on our current forecast, we anticipate our third quarter comp ratio to come in at 58%. Our non comp expenses totaled $278,000,000 a 7% increase from the same period last year and our non comp operating ratio was 20.3. We would expect a similar non comp ratio for the third quarter.

[James Marischen, CFO at Stifel Financial]

I'd also note that we incurred $28,000,000 in severance and other restructuring charges during 2Q in our European operations. As Ron mentioned earlier, this is part of the plan to shift our European focus more towards investment banking. These costs represented the majority of the non GAAP expenses incurred during the quarter. Our tax rate for the quarter is 25.4%. I would note that we expect to see a similar effective tax rate for the third quarter, but then see a decline in this rate during 4Q.

[James Marischen, CFO at Stifel Financial]

If the stock price holds at current levels, we'd expect the full year effective tax rate to be between 2022% for 2025. On slide 10, I'll review our capital position. Our balance sheet continues to be well capitalized. Tier one leverage capital was in line with first quarter levels at 10.8%. Our Tier one risk based capital ratio declined by 10 basis points to 17.5%.

[James Marischen, CFO at Stifel Financial]

Based on a 10% Tier one leverage ratio target, we have approximately three fifteen million dollars of excess capital. In terms of capital deployment during the quarter, we completed the acquisitions of B. Riley and Bryan Garnier. This added approximately $90,000,000 to goodwill and intangible assets, and we repurchased roughly 970,000 shares with 8,200,000.0 shares remaining on our current authorization. Absent any assumption of additional share repurchases and assuming a stable stock price, we'd expect the third quarter fully diluted share count to be 110,200,000.0 shares.

[James Marischen, CFO at Stifel Financial]

And with that, let me turn the call back over to Ron.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Thanks, Jim. Let me turn to our full year guidance. Despite market volatility in March and April, our annualized net revenue is on track for another record year. We are seeing momentum build across our businesses, which we believe will translate into a strong second half, and we remain confident that our full year 2025 results will come in within our guidance range. In addition, while our tax rate expectations aren't shown on the slide, as Jim said, we continue to anticipate a full year effective tax rate in the 20% to 22% range.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

From a capital allocation standpoint, we remain focused on generating strong risk adjusted returns and reinvesting in our business. We anticipate additional bank growth in the second half and have more than 8,200,000.0 shares remaining under our repurchase authorization, and we'll continue to pursue both organic and inorganic growth opportunities in Global Wealth Management and the Institutional Group. We're also mindful of what's happening at the edges of the market. From a macro perspective, there is still a lot of uncertainty about the overall impact that tariffs will have on the economy. In terms of the market, we've seen a reemergence of mean stock behavior, a sharp rise in margin debt and pockets of speculation that feel disconnected from fundamentals, certainly in my view.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Valuations are now pricing in near perfect outcomes. And while we're not in the business of predicting pullbacks, we do believe in staying disciplined. We've been through enough market cycles to know that a strong market can be fragile, especially when momentum overtakes fundamentals. A brief pullback wouldn't surprise us. In fact, we'd welcome it as a sign of healthy price discovery.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

But either way, we'll keep doing what we've always done, serving clients, underwriting growth, and allocating capital with a long term lens. Taking it all together, we're very optimistic about the second half of the year. Market conditions have clearly improved since April. Deal activity is up. Investor sentiment has turned constructive, and key macro risks like tariffs, inflation appear better contained than many feared just a few months ago.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Additionally, our recruiting activity year to date has been extremely strong, and we've built the platform to support it, reflected in our third consecutive number one ranking in J. D. Power adviser satisfaction. That recognition isn't just about today. It positions us for continued recruiting success going forward.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

In institutional, we're leading in bank m and a and believe that the current environment creates even more opportunity. And in venture lending, we're making meaningful progress, deepening relationships with venture funds, founders, and emerging growth companies across innovation driven sectors. These are early wins, but they're strategic, and they're building real momentum for the future. So overall, I'm confident in our positioning, and I look forward to a strong second half. Before I close out the call, I want to take a moment to recognize Victor Nisi.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

As many of you know, Victor recently stepped down from his day responsibilities as Co President and Head of our Institutional Group after sixteen years of extraordinary leadership. At the same time, I'm pleased to share that Victor has joined the Board of Directors of Stifel Financial Corp. His contributions to our firm, particularly in building one of the industry's leading middle market investment banks, are hard to overstate, and I look forward to his continued insight and guidance as a Stifel Director. So with that, operator, please open the call for questions.

