Stifel (SF) Q4 2025 Earnings Call Transcript

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DATE

Jan. 28, 2026 9:30 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Ronald James Kruszewski
• Chief Financial Officer — James Marischen

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TAKEAWAYS

• Firm-Wide Revenue -- $5.5 billion, up 11%, surpassing $5 billion for the first time in company history.
• Q4 Revenue -- $1.56 billion, a 9% sequential increase, exceeding consensus by $50 million, and up 14% year over year.
• EPS (Excluding Q1 Legal Accrual) -- $7.92 for the full year; Q4 record EPS of $2.63.
• Return on Tangible Common Equity -- 25% for the year and over 31% in Q4.
• Pretax Margin -- 21% for the year, exceeding 22% in Q4.
• Global Wealth Management Revenue -- $3.5 billion, highest ever, marking the 23rd consecutive record year.
• Institutional Revenue -- $1.9 billion for the year, up 20%, with Q4 revenue at $610 million, up 28% year over year.
• Investment Banking Revenue -- Q4 revenue of $456 million, up 50% year over year, with advisory revenue up 46% to $277 million.
• Equity Capital Raising Revenue -- $95 million in Q4, double the prior year, led by health care, financials, and industrials.
• Fixed Income Underwriting -- Record $76 million in Q4, up 23%, driven by public finance and corporate issuance.
• Record Client Assets -- $552 billion at quarter-end, with fee-based assets reaching $225 billion; net new asset growth in the low- to mid-single digits percentage range.
• Adviser Recruiting -- 181 financial advisers added during the year, including 92 experienced advisers with a trailing twelve-month production of $86 million.
• Net Interest Income -- At the high end of guidance for Q4 but $2 million below consensus; for 2026, guided to $1.1 billion-$1.2 billion, with $4 billion in anticipated balance sheet growth.
• Operating Expense Management -- Compensation ratio at 58% for the quarter and year; non-compensation expenses at $307 million in Q4, up 6%, largely due to investment banking activity.
• Capital Position -- Tier 1 leverage ratio at 11.4%, risk-based capital ratio at 18.3%, and over $560 million in excess capital above the 10% leverage target.
• Shareholder Actions -- 11% dividend increase authorized for 2026 and a three-for-two stock split effective Feb. 26, 2026 (record date Feb. 12, 2026); 335,000 shares repurchased in Q4, with 7.6 million remaining under authorization.
• Strategic Transactions -- Sale of Stifel Independent Advisors (SIA) and closure of European equities business, removing $100 million in annual revenue but expected to improve operating leverage and margin profile.
• 2026 Guidance -- Net revenue forecasted at $6.0 billion-$6.35 billion, reflecting strategic changes; compensation ratio guided to 56.5%-57.5%, and non-compensation operating ratio to 18%-20%.
• Leadership in M&A Advisory -- Participated in 75% of depository M&A advisory transactions by deal volume in 2025; announced new depository M&A transaction representing Stellar in sale to Prosperity Bank.
• Public Finance Platform -- Remains the number one negotiated issue manager by deal count, with increased success in larger par value transactions in Q4.

SUMMARY

Stifel Financial (NYSE:SF) delivered record-breaking results for both firm-wide revenue and multiple business segments, citing disciplined growth and sustained adviser productivity as key drivers. Management announced a three-for-two stock split and an 11% dividend increase, emphasizing enduring confidence in capital generation and operating leverage. The strategic sale of SIA and closure of the European equities business are expected to shift the expense and margin structure going forward, with 2026 guidance explicitly accounting for $100 million in revenue reduction from these moves. Planned $4 billion balance sheet growth and targeted recruiting investment may support continued asset and earnings expansion, even as market conditions evolve.

• Chief Executive Officer Kruszewski stated, "the time, we looked forward, it was our ability to generate $5.2 billion in revenue and $8 a share in a normalized environment," affirming the company surpassed these aims in 2025 despite headwinds.
• Chief Financial Officer Marischen highlighted that net interest income guidance for 2026 assumes all balance sheet growth will be funded with treasury deposits, remaining "relatively rate agnostic" due to portfolio structure.
• Leadership identified health care, technology, and financial institutions as sectors with notable momentum in investment banking pipelines.
• Marischen indicated that the SIA sale and European restructuring will materially lower compensation and non-compensation expense ratios, with $20 million-plus annual non-compensation savings anticipated.
• Kruszewski noted potential for further adviser recruiting investment, suggesting an increased allocation could accelerate net new asset flows and team productivity.

INDUSTRY GLOSSARY

• Fee-Based Assets: Client portfolios where revenue is earned through advisory or management fees rather than per-transaction commissions.
• Sweep Balances: Client cash automatically moved from brokerage accounts into interest-bearing deposit or money market accounts at financial institutions.
• Negotiated Issue Manager: Lead underwriter for a public finance deal selected through negotiation rather than a competitive bid process.
• Bookrunner ("lead left"): The firm leading placement and distribution in a syndicated capital markets deal, typically named in the primary (leftmost) position on investor materials.

Full Conference Call Transcript

Ronald James Kruszewski: Joe, and good morning, everyone. 2025 was another record year for Stifel. Firm-wide revenue of $5.5 billion increased 11% and marked the first time we've surpassed $5 billion in revenue in our 135-year history. Record performance in global wealth management and our second-highest year of institutional revenue drove these results. Given the volatility we experienced throughout the year, this performance highlights the breadth, quality, and resilience of our franchise. Stepping back, 2025 was a strong year for markets, but it was not without its challenges. Economic resilience, healthy balance sheets, and improving capital markets activity supported growth even as volatility, geopolitical risk, and policy uncertainty remained very real.

