Attached files
| file | filename |
|---|---|
| 8-K - 8-K - STIFEL FINANCIAL CORP | d535873d8k.htm |
| EX-99.1 - EX-99.1 - STIFEL FINANCIAL CORP | d535873dex991.htm |
 1 Quarter 2013
Financial Results Presentation
May 9, 2013
st
Exhibit 99.2 |
 1
Disclaimer
This presentation may contain “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995 that involve significant risks,
assumptions, and uncertainties, including statements relating to the market opportunity and future business
prospects of Stifel Financial Corp., as well as Stifel, Nicolaus & Company, Incorporated
and its subsidiaries (collectively, “SF” or the “Company”).
These statements can be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,”
“estimate,” “project,” “believe,” “intend,”
“anticipate,” “expect,” and similar expressions. In particular, these statements may refer to our
goals, intentions, and expectations, our business plans and growth strategies, our ability to
integrate and manage our acquired businesses, estimates of our risks and future costs
and benefits, and forecasted demographic and economic trends relating to our industry.
You should not place undue reliance on any forward-looking statements, which speak only as
of the date they were made. We will not update these forward-looking
statements, even though our situation may change in the future, unless we are obligated to do so under federal
securities laws. Actual
results may differ materially and reported results should not be considered as an indication of future performance. Factors that could
cause actual results to differ are included in the Company’s annual and quarterly reports
and from time to time in other reports filed by the Company with the Securities and
Exchange Commission and include, among other things, changes in general economic and business
conditions, actions of competitors, regulatory and legal actions, changes in legislation, and
technology changes.
The Company utilized non-GAAP calculations of presented net revenues, compensation and
benefits, non-compensation operating expenses, income before income taxes,
provision for income taxes, net income, compensation and non-compensation operating expense ratios, pre-tax
margin and diluted earnings per share as an additional measure to aid in understanding and
analyzing the Company’s financial results for the three months ended March 31,
2013. Specifically, the Company believes that the non-GAAP measures provide useful information by
excluding certain items that may not be indicative of the Company’s core operating
results and business outlook. The Company believes that these non-GAAP measures
will allow for a better evaluation of the operating performance of the business and facilitate a meaningful
comparison of the Company’s results in the current period to those in prior periods and
future periods. Reference to these non-GAAP measures should not be considered as a
substitute for results that are presented in a manner consistent with GAAP. These non-GAAP
measures are provided to enhance investors' overall understanding of the Company’s
financial performance. Use
of
Non-GAAP
Financial
Measures
Forward-Looking
Statements |
 2
Chairman’s Comments
“We are pleased with our performance for the quarter, which included
record net revenues. While our profitability is clouded by merger-related
charges, it is noteworthy that our Global Wealth Management segment
posted record revenue and profitability, and our Institutional segment
generated record quarterly revenue. As we work through the KBW
integration process and the related expense reductions, we expect to
continue to report both GAAP and non-GAAP results for the remainder of
the year. Looking forward, we are focused on leveraging our new and
established businesses to drive growth and profits across the platform.
Additionally, we are on track this quarter to complete the acquisition of the
U.S. institutional fixed income sales and trading team and hiring of the
European team from Knight Capital Group.” |
 Market
Overview Domestic Equity Flows
Equity Risk Premium
Activity Summary
Volumes are in million $, except trading volumes which are in million shares. Data as
of 3/31/2013 2013 Q1
2012 Q4
2012 Q3
2012 Q2
2012 Q1
QoQ
YoY
S&P 500
1,569
1,426
1,441
1,362
1,408
10%
11%
U.S. Treasury 10yr Yield
1.85%
1.76%
1.63%
1.65%
2.21%
+9 bps
-36 bps
Equity ADV
6,372
6,084
5,981
6,917
6,821
5%
-7%
Corporate Bond ADV
20,736
16,347
16,364
17,147
19,933
27%
4%
U.S. DCM ($)
626,267
584,655
639,520
545,139
644,207
7%
-3%
U.S. DCM (#)
2,236
2,189
2,441
2,490
2,912
2%
-23%
U.S. ECM ($)
75,491
63,033
79,976
69,876
57,535
20%
31%
U.S. ECM (#)
287
257
250
223
253
12%
13%
Municipal Bond DCM
82,870
97,126
87,670
115,009
79,087
-15%
5%
U.S. Announced M&A ($)
316,339
356,033
218,295
228,630
170,273
-11%
86%
U.S. Announced M&A (#)
2,629
3,282
2,893
2,948
3,101
-20%
-15%
U.S. Completed M&A ($)
231,503
320,126
211,771
302,664
193,951
-28%
19%
U.S. Completed M&A (#)
2,575
3,272
2,840
2,880
3,011
-21%
-14%
First Quarter
Results
3 |
 KBW
KBW
Merger
Merger |
 5
KBW Update
Market Acceptance of Transaction
Merger closed:
February 15, 2013
All client facing decisions made by deal close
Back-office conversion completed: March 6, 2013
Significant steps towards achieving cost savings target
KBW Investment Banking
KBW is #1 year to date in the number of FIG and Bank
mergers
KBW is #1 in gross deal value for Bank mergers and has
advised on the 5 largest Bank mergers this year
Cross-selling success:
Boston Private Financial Holdings, Inc. preferred
equity offering
Zions Bancorporation preferred equity offering
Radian Group, Inc. convertible senior debt offering
MGIC Investment Corporation convertible senior
debt offering
KBW Equities
KBW Research reassigned and launched
Readership of KBW Research is above pre-deal
levels
Market share in adv. Volume for KRX components
was 4.5% for Q1 2013, compared to 2.7% for Q1 2012
April was the best month for equity commissions for
KBW in over a year in its U.S. and European products
M&A Statistics Source: SNL Financial; Includes transactions announced since 1/1/2013;
Data as of 5/8/2013
Note: Includes only whole institution transactions in the United States.