[Operator]

Thank And we will take our first question from Devin Ryan with Citizens. Please go ahead.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Great. Hey, Ron. Hi, Jim. And Jim, how are you?

[James Marischen, CFO at Stifel Financial]

Good morning.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Hi,

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Want to start with a question just on KBW. And I appreciate Financials Investment Banking. KBW has already been, I think, pretty strong just from the nondepository subsectors. But with bank M and A seemingly reaccelerating here and probably picking up more into the back half, And then you had a nice deal that KBW was advising on last week. What are you expecting there in terms of activity?

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

And if you can, maybe just frame out a little bit more around the opportunity in order of magnitude of kind of revenue potential or maybe what you've maybe been missing because there's been such a dearth of depository M and A over the past four years?

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Well, part of your question answers your question, Devin, in that the dearth of activity over the last several years driven by many factors, you know, the economic, the rate environment, a certain amount, certainly of uncertainty. The regulatory, you know, backdrop was was not, shall we say, conducive. It was certainly not conducive to timely m and a approval. So as those things, all of them, have improved, hence of the environment for m and a, and you couple that with a need for banks and certainly some of the mid regional banks to probably combine to be able to compete, whether it's technology or market share or just, frankly, the sheer growth of the of the SIFI will bode well, I think, or speaks to the need for some consolidation. We've been talking about this for years, but the the, you know, the environment today is conducive to that.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And, certainly, boardroom talks, they understand the the benefits of doing smart strategic m and a. As it relates you know, so that's the environment's good. That's a long answer to say the environment's good. You know, with respect to you know, we don't talk about, you know, our share or whatever. We've we've we've done very well.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

I think KBW Stifel has has, you know, shown that it's the way we've approached that deal and the way we've maintained the culture and the brand and the research and the sales and the trading and everything that goes with that has has has paid some dividends here. So I never am, you know, expecting a business at all. We've earned it, but we're well positioned. So that's you know, I'm not gonna give you any revenue numbers. Heck, I don't know.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

I just expect to get our fair our fair share.

[James Marischen, CFO at Stifel Financial]

KBW is also in a depository I'm sorry. KBW is also in a depository conference in New York right now, so hopefully, they're signing up deals as we speak. We got a deal.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

We'll keep an eye out. Thanks for that. And then just as a follow-up on the wealth business, nice to see the strong financial advisor recruiting. And Ron, I heard the comment about net new assets kind of increasing through the quarter and ending June around 5%. If you're seeing an acceleration in advisor recruiting and there's often a bit of a lag of assets relative to when advisors join, could we expect further acceleration in net new assets from kind of mid single digits?

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Or just more broadly, what are some of the puts and takes you're seeing in the formula for net new assets?

[James Marischen, CFO at Stifel Financial]

Well,

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

look, we're in the business of getting net new assets. That's just what our business is. So it's always somewhat hard to to understand what's really going on because we're not a custody firm. And so, you know, sometimes net new assets will will appear while you're custodying assets. That's that's relatively lower margin in terms of what happens with net new assets.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

But I'm I'm very pleased with with our recruiting, especially high end big teams, and the net new assets bodes very well. So, you know, stepping back and looking at what we've been doing, looking at our momentum, I've been pleased, Devin. We've been doing this a long time, and, this is, we're I think we're doing very well on this front.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Okay. Appreciate it. Good catching up.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. Hey. Have a good day.

[James Marischen, CFO at Stifel Financial]

Thanks, Evan.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Evan. Thanks.

[Operator]

We'll go next to the line of Steven Schuback with Wolfe Research.

[Steven Chubak, Managing Director at Wolfe Research LLC]

wanted to start off with a question on the NII outlook. So just looking at Slide 11 in the deck, you noted that you expect to see a meaningful ramp across majority of fee and revenue category, second half versus first half. It looks like for the full year NII, you expect the second half run rate to roughly approximate the first half. I want to know if that's the right interpretation and whether there is a credible path to at least reaching the low end of the guidance range that you offered up for NII at the start of the year.

[James Marischen, CFO at Stifel Financial]

I think that's a fair way to think about it. Is the right interpretation. I'd say if you take a step back and think about 2Q, we certainly benefited from some of the fee income we talked about. In terms of NIM, that probably equates to about four basis points. And then you think about some of the deposit mix shift given the fact that typically the the nonwealth deposits, so venture, fund banking, commercial are typically a lower cost funding mechanism than smart rate.