As the environment strengthened during the year, our focus on client service allowed us to capitalize on the improving market trends. That focus is reflected in J.D. Power ranking Stifel number one in employee adviser satisfaction for the third consecutive year and in the fact that 2025 was our strongest financial adviser recruiting year since 2018. On the institutional side, I'd also highlight the performance of our KBW subsidiary. In 2025, we participated in approximately 75% of depository M&A advisory transactions measured by deal volume, underscoring our leadership position in financials and the depth of our client relationships across the sector.

Building on that momentum, this morning, we announced another depository M&A transaction representing Stellar in its sale to Prosperity Bank. This reflects the continued level of engagement we're seeing across bank boards and management teams as strategic conversations translate into executed transactions. Before getting into the details of our results, I want to step back and briefly address our business model because it's central to understanding Stifel's competitive position. We do have a $41 billion balance sheet. Approximately 80% of our revenue comes from wealth management, asset management, investment banking, and capital markets, with net interest income representing about 20% of the mix. Our balance sheet exists to serve our clients, not as a standalone business.

It allows us to provide individual lending, credit, and treasury capabilities to companies in the innovation ecosystem and capital solutions to clients. It's client-serving infrastructure that supports our core business. This structure gives us meaningful competitive advantage. Unlike independent wealth managers, we can enhance the full client experience through integrated lending and cash management. Because our model is advice-led, we generate the growth and returns on an advice-based business. That's why you'll hear us focus our commentary on the businesses that drive our growth trajectory: Global Wealth Management and Institutional. The balance sheet enables those businesses, but it is not itself a separate business line.

We use our balance sheet to support our clients when it's right to do so while remaining well-capitalized. Our bottom-line results reflect increased scale and operating leverage. Excluding the first quarter legal accrual, we delivered EPS of $7.92, a pretax margin of 21%, and for 2025, a return on tangible common equity of roughly 25%. Strong earnings again generated meaningful excess capital, which allowed us to continue investing in the business, grow our adviser-led client-serving platform, acquire Brian Garnier, and the employee wealth business from B. Riley, and repurchase shares.

To put our 2025 performance in proper context, more than two years ago, on our third quarter 2023 earnings call, we discussed our ability to generate, at the time, we looked forward, it was our ability to generate $5.2 billion in revenue and $8 a share in a normalized environment. And, look, at the time, those targets were viewed as aspirational. Particularly given that we were on our way to delivering 2023 revenue of $4.3 billion and earnings per share of $4.68. In 2025, we exceeded that revenue target and essentially reached $8 per share in earnings despite market headwinds in the first quarter.

That outcome reflects and reinforces both the durability of our model and the operating leverage inherent in the business. Stepping back and taking a longer view of our growth, the trajectory of the firm has been consistent and disciplined. Over the last decade, Stifel's revenues are up 137%, driven by meaningful expansion across both of our operating segments. In Global Wealth Management, revenue has grown 157% over the last ten years, reaching $3.5 billion. That growth has been driven by sustained adviser recruiting, higher adviser productivity, growth in fee-based assets, and the continued build-out of our client-serving platform, which has improved both the growth and consistency of our results.

In our institutional business, revenues nearly doubled over that same ten-year period, reaching $1.9 billion. That growth reflects diversification across advisory, capital markets, and public finance, deeper industry coverage, and continued investment in talent. That long-term execution is also reflected in shareholder returns. Since 1997, the S&P 500 is up roughly nine times. Microsoft, one of the most successful growth companies of our generation, is up approximately 45 times. Stifel, over that same period, is up around 76 times. Even over a more recent horizon, the story is consistent. Over the last five years, Stifel stock is up roughly two and a half times, while Microsoft has roughly doubled and the S&P 500 has not quite doubled.

Reflecting that performance and the confidence the Board has in the durability of our earnings and cash flows, the Board of Directors authorized an 11% increase in the common stock dividend beginning in 2026. In addition, the Board authorized a three-for-two stock split effective February 26, 2026, for record as of February 12, 2026. This marks the fifth stock split during my tenure. Taken together, these results reinforce what we believed for a long time: that disciplined growth, consistent investment in our people, and a long-term mindset can create significant value for shareholders across market cycles.

With that context on our business model and long-term performance, I'll now turn the call over to our CFO, James Marischen, to walk through our quarterly results and outlook in more detail.

James Marischen: Thanks, Ron, and good morning, everyone. The fourth quarter capped another strong year for the firm. Revenue was a record $1.56 billion, surpassing last quarter's record by 9%, with both operating segments delivering solid results. Global Wealth Management once again led the quarter, delivering another record result, while institutional revenue increased 28% year over year, marking its second strongest quarter on record. The performance across both segments drove record EPS of $2.63, a pretax margin of more than 22%, and a return on tangible equity of more than 31%. During the quarter, we also announced the sale of Stifel Independent Advisors. Combined with the actions taken earlier in the year, this positions the firm for improved operating leverage going forward.

Turning to slide four, I'll walk through our results relative to consensus estimates in the prior year. Total net revenue exceeded consensus by $50 million and increased 14% year over year. Investment banking revenue was the primary upside driver, exceeding expectations by $70 million or 18%. Higher advisory revenue was the main contributor, and we also exceeded expectations for both equity and fixed income capital raising activity. Transactional revenue came in 4% below expectations, primarily due to lower fixed income revenue, which more than offset modestly higher wealth management revenue. Within fixed income, results were slightly below our prior quarter guidance. Asset Management revenue was in line with expectations.

