Stifel Financial Corp Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Mike Brown - Wells Fargo Securities - Analyst : Good morning. Thanks for taking my questions. Ron, I wanted to start on the wealth side. I guess organic growth has been a little bit soft in 2024 for the industry. And you guys mentioned that the pipeline is strong. So do you expect the organic growth here to increase in '25 versus '24? And, and I guess what's the catalyst that's going to really get some of these advisers to kind of make the move, what's going to get them off the sidelines?

Question: Mike Brown - Wells Fargo Securities - Analyst : Okay, great. Thanks for that color. I'll just change gears to the 2025 guidance. One of the things that stood out to me is the bottom end of the comp range, the 56%. When I look back, 58% has kind of been the historical spot for Stifel and just given the momentum across the franchise, it does make sense that you could certainly get to that level. I guess, curious what would drive you towards the bottom end of that range in '25? And then if you play this forward and the capital markets recovery continues into the '26 and markets remain supportive, is there enough comp leverage to eventually go below 56%?

Question: Mike Brown - Wells Fargo Securities - Analyst : Okay, great. Thanks for taking my question.

Question: Devin Ryan - Citizens JMP - Analyst : Hey, good morning, Ron, Jim. How are you?

Question: Devin Ryan - Citizens JMP - Analyst : Morning. A question on operating leverage in the institutional segment as the business continues to recover. And I guess tying that to the 2025 guide range for revenues and margins, does that, in that business, reflect kind of that more normalized environment, Ron, where we're recovering toward something quite a bit better than we've been in? And as we think about your margins specifically in that business here, you were 0% in 2023, 14% this year, 20% in 2020 -- 26% in 2021. So just want to think about kind of, are we -- is 2025 at normalized number of revenues? And then when does the margin get back to you when the business does normalize if it's not in 2025? Thanks.

Question: Devin Ryan - Citizens JMP - Analyst : Yeah, I'm just getting at is the '25 guidance reflecting kind of a normalized investment or institution segment revenue and margin or are we still normalizing towards that, which would imply that there's still quite a bit of upside even beyond the 2025 number, is really what I'm getting.

Question: Devin Ryan - Citizens JMP - Analyst : Yeah. Okay. That's great color, guys. Thank you for that. Appreciate it. And then on the -- and then the net interest income, obviously very good outlook there as well. Relatively resilient NIM outlook, healthy loan demand. Let me just dig into kind of where you're seeing the loan demand come from. And then more broadly, how you would frame this loan demand today? You've obviously widened the funnel within kind of your channels and then just what current capacity looks like for lending as well? Thanks.

Question: Bill Katz - TD Cowen - Analyst : Great. Thank you very much. I appreciate all the -- good morning, everybody, and thank you so much for your guidance and color. Just some of the items that you didn't explicitly forecast. I was just curious, given -- I think you mentioned in your press release that there was a little bit of erosion in the credit book, I wonder if you could talk to how you sort of think about the normalized provision for 2025? And then Jim, I was sort of curious just to how to think about the tax rate for the year. And underneath that, it seems like you're assuming flat share count, but how we think about capital deployment, is it all sort of bank lending at this point or are there other opportunities? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 2:30PM, SF.N - Q4 2024 Stifel Financial Corp Earnings Call

Question: Bill Katz - TD Cowen - Analyst : Okay. I was just wondering if you might come in on. So how do you think about capital allocation, seems like maybe bank growth is the primary focus for '25 and maybe I'm incorrect on that. And then relatedly as a follow up, just sort of curious you mentioned that client cash has improved a little bit. I think wanted to unpack the seasonal dynamic that until the end of the year and how things are trending in the early part of '25 in terms of cash -- client cash trends? Thanks.

Question: Alex Blostein - Goldman Sachs - Analyst : Hey, good morning, guys. Thanks for the question. I mean, I think it's pretty widely expected for the capital markets dynamics to improve in 2025 and into the '26 we've talked about for a little while. I guess if you look at your investment banking business and definitely not asking you to put an explicit number on this. But if you look at where that peak back in 2021 with the forces in play, how do you think about the peak revenues for this business in this current cycle? Any KPIs you can provide us to think about either in terms of Senior MDs in the banking division or anything else to kind of help us frame the opportunity set in this business for the next couple of years.