[James Marischen, CFO at Stifel Financial]

That's been about 10 basis point cheaper. There's not necessarily a rate sheet we can point it to, but that average is probably the best way to think about it. We really benefited from that. Now the fee income is hard to extrapolate going forward, but any potential mix shift is a benefit there. So you think about our guidance for 3Q is 265 to 275,000,000.

[James Marischen, CFO at Stifel Financial]

That equates somewhere around a $3.10 to $3.20 NIM. That being said, we did sell probably about 500,000,000 of middle market C and I loans, which carried higher yields. So it's a bit of a headwind going forward, but that will be offset as we continue to grow the balance sheet. You know, a billion dollars is the guidance we gave that certainly that number can move up from here. We could see more additional growth in the back half.

[James Marischen, CFO at Stifel Financial]

And really then, it's gonna come down to really what happens with the funding mix. So I think, you know, you're you're reading the chart right. We're not ready to change our full year NII guidance, But, you know, there is a path with, you know, more loan growth, with more deposit mix shift, and those various different components to get to the bottom of that as well.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. Look. I'm I'm really I'm I'm pleased with where we are. I you know, always trying to look forward and and discern trends, you know, in NII as if there's some long term, you know, health trend is is not how I look at it. Just wanna tell you, I we've done some balance sheet shifts, for instance, selling some portions of our loan portfolio that were highly higher yielding, but we did not view as necessarily as strategic as to where we're placing other assets.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

So that has a short term impact on NII. But look. Right? What do I like? I like the fact that our deposits have grown.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Our bill our liquidity source for deposits have grown. We do not have a problem generating loans here. Alright? So it's a matter of doing it right. And so I think that you're reading the chart right, but I wouldn't I'd tell you to be careful not to read that as some, you know, limiter on growth.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

It's just as we're remixing things, you know, you're you're seeing us not, you know, trying just to hit a target. We're trying to build a high earning, stable, risk adjusted NII. And that that's just where we're going here. And I we're in on that path, we're we're doing really well.

[Steven Chubak, Managing Director at Wolfe Research LLC]

No. I appreciate all that detail. Maybe just a follow-up on Devin's earlier question around bank M and A and some of the structural tailwinds that you outlined. I think it's consensus, but I think there's a strong case to be had that we're poised to see a meaningful ramp in bank consolidation activity. Certainly, we're seeing a meaningful uptick in deal activity, in recent months.

[Steven Chubak, Managing Director at Wolfe Research LLC]

One of the concerns that has started to emerge is just some of the weaker performance in the share prices of the, both the acquirer bank as well as the target. I was hoping to get some perspective on whether you view some of that price action as being somewhat anomalous or whether that could actually disrupt some of the recent momentum in bank consolidation activity.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Great question. You know, it's so deal specific that that's hard to answer generally. You know, what what when you take, you know, potentially, you know, two high performing banks in the middle, you know, middle market whose whose stock is is discounting growth as they gain market share and combine them, you're gonna take that growth premium initially out of those stock prices. And that's what we just saw, in my opinion. You know, it's just but what came out of that will be is a stronger bank, a stronger competing bank, and a bank that can deliver returns.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

So I think that I think that the bigger question is is putting deals together that are sustainable and that are competitive over the next number of years. And I think boards and management teams are clear eyed about that is the goal, not necessarily worrying about taking a little growth premium out of out of stock. Stocks are stocks are highly valued here in my opinion, you know, in terms of historical valuations. But I don't think that that's a concern regarding the long term rationale, therefore, the the, you know, the underpinning of future bank consolidation. That make sense to you? It's you know?

[Steven Chubak, Managing Director at Wolfe Research LLC]

Yeah. That makes perfect sense. So appreciate that.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

No. Overall, Ross, this is yeah. Well, these are being done for strategic questions. You know, you need you need to grow, and some of these banks need to grow. They need they need technology.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Their their deposits, all of the things that that are driving this strategic underpinnings are there. And that's what I think these companies are focusing on, which is the right thing. And, so, I I don't really share that concern.

[Steven Chubak, Managing Director at Wolfe Research LLC]

Great. If I could just squeeze in one more ticky tack modeling question. I was hoping you could quantify the aircraft leasing gain just so we could gauge what's the right jumping off point for that core FICC brokerage number.