Net interest income was at the high end of our guidance but was $2 million below consensus. This was a result of the decline in fee income recognized during the fourth quarter. Expenses were well controlled, with the compensation ratio and total non-compensation expenses generally in line with expectations, allowing for operating leverage on a higher revenue base. The effective tax rate for the quarter was 14.1%, slightly above both guidance and consensus. During the quarter, we recognized the benefit related to stock-based compensation, which was offset by an unfavorable return to provision adjustment on foreign taxes. Turning to slide five, I'll start with Global Wealth Management, which remains the foundation of the firm's earnings, capital generation, and long-term growth.

2025 marked our twenty-third consecutive year of record wealth revenue, with total revenues exceeding $3.5 billion, driven by record asset management and transactional revenue, along with our second-highest year of net interest income. Fourth quarter results were equally strong, with record quarterly revenue of $933 million, again driven by strength in both transactional and asset management activity. We ended the quarter with record total client assets of $552 billion and record fee-based assets of $225 billion, reflecting continued market appreciation and net new asset growth in the low to mid-single digits. Recruiting was a significant contributor to growth in 2025. We added 181 financial advisers, including 92 experienced advisers with trailing twelve-month production of $86 million.

This represents more than double the number of experienced advisers added in 2024 and a meaningful increase in trailing production. Our recruiting pipeline entering 2026 remains strong, and we expect another solid year. Our client-driven balance sheet activity continues to enhance both earnings consistency and client engagement. As shown on the slide, economics associated with client-driven balance sheet usage has been relatively unaffected by rate cuts over the past year. Given the floating rate nature of our assets and liabilities, we remain relatively rate agnostic, with growth in net interest income driven primarily by client activity and balance sheet expansion rather than changes in interest rates.

For 2026, we expect net interest income to be in the range of $275 to $285 million. Client cash and funding increased meaningfully during the quarter. Suite balances increased by $510 million, while non-wealth client funding increased by nearly $1.5 billion. This was the strongest quarter of growth we've seen in our venture activity and reflects continued momentum from investments made in that group. In addition, we saw more than $1.4 billion in third-party money fund balances. As a result, we enter 2026 with significant capacity to support wealth-related and institutional client-driven balance sheet growth while maintaining a conservative credit risk profile. Turning to slide six, I'll discuss our institutional group, which provides meaningful upside as market conditions improve.

For the full year, institutional revenue exceeded $1.9 billion, up 20% year over year, marking the second strongest year for the segment. Fourth quarter revenue was $610 million, up 28% year over year, driven primarily by investment banking. Investment banking revenue totaled $456 million, up 50% year over year. Advisory revenue increased 46% to $277 million, continued strength in financials, and improving traction in technology and industrials. Equity capital raising revenue was $95 million, double the prior year, led by health care, financials, and industrials. Fixed income underwriting reached a record $76 million, up 23% 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. We're also seeing increased success in larger par value transactions at record levels. Investment banking and advisory pipelines into the quarter provide strong visibility into the first quarter and beyond. Transactional revenue declined 10% year over year due to an 18% decline in fixed income revenue, which more than offset a 6% increase in equity revenue. The fixed income results were impacted by the government shutdown and timing of gains in prior periods. Turning to slide seven, expenses remained well controlled during the quarter.

Non-compensation expenses totaled $307 million, up 6% year over year, primarily reflecting increased investment banking gross-up associated with higher advisory and underwriting activity. As a result, our quarterly adjusted non-compensation operating improved by 200 basis points. For the full year, excluding the first quarter legal accrual, our non-compensation operating ratio improved by 140 basis points, reflecting the benefits of increased scale, improved operating leverage, and a more favorable revenue mix. Compensation expense remained well aligned with revenues, coming in at 58% for the quarter and the full year.

Despite quarter-to-quarter variability, improvement in our overall expense profile continues to be driven by the combination of scale, growth in net interest income within wealth management, and actions taken to simplify business support. Our capital position remains strong and provides meaningful strategic flexibility. The tier one leverage ratio increased to 11.4% and the Tier one risk-based capital ratio rose to 18.3%. Based on a 10% Tier one leverage target, we ended the quarter with more than $560 million of excess capital. We repurchased 335,000 shares during the quarter and have 7.6 million shares remaining under the current authorization.

Assuming no additional repurchases and a stable stock price, our fully diluted share count for the first quarter is expected to be approximately 109.7 million shares. On a pro forma basis, reflecting the recently approved three-for-two stock split, that equates to approximately 165 million shares. And with that, Ron, back to you.

Ronald James Kruszewski: Thanks, Jim. As we look ahead to 2026, the setup is constructive. Client engagement remains high. Strategic activity is picking up. And capital is beginning to move more decisively. At the same time, we remain mindful that risks are ever-present and that market conditions can change quickly. Our focus remains on disciplined execution, serving clients, and building durable performance through the cycles. Our adviser-led integrated model continues to differentiate Stifel. We're attracting high-quality advisers, deepening client relationships, and seeing clear evidence that a platform combining wealth management advice, institutional capabilities, and balance sheet support creates value that clients recognize and that advisers appreciate.

Before turning to guidance, I want to briefly highlight how our businesses are positioned as we enter the year. Our wealth business enters 2026 with strong momentum. Recruiting engagement and pipeline remain robust. Experienced advisers are attracted to Stifel's platform, tech, and integrated model. Fee-based asset flows remain elevated, with fee-based assets up 17% in 2024. And revenue, as always seems to be true, follows assets. Our venture initiative continues to gain traction, supporting lending activity, deposit flows from venture-backed firms and their stakeholders, and fund lending relationships. Elevated client asset levels continue to represent opportunities, supporting lending initiatives and providing flexibility for future investment alternative allocations and opportunistic deployment by our clients.

We're also seeing increased momentum across our institutional business with a record pipeline. A few areas are worth noting. We continue to see strong momentum in advisory, supported by active pipelines and increasing client engagement. Equity capital markets activity is off to a strong start to the year, with issuance active across sectors and products. We continue to see a pull forward in the new issue calendar where possible. Pitch and mandate levels are increasing. While there have been some volatile sessions, markets are functioning well with strong investor engagement.