Question: Alex Blostein - Goldman Sachs - Analyst : Yeah, that's really helpful color. Thank you. Second question just around non-comp expense growth. When you normalize for investment banking growth ups and loan reserves, it looks like you guys have been pretty consistently in sort of 10%-ish year over year growth for the last couple of years and non-comp expense. Your guidance implies, I think, something similar to that for 2025. Any framework to think about how you can sort of bend this cost curve a little, what's driving sort of this pace of expense growth. So any anything else you guys could provide to help us think through sort of the longer-term expectations for that expense?

Question: Alex Blostein - Goldman Sachs - Analyst : Awesome, great. Thank you, guys.

Question: Steven Chubak - Wolfe Research - Analyst : Hi, good morning, Ron. Good morning, Jim. Hope you're both well.

Question: Steven Chubak - Wolfe Research - Analyst : I wanted to ask on the FIC business. The performance has really started to improve, that full year revenue number of $390 million. It's approaching a previous record. And as we look at an environment with the recent steeping in the curve potentially sparking some increased engagement from the depositories in particular, just how you're thinking about the revenue potential for the FIC business, especially since we haven't seen a normal environment with the contribution from Vining Sparks and just what it can generate in the absence of further trading gains. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 2:30PM, SF.N - Q4 2024 Stifel Financial Corp Earnings Call

Question: Steven Chubak - Wolfe Research - Analyst : That's really great color. And for my follow up, I have to ask on Sweep Cash, Jim, and I'm really trying to help you here since you noted that Sweep Cash balances so far in January are down just given the magnitude of the growth that we saw in 4Q. I was hoping you could explicitly quantify the reduction that you've seen in January. And what level of Sweep deposit growth is actually underpinning the NII guidance for the coming year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 2:30PM, SF.N - Q4 2024 Stifel Financial Corp Earnings Call

Question: Brennan Hawken - UBS - Analyst : Good morning, Ron and Jim. Thanks for taking my question. Ron, you referenced the expectation of comp leverage moving forward, which makes a lot of sense given your outlook for revenue growth. I'm hoping you could maybe help me unpack what happened though in the fourth quarter because both segments actually sort of beat us on the comp ratio but the firm wide missed by a bit. So could you maybe unpack what caused that disconnect?

Question: Brennan Hawken - UBS - Analyst : Fair enough and cheers on that accrual. Okay.

Question: Brennan Hawken - UBS - Analyst : Great. For my second, I'd love to ask a little about institutional. So one of the things, number one, your fourth quarter advisory was just a lot stronger than the public data normally suggests. So was there a lot more private or smaller deals represented in the advisory this quarter and do you think that's going to continue based upon the pipeline that you have today? And we've also heard some concerns from investors about recent poor performance of IPOs, a couple of them have broken price. What do you think the implications of that could be? I think that it might be.

Question: Brennan Hawken - UBS - Analyst : It's under the radar, right? Like, just -- got it. Fair enough.

Question: Brennan Hawken - UBS - Analyst : Yeah, that's what I meant by that. So that makes a lot of sense. There has been -- any thoughts on implications of the broken IPOs?

Question: Brennan Hawken - UBS - Analyst : The IPOs that have broken price recently and whether or not that might have an impact.

Question: Brennan Hawken - UBS - Analyst : And it could make M&A a more viable option if it's a sponsor looking to sell versus the public--?

Question: Michael Cho - JP Morgan - Analyst : Hey, good morning, guys. Thanks for taking my question and squeezing me in here. Yeah, I just wanted to touch on advisory code activity, just to follow up. But I think you referenced MD count of 212, excluding Bryan Garnier. I think that's just a little bit down from what you disclosed prior. So I think anything to call out in terms of what areas might have saw some change there. And then when we think about improvement in MD productivity into '25, I think you called out 21 M&A levels or M&A levels reaching 21. Like is that the benchmark at this point when we think about MD productivity into 25?

Question: Michael Cho - JP Morgan - Analyst : Fair enough. And then -- yeah, no, it does. And then just in terms of recruiting -- and you cited strong pipeline again. You gave us kind of a relative comparison when we talk about -- think about the banking pipeline. But is there some relative metric that you can REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 2:30PM, SF.N - Q4 2024 Stifel Financial Corp Earnings Call help us with when we think about the recruiting pipeline that you're seeing today maybe versus where you are at the start of 24? And how would you envision the recruiting packages to evolve with markets continuing to reach higher levels and then potentially higher for longer rate environment as well?