[James Marischen, CFO at Stifel Financial]

I think that's a good question. So the gain in the quarter was about $28,000,000 And as we sit here and think about this going forward, dollars 100,000,000 is a good run rate as we look at probably the fourth quarter. But I would say you have to remember that there is some seasonal slowness that we typically see in the third quarter in terms of fixed income transactional. That's a good way to think about it. But, that group is still active.

[James Marischen, CFO at Stifel Financial]

You'll see additional gains in the future, but that's a good way to think about the normalized run rate.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. I you know, Jim's been Jim's been pointing this out as a onetime item for about five times now. So I just wanna point that out. Okay? So, anyway, it it is it is a little more lumpy than you know?

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

But it's they take it. But that that's a fair question.

[Steven Chubak, Managing Director at Wolfe Research LLC]

We'll be mindful of the recurring one timers. Thanks so much to both of

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Thank you. Thank you.

[Operator]

We go next to Alex Blostein with Goldman Sachs. Please go ahead.

[Alex Blostein, Managing Director at Goldman Sachs]

Hey, guys. Good morning. I have a two part question, but we can lump it into one, and and you guys could kind of take it in parts. But it's related to the overall profitability of the franchise. And I guess on the cyclical part, as you think about recovery in Investment Banking, I think that's pretty well expected by the market at this point.

[Alex Blostein, Managing Director at Goldman Sachs]

How do you think the incremental margins from higher Investment Banking revenues will come through the P and L, both in terms of the impact on institutional margins but also firm wide? And then the second question, and I have to ask the AI since you guys put the slide out there, as you think about what profitability and efficiencies that could create to the organization over time, how that would show up and how we could measure that from the outside looking in, would be helpful. Yeah.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Well, look, I'll take the second question first and then talk about the the other one. Although they are kinda related to so I'm glad you put them together. As it relates to AI, you know, the probably the thing that we see is an ability to use a lot of these AI agent models on things that in our business, so much of what we do administratively is comparing, you know, inputs to rule books. Okay? Whether it's you know, supervisory analyst type stuff, you know, a lot of things that I can go on and on through our workflows and identify productivity, not unlike what the personal computer did in many areas.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

What so what I see happening is productivity increases where we, you know, we can continue to grow and not, you know, driving profitability by reducing workforce, but by, you know, being able to be much more efficient and reassign people to to other tasks, whether it's in, again, onboarding, marketing, compliance, you know, AML, investment banking, analytics, all of these things, which I frankly you know, I I read what you're doing over at Goldman as well. And I I see it, and the the key is is to train people and to to make sure that you know, my concern would be that we somehow work to a lowest common denominator, which can be AI. I mean, my my goal is that AI is an amplifier, not a you know, not just something that you just plug in and and people can, you know, work from home. That's not the viewpoint here. And so we see and I personally see big efficiencies, not just at Stifel, but across the industry, in productivity.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

As it relates to your first part of your question, look, I think we've you know, we're restructuring in Europe. Our fixed income margins this quarter were were very good. Our equity margins were less than optimal, but we have a clear path toward improving our our equity business, both our focus shift in Europe plus some of the productivity things that we have been putting into place, we see we see meaningful improvement in in the margins in that business. And that that'll impact overall the the, you know, the margin capability of the business. And, you know, when we talked about getting you know, I hate to bring it up because no one brought it up, but we, you know, we did have a talking about $8 a share.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

You know, that that differential versus where we are to that is simply some of that low hanging fruit in margin improvement in the institutional, primarily equity part of our business.

[James Marischen, CFO at Stifel Financial]

So I'm optimistic about that, Alex. To put some simple math behind that, when you look at the institutional group, we were sub 15% pretax margins this quarter. That number really should be north of 20. And so you can look at a normalized operating environment in terms of revenue and that kind of margin capability. And that's the kind of lift we're talking about here in in terms of the operating leverage, particularly within equities.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. And we have a and and now we this isn't just, you know, looking at a number and saying, oh, it should be higher. We have a clear path to how to get there. We know exactly what what where what we need to do.

[Operator]

We'll move next to Bill Katz with TD Cowen.

[William Katz, Senior Equity Analyst at TD Cowen]

Just circling back to the NNA discussion on the new assets coming in the door. I was wondering if you could click maybe a level deeper. You mentioned that things are going well, which is great to hear and certainly appreciate the accelerating momentum into the second half of the year. Could you unpack a little about what is actually going well? Is it just better recruitment?