Financial institutions activity is robust across banks, insurance, and financial technology, as evidenced by the Old National Bancorp offering, which we priced on Monday, which was upsized based on demand at attractive spread levels. And, of course, I've already mentioned a recently announced M&A transaction. Health care has experienced one of the strongest January new issues in several years, with a growing backlog of biotech IPOs that are helping drive broader market momentum. Technology and industrial technology remain active, driven by AI and infrastructure investment, with large transactions in energy, infrastructure services, and defense being well received by the market. Our public finance backlog remains strong.

And a normalization of the yield curve is a positive development for our fixed income rates and credit businesses compared to the headwinds created by the sustained inversion of the yield curve following the Fed's rate hikes beginning in 2022. Taken together, these trends across wealth and institutional position us well to continue executing our strategy, gaining share, delivering operating leverage, and compounding earnings is disciplined through the cycle. So this brings us to our guidance for 2026. Total net revenue is expected to be in a range of $6 billion to $6.35 billion.

I would note that this reflects the impact of the SIA sale and the closing of our European equities business, which together represented $100 million of annual revenue. So our guidance does not include that $100 million of revenue which we had last year. We think that these changes will be offset by improved expenses and improved margins. Net interest income is forecasted to be between $1.1 billion and $1.2 billion, supported by approximately $4 billion of balance sheet growth. We have lowered our expense ratios to reflect increased operating leverage. The compensation ratio is now in a range of 56.5% to 57.5%. And the non-compensation operating ratio is 18% to 20%.

So what does this mean for Stifel going forward? Simply put, our long-term track record of disciplined execution gives me confidence that we can once again double this business over time. Yes, I still believe we'll reach $10 billion in revenue and $1 trillion in client assets. And, no, I'm not gonna give you a time frame. With that, operator, please open the line for questions.

Operator: Thank you. Star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, press 1 to ask a question. We'll pause for a moment to assemble the queue. We will take our first question from Mike Brown with UBS.

Mike Brown: Great. Good morning. Good morning. Thanks for taking my question. So, Ron, maybe just to start on recruitment here. So what factors do you think will kind of shape recruitment in 2026? And then you maybe just give an update on how you're approaching recruitment of the high net worth adviser space, you know, specifically. And, maybe just one last follow-up there. How are you thinking about productivity expansion from the experienced advisers that you bring on to the platform? Maybe you could touch on the B. Riley advisers that you brought over. Did you have you noticed a pickup in the productivity from that advisor cohort specifically?

Ronald James Kruszewski: Thank you. Yeah. Well, your last question first. I for sure, have noticed productivity increase in B. Riley. I know some of that's market, but a lot of it is just platform technology products. You know, we have a well-developed platform. We have an integrated lending and credit model. All of which helps us deal with clients across a broad spectrum of their financial needs. And that equates to higher productivity. As it relates to recruiting, look. Past is prologue. I get this question all the time. I feel like I'm out of for twenty-eight years, and we continue to recruit. What I would say has changed over the years is the level of teams that come in.

I think I've said in previous calls that, you know, a few years ago, we would say, oh, you know, we hired 10 people doing $7 million. And now we're saying, well, we hired one team doing $7 million. And it's really how our focus is. We're recruiting people who do a mix of business. They do advisory, for sure, but they also will do brokerage. They'll also participate in lending activities and in deposits. So it's a broad mix of clients that we like to look at. But to answer your question, recruiting is strong.

If anything, I'm thinking about even increasing our allocation to recruiting because I think our platform and where we are allows us to really gain even more market share if we choose. So that's on my mind.

Mike Brown: Okay. Great. And just as a follow-up, just change gears a little bit and shift over to the institutional side. So very strong investment banking results this quarter. Clearly, a lot of strength coming through on the financial side and particularly in advisory. As we now move into 2026, are you starting to see the activity really broaden across the platform? And where is maybe the deal momentum accelerating the most in your observation?

Ronald James Kruszewski: Well, I think that as we went into 2025, the sector, at least on advisory, that picked up first. And that we just had a tremendous year was in financial institutions. Primarily depositories, although we've done a lot in fintech. But where we see that continuing for one. But we see an increase now in activity in health care. Health care at one point was one of our largest sectors, and we're seeing equity capital markets transactions and other transactions in health care. You know? And if I can sort of say the same story again and again when I talk about industrials, tech, and consumer.

I would say that as we looked last year, those businesses started to pick up in the fourth quarter. And now if we keep geopolitical risks at bay and let the market function normally, I see a lot of business to be done, not just in big, but in industrials, tech, health care, and consumer.

James Marischen: I'd also add to that. Sponsor activity is really not all the way back but is noticeably improving. You know, we still there's still a runway for significant growth related to sponsor activity if markets hold up through the remainder of 2026. So that's definitely an area of growth as well. And, you know, and a lot of people like to use the term the, you know, private equity unlock. You know? And we've been talking about that for years. So, you know, when will private equity begin to unlock some of these companies? And we're seeing signs of that. Certainly, robust market valuations are helping that.

But when you think bring all of this together, it's a very conducive environment as we sit here today.

Mike Brown: Great. Thank you, Ron and Jim, and good luck to the US ski team.

Ronald James Kruszewski: Hey. You got it. Alright. I like that. I'm gonna bring some metal salt. Stifel US ski team. Stifel US ski team, by the way. Let's get the name right.

Operator: We will take our next question from Steven Chubak with Wolfe Research.