[William Katz, Senior Equity Analyst at TD Cowen]

Is it better packages? Is there a pickup of market share just given what's going on, with some larger scale transactions out there? I'm sort of curious if you could just speak to, you know, what's driving that that good growth.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

You know, I think it's I think it's overall the platform of of of what we do. As as we always say, you know, the what does business is net new assets. Okay? And, and we are in the business of of getting net new assets. I it's a core basis of what we do.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And, and so I I don't know, Bill, that it's necessarily quarter to quarter. Yeah. You can you can get a, you know, a couple nice accounts. But across Affirm now with some scale, and we have some scale, you know, we we just need to put in place the the culture and the systems and the technology, all of the things that you see in you know, that you saw come through. The J.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

D. Power, I know I've said it a couple of times, but that underscores what we're doing in terms of recruitment and the fact that we're bringing in some very large teams now. And, and and they're and they're quite productive. So, you know, we're we're we're gonna continue to grow. And when I say we're gonna grow, and we've grown for, you know, shoot, twenty eight years.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

You go back, and we've had record I can't remember when last time we didn't have a record year in wealth management. It's it's because we have a culture and a system to grow our business, which means growing net new assets. So it it moves around, and, you know, you gotta sometimes there's noise in those numbers, mostly around the custody side is what I would say. But, anyway, I I want to just tell you that I'm not sure how much I can unpack it, but we're pleased with with the growth. You see it in recruiting first and NAA later.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Thank you. And then just maybe a follow-up on capital allocation. It hasn't come up yet on the call. Just wondering if you could sort of speak to priorities.

[William Katz, Senior Equity Analyst at TD Cowen]

Appreciate you might grow the bank a little bit net of the loan sales into the third quarter, I presume. But how should we be thinking about maybe buyback versus bank growth versus maybe where you are in terms of the pipeline of potential deals?

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. I feel like we've come full circle here. We talked about we started the year when our equity values, including financials, you know, where at this level, we we said we would focus on bank growth because we view the risk adjusted returns and the franchise value that we get by, you know, allocating. It's just turning the dial. It's not not like we're gonna do one or the other.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

But, you know, we're gonna do bank growth, and then, you know, we run into liberation day, and and our stock in the whole industry, you know, corrects down a significant amount, really, we got on the call and said, hey. We're gonna focus on buying back our stock and not do bank growth. So now we're sort of all the way back to where we were beginning of the year, and and we're gonna look at bank growth. And you might not see the numbers because we're restructuring the bank a little bit in our in our loan mix, but we're gonna focus relatively compared to the first quarter, we'll focus more on bank growth. We'll still do stock buybacks, but we see the numbers being more accretive in bank growth.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And it's just a function of where the market is from an equity valuation perspective.

[William Katz, Senior Equity Analyst at TD Cowen]

Thank you, guys.

[James Marischen, CFO at Stifel Financial]

Thank you.

[Operator]

We'll turn next to Michael Cho with JPMorgan. Please go ahead.

[Michael Cho, Equity Research Analyst at JP Morgan]

Hi. Good morning. Thanks for taking my question. I'm I'm gonna just go ahead and ask an AI question as well. You know, you know, kinda laid out the various areas you're you're, you know, you're looking to improve, and then you you know, you're clear that it's not just a profitability kind of focus.

[Michael Cho, Equity Research Analyst at JP Morgan]

I'm just kinda curious, you know, with the, you know, dozens or or even hundreds of things that are out there in terms of how AI can improve, you know, your own business and your own client experience. I mean, how are you prioritizing some of these initiatives? And and maybe you can kinda talk through the the pace of focus or pace of investment that that you're thinking about when when it comes to AI. And and are you doing this all in house or are using vendors? Or I'm just kinda yes.