Steven Chubak: Hey, Steven. Good morning. Hey, guys. Good morning. Thanks for taking my questions. So maybe to start just on the ECM outlook. And Ron, everyone recognizes the strength of the advisory franchise, particularly in fin services. If I look at advisory fee share, it kept pace with the bulge bracket peers. DCM fee share was also consistent with the bulges. I'd say the more surprising stat was the magnitude of ETM share gains. Full year revenue growth, I think, outpaced that group by about 40 percentage points.

And just want to better understand what's driving some of that share strength in ECM relative to your large peers and your confidence level that ECM fees should continue to build this year given the pipeline commentary and you were alluding to a strong start to '26 as well.

Ronald James Kruszewski: Well, Tim, go back to '21 and look at our ECM fees while I answer this question. Give them some look up even while we would do this. But yeah, I think that it's nice for you to point out that we've done that. I view it as the firm. We were talking before we got on the call about some recent deals that we've done in both fixed income and equities where we have been lead left with some rather large firms to our right. The left, which five years ago didn't happen. And as co-managers, and Stifel has been on it just didn't happen.

And so on those deals alone, obviously, we're getting market share because we're getting more economics on those deals. And what I see happening is not, you know, some seismic shift in all this. It's just that we are moving up in our participation levels, and we're doing more deals that go to the just the level of capability that we brought to the firm. You know? And ten years ago, our institutional business was half of what it is today. And we didn't have as many MDs. We didn't have the capabilities. We didn't have the debt. We didn't have the ability to leave left, you know, a $500 million subordinated deal with the large firms to our right.

All of those things speak to the fact that we are really achieving our goal, which is to be a premier wealth management and middle market, if you will, investment banking firm. And you're seeing it. So thanks for pointing it out.

James Marischen: ECM revenues back in 2021 for the full fiscal year were $230 million. So we were above that and what we produced in 2025.

Ronald James Kruszewski: Pretty extraordinary.

James Marischen: Easy? We've exceeded 2021, but we don't think in 2021, I think we're running at 105% of capacity. And today, I think we're running at 50% of capacity. And that's an important, you know, don't quote me on those numbers. That's off the top. I have big people always wanna know what capacity actually means. But I feel that we have a lot more ability to do things because instead of being a 5% co-manager, we're a book. Same deal. Just higher economics. And that's what you're seeing.

Steven Chubak: Alright. Well, rest assured, we won't reflect those numbers you just quoted in the model around capacity. But I did wanna ask you on the comp guidance. And if I look over the last two years, the revenue guide's come in better than the midpoint of the outlook that you guys have provided. The comp ratio, however, has come at the higher end. And the guidance for 26 contemplates pretty meaningful comp leverage a 50% incremental margin, and just wanna better understand how much of the comp improvement in '26 is attributable to the restructuring and business exits versus the, let's call it, improved business as usual comp discipline. And what gives you confidence that this time will be different?

And the comp leverage will come through just given continued elevated competition for talent?

Ronald James Kruszewski: Well, first of all, I mean, we've been in our range, and albeit we've been at the top end of our range. And I think if you step back a little bit, you know, we don't operate a vacuum when it comes to talent. Right? It's very easy to say, oh, our model's x and what we're gonna do. And if you run just pure numbers, you will see comp leverage as productivity goes up. Is that just sort of to be expected. And as you bring new recruits, you might be paying recruiting, you're gonna bring those people online.

And what I would say, Steven, if you go to most of the street, what you've seen is an uptick in the comp ratio. Over time. You look at your own universe, and we've remained very consistent. And what that is it's us trying to manage our growth while not giving up our margins. We've had if steady state people stayed here and we weren't recruiting, we'd be driving our comp ratio lower. Now that's because of a lot of the investments we've made since 2020 across the board. We've recruited a lot of people. Growth in recruiting puts upward pressure on the comp ratio. We've managed it very well. All that said, I'll let Jim talk about it.

We're doing a couple things with the sale of SIA and the European restructuring, which alone left in a vacuum drive comp ratio lower.

James Marischen: So again, yeah, I'll focus on the sale of SIA and the European reorg here. And Ron talked about in his prepared remarks as well as we noted in slides, you're talking about a $100 million of revenue here. In terms of compensation expense, both of those groups were well north of our consolidated 58% comp to revenue total. Yeah. I would say most people understand generally where the comp ratio hovers around for an independent FA model. That ratio was probably a little bit lower for European equities, particularly since we have retained some US distribution capabilities there. Kind of in the after reorg.

But when you think through those that can give you a ballpark idea of where those comp savings are. Now I'll just touch on the non-comp related to those two entities as well. The independent channel is obviously gonna be more heavily weighted towards comp. So there's not a whole lot of non-comp savings there. You back off related to the SIA sale. But when you look at that in combination with the European reorg, that could take a good 20 plus million dollars out of non when you look at 26 compared to 2025.

And then I just kinda highlight that, you know, when you look at our expense guide, as Ron kind of reiterated, both of those things then do contemplate additional investment across our existing businesses but it can give you somewhat of a decent understanding of how we came up with those new ranges absent the normal course of just higher net interest income or the normal operating environment, but specific to these two transactions.

Ronald James Kruszewski: I think it's a great question. Very helpful, man. I'm comfortable with our comp ratio. We also take opportunities just like every firm does. We take opportunities to recruit and build our capabilities. And that goes the other way on the comp ratio. So we tend to be conservative. But you got to admit, we at least deliver within our range.

Steven Chubak: Fair enough. And usually towards the higher end of the guidance. I appreciate that. And thanks for taking my questions.

James Marischen: Thanks.

Operator: We will take our next question from Devin Ryan with Citizens Bank.

Devin Ryan: Great. Good morning, Ron. Good morning, Jim. Good morning. Stay on financial adviser recruiting. Obviously, coming off of a good year. Ron, it should be good to get your perspective around kind of the future of adviser mix in the industry between kind of employee independent RIA? Obviously, a lot of discussion over the last, you know, decade plus around tailwinds towards independent. But recently, we've seen pretty healthy and maybe accelerating or reaccelerating net new assets within some of the leading employee firms. So just love to kind of hear what you think about maybe whether we're getting to an equilibrium of how many people wanna be independent.

Obviously, you have your trip on the employee channel, but at the same time, I also appreciate that you're taking advisors from the wirehouses as well, so maybe you grow independent of what the wirehouses are doing. So just wanted to get a thought on kind of broader kind of remixing potential of advisers.

Ronald James Kruszewski: Yeah. It's a tough question. I'm you know, in terms of remixing. What I would say is that the initial competitive landscape of private equity. Remember, a lot of this gasoline to get this done was provided by private equity dollars. And I would say that, you know, they started with a bang on, you know, being able to pay less in transition and sell the way you can be independent and all of that. And you got a lot of initial flows. And then it got quite competitive. And so now I think that you know, that plus rates coming down are double kind of whammy.

A lot of the economics in the independent channels on the rate is on the cash side. And as that comes down, that's pressure on that. So what I see is the overall in the competition, I see the ability to, you know, to recruit at significantly higher levels. These PE firms are you know, they want 20% IRRs. The math just doesn't work as many people think. And then the concept of trading paper. You know, we'll pay cash and many private firms say, well, wait. We just value debt this. We'll give you paper. That's slowed down. That's all I can say. Now the independent channel is absolutely it's like the do-it-yourself channel and investors.

Some people are just gonna use discounters, some are gonna use advice. Some people, advisers really like the employee model. They don't have to worry about a number of things. Their profit margins are 60%. So I see, to answer your question, I see a general slowing of what, you know, get a 100 people in I'm making up 70 were going independent, and 30 were going employee. I would see those numbers going seventy's lower. And more will come to employee for all the dynamics I just said. Now that's my view of the world. You know, some other people may have a different view.

Devin Ryan: Yep. I appreciate that, Ron. Just good to get your perspective there. So thank you. A follow-up probably more for Jim here just on kind of the net interest income guide. Some of the underlying assumptions we'd just like to unpack a bit. So the $4 billion of loan growth, can you just talk about kind of where you see that coming from? What are some of the buckets that you expect to see kind of the net growth? And then just talk about some of the differentials in yields that you're seeing across different loan categories today.

And then as you think about kind of that $4 billion could there be upside obviously dollars 600 million or so of excess capital today that going to grow or you're going create a lot of excess capital over the next year? So just how we should think about potential upside cases to the four? And then the liability side as well, if you could just touch on that kind of in terms of the what you're expecting. You've seen kind of couple of quarters of nice growth in sweep cash. So I'd love to get some sense there as well.

James Marischen: I think that was about four questions, but I'll start taking them one at a time here. The first of which is the $4 billion in growth. I'd say, you look back at what we've done historically, think fund banking will be a large portion of what you see in our balance sheet growth here. You know, that's probably a 130 to a 160 basis points in yield higher than what you see on the average loan portfolio. We'll continue to add mortgage. We'll, you know, we'll do what we can at securities-based lending. We'll do selective commercial lending, and, obviously, we're supporting our venture group as well.

But those yields, you know, I think you can look at the yield table and kinda see can where those are coming out. But if you take a step back and think about the guidance general, you know, we're talking about two seventy-five or 175 to 285 million of NII. In the first quarter and then a billion one to billion two for the full year. I think when, you know, we make comments about being relatively rate neutral, the key assumption here then is that $4 billion balance sheet growth, which I touched on kind of what the mix could look like there. But we're, you know, we're generally assuming linear growth.

So you can basically plug, call it, $2 billion of average interest-earning assets into your model. And I would also say when you touch on the liability side, we're assuming that all that growth will be funded with treasury deposits. Rather than, you know, sweep or smart rate. So, you know, we're talking about a cost of funds slightly better than where we see smart rate today. We're not really modeling in any changes in interest rates even though, you know, I just said we're of agnostic to interest rates. And so you bake that all together, we're somewhere around a 320 basis point, net interest margin for the year.

And so, again, the key is gonna be the mix of those assets and being able to deliver on that growth. And so we provide a range. It's a large range, but can kind of annualize the first quarter and think about that 2 billion of average interest-earning asset growth. And the fact that we're really not baking any other kind of fee income related to our assumptions here. That, you know, we feel like we're being, you know, fairly conservative in the guide there.

Devin Ryan: Let's see.

James Marischen: Other questions were liquidity and capital. Is that right?

Devin Ryan: I didn't go there, but if so you could you could always expand. But, no, I think we're I think we're good.

James Marischen: Alright. We have plenty. Yeah. Good. I did see that you have excess capital here, beyond the you know, it's kinda fun the $4 billion, I guess, is the point. So just like the upside case to potentially growing loans even more.

James Marischen: Right.

Operator: We will take our next question from Brennan Hawken with BMO Capital Markets.

Brennan Hawken: Hey, good morning. Thanks for taking my question. You just touched on this a little bit in the questions from Devin. But the C&I loan growth that we saw here this quarter, seem to come on in the back end of the quarter. And it also seemed to come on the asset beta was a little bit greater than we would have expected. Of course, there's some front-end sensitivity, but it seems like the spreads are coming on a little tighter. Could you speak to how much of that was new loans versus like a remix in the portfolio? And how should we be thinking about spreads in that book? Here as we go forward?