[Michael Cho, Equity Research Analyst at JP Morgan]

Just curious about the the magnitude and pace as you're thinking through these AI initiatives. Thanks.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Yeah. It's a great question. I mean, we you know, we're we're starting, I would say, with with with basics across the firm. You know, AI, you've got to you've got to train people. I I keep saying, I say it all the time, that it's AI is an amplifier.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

It makes smarter people smarter. And on on the converse side, if you're not so smart, it makes you look really organized, not so smart. And so, you know, we have to we're you know, we're obviously doing the basics that are that are in our system, copilot, you know, all of the things. We've we've rolled that out. We very product prod pro high productivity for people that are using that.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

We're focusing on training and, and then scaling that up. We've we've implemented a number of seats on LLMs that are much more sophisticated. And but what I would say is that in our business, you know, there you know, the regulatory aspect doesn't say that AI can sign off on on series 24, 20 you know, certain things that require human elements. So we're being a little careful to make sure that our workflows, you know, have have human interaction at at the end. But the point is is there's so much to do on basic, basic things that AI is very good at, which is summarizing, comparing, contrasting, looking at fixed rules, and being able to make people much more product you know, productivity.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And so I I personally sat down in our workflows, and I identified, like, 70 of them. I just said there was, like, 70 me. I'm sitting in my office. I'm not getting into some of the stuff and going, oh my gosh. We can do this, this, this, and this.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And and and a lot of that is off the shelf type stuff. We we're this is moving so fast that I'm concerned, if you will, that we don't need to be trying to write our own models when it it's evolving so fast that we can get so much lift off of doing stuff that's pretty much off the shelf, and then we customize it a little bit. We don't need to be, you know, developing our own or competing with with some of these firms. Let let let them give it to us. There is so much we can do on the productivity front.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

So that's what we're doing. I think the difference is, you know, from my perspective, the biggest impediment to AI is bureaucracy. I mean, bureaucracies have a way of protecting bureaucracies. And and so here at Stifel, you know, I'm taking a lead on on pushing through what I think are relatively simple productivity enhancements utilizing AI.

[Michael Cho, Equity Research Analyst at JP Morgan]

That's great. Appreciate all that all that color. Just I wanna touch on Europe for my second question. You you've talked through the business mix shift there, you know, a couple of times and certainly in the past as well. I recognize you just closed the deal.

[Michael Cho, Equity Research Analyst at JP Morgan]

But, you know, going from here, know, where where do you see the the kind of the incremental focus from here as it relates to to expansion and mix shift there? You either whether it comes from a industry perspective or geography focus. Just kinda curious where you think the the next incremental focus is at given given where you're at? Thanks.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

I wouldn't call it incremental. I'd call it a shift in focus a little bit. What what we what we learned, if you will, you know, the the sales trading, anytime you touch markets in any market, but in Europe, the the overhead associated with that from a legal compliance market structure, making sure, you know, settlement risk, all of those things on the sales and trading side is is you know, it's a scale business in The US. It's really a scale business in Europe. And so as we've looked at it, we've we've decided that we would deemphasize that and then focus on where we see real synergies, which is in banking.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

And and we'll still have sales and trading. You need to have it because we're gonna take you know, we're gonna help companies access The US markets or underwrite as we have in the past, but we're we're gonna not be as much in the the day to day trading businesses. We're gonna focus on advisory and banking, which is a natural extension of what we do in The US. So, anything we do in Europe will have will be, if you will, linked to what we do in The US. And and that focus and that shift will will improve our profitability because we were we were not nearly as efficient as we should have been over there, and we're addressing it.

[Operator]

And we have no further questions at this time. I'd like to turn the floor back to our speakers for any additional or closing remarks.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

Well, I would just say that it certainly, as I sit here today, I'm optimistic and and feel good about how how things are positioning for the the second half of the year. It's amazing how things have changed even since the first quarter in terms of perception and a lot of the things that that are happening. So, you know, we we maybe always talked about '25 being a transition year, and I think maybe it'll be the back half of '25 transitioning into '26 because the first half was certainly slower. But I'm I'm excited about that. I appreciate everyone getting on for the calls.

[Ronald Kruszewski, Chairman & CEO at Stifel Financial]

I look forward to reporting back to you in the third quarter. And thanks for your interest in Stifel, and we'll we'll be in touch. Thank you.

[Operator]

This concludes today's conference. We thank you for your participation. You may disconnect at this time.

Participants

Executives

• Joel Jeffrey, SVP - IR
• Ronald Kruszewski, Chairman & CEO
• James Marischen, CFO

Analysts

• Devin Ryan, Director of Financial Technology Research at Citizen JMP
• Steven Chubak, Managing Director at Wolfe Research LLC
• Alex Blostein, Managing Director at Goldman Sachs
• William Katz, Senior Equity Analyst at TD Cowen
• Michael Cho, Equity Research Analyst at JP Morgan