James Marischen: So the asset beta, you gotta remember the commentary we gave on fee income. We really didn't have any of those fees showing up. Which, you know, obviously can distort some of your yield calculations. The yield calculation annualizes that one-off type fee over the entire year. And, again, it distorts the yield a little bit. We just we went from, you know, last quarter, we had a handful of million dollars of fees to, you know, not a whole lot of those, you know, less than, you know, maybe a $100,000 or so in the quarter. So it was a pretty big change there.

We had a reclass of loans, out of held for sale back into the retained portfolio. That was probably a couple $100 million, but not overly material, but that was driving some of that growth as well. But, again, I would just kind of focus on our commentary related to fee income is the biggest driver as a delta between your expectations and the beta on the asset yields?

Brennan Hawken: Got it. Okay. Thanks for that. And then there's, you know, what justified or no, there seems to be a decent amount of concern around private credit markets. I'm curious what you're seeing within your COO book. You know, how are you thinking about that? I know you guys buy it high quality. You got a lot of subordination. But, you know, can you speak to any trends that you're seeing there? Thanks.

Ronald James Kruszewski: Look, the minuscule? I mean, none. I just really none. Some of our CLO book had very, very little exposure to some of the names. But as we look at it, and I've always been very comfortable with both the subordination and what goes on in that book. And a lot of our sponsored finance loan book. You know, we sold. So just to answer your question directly, really no we don't see any issues there.

James Marischen: I think one thing I would add to that is, you know, we've actually seen a fair amount of refinance and redemption activity across the CLO book. You know, the structure is the credit subordination and diversion of cash flows and whatnot, if there are any credit issues here, we end up getting paid off. And so the structure works as intended. We're not seeing any material change. Any of our key metrics and really no concerns.

Brennan Hawken: Thanks for taking my questions.

Operator: We will take our next question from Bill Katz with TD Cowen.

Bill Katz: Great. Thank you very much for the expanded commentary and taking the questions this morning. Maybe big picture down. You mentioned sort of the loan growth thing that's pretty straightforward. Ron, how are you thinking about maybe strategic use of capital, fair amount of M&A going on around you, just obviously from the banking side. Also, some of your peers have been sort of been pretty active. Maybe just update us on your thinking of where you might be interested versus maybe returning that capital to investors? Thank you.

Ronald James Kruszewski: Well, you know, we increased the dividend. Right? So the dividend's up eleven. As I've said in every call, you know, the breakeven analysis, if you will, between stock buybacks and deploying capital, whether on the balance sheet or acquisition, moves around, and we're always looking at that. Broadly speaking, you know, we've said that we see balance sheet growth of about $4 billion. And so round numbers, that's $400 million of capital plus the dividend. It still leaves us a lot of capital to do some things with. And I would say that while we see almost everything, a lot of everything seems pretty richly valued.

Not just at the point in time, but frankly, forward projections on things that, you know, may have me usually take pause. And I'm pretty conservative, and if you know our history, we generally do not participate in really good markets. Okay? That's just not our style, and we'll be there. And if the right deal comes along and it makes you money as a shareholder, and builds our client relevance and is accretive to our new people and to the existing people in the firm. That has been a formula that has worked for us for twenty-eight years. And done a lot of deals.

The fact to just go out and do a deal to become larger and maybe dilute that return on tangible equity, return on equity, it's just not in our mindset. So plenty of opportunity. I tend to not answer the phone as much when the markets are at these levels.

Bill Katz: Alright. That's helpful. Just as a follow-up, maybe two-part to keep up with my peers here. First one is just in terms of the margin, how much of the margin if you separate maybe sort of the repositioning of SIA and the European footprint, as you look forward, how much of the incremental margin comes from the investment banking opportunity versus the wealth management looking particularly at the wealth management business, and that seemed to be a little sticky on the margins again. I don't know how much of the merger charge was in there. Or the prospective impact.

And then unrelatedly, the second question is, you give us a sense of any activity levels into the new quarter just in terms of client cash dynamics? Thank you.

Ronald James Kruszewski: I'm not quite sure I understood the I generally say that I think for the year, for instance, institutional margins combined came in around 17%. And, you know, when we look at what we're doing, there was a drag in our European operations. You know, I'd like to think that those margins are in the low twenties. Right. So that's maybe five points more. On, you know, $2 billion of revenues, round number last year. So that'll give you some sense of what we see as we're making sure that we're optimizing that business. Okay? And I think that business can I think those can even be higher? But we've had a lot of new hires, a lot of invest.

So we're 17. We've talked when we gave our $8 number, I think that we said that if we got to 18%, that would be one of the triggers of helping us recover to where our interim target was. As it so, you know, that'll give you a sense. Wealth is a very profitable business, you know, margins of 35, 36, 37% is just a very good business that's been consistent over time. So I'm not sure I see anything diminishing that. Jim, on cash,

James Marischen: Yep. So in terms of liquidity, we saw a total sweep in smart rate balance increase at as of year-end, it was about $26.6 billion. I look back over the last week, and that number has been relatively steady to say down $200 million. Most of that fluctuation we've seen has been in sweep. It is somewhat hard to say exactly where those balances will move on a day-to-day basis, and a lot of that's just gonna depend on client activity. Generally speaking, I will say we expect to see some outflow of cash through tax season and then a build in the latter half of the year as we've historically seen.

But I would also highlight, you know, within venture and other treasury deposits, we had a record quarter of growth in April. It's $1.5 billion. Not sure if that's exactly the right run rate to model going forward. I'd say at this point, it'd probably be reasonable to expect around, call it, $750 million to a billion dollars of incremental deposits on a quarterly basis. And, lastly, I'll just highlight, you know, we just had recently made some new hires within kind of the health care, life sciences group, as well as in energy tech. Those folks are just getting started, and, you know, they're gonna continue to add your capabilities here.

Bill Katz: Thank you.

Operator: We will take our next question from Michael Cho with JPMorgan.

Michael Cho: Hi, good morning. Thanks for taking my I just wanted to touch on bank M&A. You highlighted it a few times on the call, and clearly, an uptick in kind of nice momentum looking into '26. I mean, if we think about the bank M&A runway and maybe beyond '26, I was wondering if you could maybe remind us how we might frame the multiyear tailwind and maybe in terms of sizing and maybe pace of that opportunity for Stifel ahead?

Ronald James Kruszewski: Yeah. I think look, I don't think there's really any question at the broad not I don't want to talk about any specific banks or anything like that. That's not appropriate. But generally speaking, there you know, there's a lot of banks that are going to need to combine for scale, profitability, you know, the technology investments, the challenges on deposits, and loan origination. And you have there's just a lot of institutions that are probably thinking, you know, how are we gonna compete? And they're gonna wanna do it through scale. And you got valuations that are allowing conversation to occur. And on the converse side, the buyers are thinking the same thing. You know?

They're thinking they need to acquire or be acquired on many fronts. So I think that the banking is in a period of consolidation. And maybe driven as much by the fact that it was very hard to do any consolidation from the period 2020 to 2024 in the previous administration. They did know, you can remember all those transactions. It would take years to get approved. And that put a damper on boards talking. So I look. I think there's a lot to do. What I like from my perspective is that we've been, you know, we merged with KBW back in 2013.

And, you know, virtually all of the MDs that were calling and have relationships with clients are still with us. We have that core group of bankers that have deep, deep relationships not only with management but in the boardrooms. And we're in a good position as a trusted adviser on getting these deals done. So I'm not gonna predict how many banks what the volume's going to be because I really don't know. I would say the trends are that you'll see more than average.

And most importantly, we're just in a really good spot, with the consistency the fact we have a separate sales force that we trade, everything that we've done has put us in a good position. You saw it last year, and we're starting this year off. With a nice transaction. So I'm confident about this.

Michael Cho: Great. I appreciate all the color. If I could just switch to the wealth side, Ron, I think you made a comment earlier in the call touched on maybe increasing allocation to recruiting. I was hoping maybe you could just flesh that out a little bit. You mean in terms of more recruiting dollars or higher incentives? And is that something that's already in the guide? In, you know, in the twenty-fifth guide? And is that something that should actually accelerate? NNA into '26? Thanks.

Ronald James Kruszewski: I mean, it's a great question. I'm looking at these numbers. I'm looking at what drives our results. I'm looking at the number of hires that we've hired, number of teams that we have hired, the mix of business they bring in, how some of these teams come in, and then we immediately see it in lending and in cash balances and in fee-based business. And I just, you know, made the general comment that as I sit here, I think I said that maybe after this call, I'll sit down with Mr. Zemlock, and just say, look. Everyone's asking me about, you know, utilization of capital and where do we wanna put our dollars.

You know, we can buy back stock. We've already increased our dividend. Look at acquisitions, do a number of things. But one the other one increased the balance sheet. The other one is to get after recruiting a little bit more. We have been generally a shop where we want people to come to us. We don't make a huge amount of outgoing phone calls. Advisors join us because they want to. That's very effective, by the way. You get people who wanna be with us. But we might be able to pick up the phone here and there, and that's what I'm thinking about, because we have a great platform.

We are a traditional wealth management firm that people love it here, and we need to press that advantage. A little bit.

Michael Cho: Great. Thanks, Ron.

Operator: We will take our next question from Alex Blostein with Goldman Sachs.

Ronald James Kruszewski: Alex, you made it, I think.

Michael Cho: Hey, guys. You actually have Michael on for Alex this morning. Just one question from us.

Ronald James Kruszewski: Tell Alex I said hello to you. Jeez.

Michael Cho: Appreciate the color on the expense outlook from here. We spent some time talking about it. But on the non I think the guide implies something like 10% year over year growth next year. Can you walk us through the incremental areas of growth embedded in there? It sounded like there might be some wiggle room on that depending on how top-line results come in over the course of the year.

James Marischen: So, you know, first, would say we are taking our guide down. We're taking it down a full percentage point down to 18 to 20%. On an adjusted basis for, you know, as a percentage of revenues. Obviously, there are some timing things associated with the sale of SIA. There are some things that take time to recognize some of the cost saves associated with European reorg. There are certain things we've talked about in the past. Things like, you know, we're running kind of our cloud migration and data center process at the same time now. We do see some potential cost savings related to that, but that's probably more of a 2027 event.

So there's a number of things related to that or that are coming into that guide. But when you look at kind of where we've come in at, from a margin perspective, it's, you know, it you take comp and non-time together, you're seeing a pretty nice increase in overall pretax margins. We've gotten a few questions related to the non-comp or seen a few questions so far this morning. But, you know, our guide is implying already higher margins for 2020.

Michael Cho: Great. Thank you.

Operator: And gentlemen, there are no further questions at this time. I will now turn the conference back to Mr. Kruszewski for any additional or closing remarks.

Ronald James Kruszewski: No, I would say that thank you, everyone, for joining. As we embark on 2026. I feel that the firm and its capabilities and our ability to grow from here, frankly, never been better. We have a better platform, broader product mix, and increasing profiles, doing detracting larger teams, doing larger transactions. It feels that the way what we've done to build out the capabilities of the firm through talented people is continuing to work, and I expect 2026 to be a continuation of the same. So look forward to reporting back to everyone. At for the first quarter. And I'll end with while some I'm gonna end with two things.

One, I'm gonna say that the Indiana Hoosiers are the national champions and go Stifel US ski team. But I've not been able to brag about Indiana in my sixty plus years of being alive, so I'm taking it right now. So go Hoosiers. Congratulations, everyone. Thanks for your time. Take care.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

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