|
 6
Non-Core Expenses
Acquisition-Related Expenses |
 7
Non-Core Expense Projections
Acquisition-Related Expenses |
 Financial
Financial
Results
Results |
 Stifel
Financial Corp. Results Three months ended March 31, 2013
9
(1)
Non-core expenses consisted of a charge related to expensing stock awards issued as
retention in connection with the acquisition of KBW and merger-related expenses.
_________________________________________________________
(1)
($ in thousands, except per share amounts)
GAAP
Non-Core
Non-GAAP
3/31/12
% Change
12/31/12
% Change
Net revenues
441,780
$
8
$
441,788
$
400,333
$
10.4%
417,830
$
5.7%
Compensation and benefits
315,727
(33,786)
281,941
254,704
10.7%
262,213
20.4%
Non-comp operating expenses
102,707
(6,552)
96,155
86,375
11.3%
94,550
8.6%
Total non-interest expenses
418,434
(40,338)
378,096
341,079
10.9%
356,763
17.3%
Income before income taxes
23,346
40,346
63,692
59,254
7.5%
61,067
(61.8%)
Provision for income taxes
8,727
15,081
23,808
24,481
(2.7%)
21,113
(58.7%)
Net income
14,619
$
25,265
$
39,884
$
34,773
$
14.7%
39,954
$
(63.4%)
Earnings per share:
Diluted
0.21
$
0.58
$
0.55
$
5.5%
0.63
$
(66.7%)
Weighted
average
number
of
shares
outstanding:
Diluted
69,189
69,189
62,669
10.4%
63,301
9.3%
Ratios to net revenues:
Compensation and benefits
71.5%
63.8%
63.6%
62.8%
Non-comp operating expenses
23.2%
21.8%
21.6%
22.6%
Income before income taxes
5.3%
14.4%
14.8%
14.6%
Three Months Ended March 31, 2013
Three Months Ended |
 Source of
Revenues 10 |
 11
Brokerage Revenues by Segment |
 Core
Non-Interest Expenses Three months ended March 31, 2013
12
_________________________________________________________
(1)
Excludes non-core expenses consisting of a charge related to expensing stock awards
issued as retention in connection with the acquisition of KBW and merger- related
expenses. (2) Transition pay includes amortization of upfront notes, signing
bonuses and retention awards.
($ in thousands)
3/31/13
(1)
3/31/12
% Change
12/31/12
% Change
3/31/13
(1)
3/31/12
12/31/12
Net revenues
441,788
$
400,333
$
10.4%
417,830
$
5.7%
100.0%
100.0%
100.0%
Compensation and benefits
259,135
236,332
9.6%
239,714
8.1%
58.7%
59.0%
57.4%
Transitional pay
(2)
22,806
18,372
24.1%
22,499
1.4%
5.2%
4.6%
5.4%
Total compensation and benefits
281,941
254,704
10.7%
262,213
7.5%
63.8%
63.6%
62.8%
Occupancy and equipment rental
31,501
30,791
2.3%
34,075
(7.6%)
7.1%
7.7%
8.2%
Communication and office supplies
21,858
20,373
7.3%
19,795
10.4%
4.9%
5.1%
4.7%
Commissions and floor brokerage
8,669
7,612
13.9%
7,480
15.9%
2.0%
1.9%
1.8%
Other operating expenses
34,127
27,599
23.7%
33,200
2.8%
7.7%
6.9%
7.8%
Total non-comp operating expenses
96,155
86,375
11.3%
94,550
1.7%
21.8%
21.6%
22.6%
Total non-interest expense
378,096
341,079
10.9%
356,763
6.0%
85.6%
85.2%
85.4%
Income before income taxes
63,692
59,254
7.5%
61,067
4.3%
14.4%
14.8%
14.6%
Provision for income taxes
23,808
24,481
(2.7%)
21,113
12.8%
5.4%
6.0%
5.1%
Non-GAAP net income
39,884
$
34,773
$
14.7%
39,954
$
(0.2%)
9.0%
8.7%
9.6%
Non-core expenses (after-tax)
(25,265)
-
-
GAAP net income
14,619
$
34,773
$
39,954
$
Three Months Ended
% of Net revenues |
 Segment
Comparison 13
(1)
Non-GAAP results for the three months ended March 31, 2013 compared to GAAP results for
the year-ago period and the three months ended December 31, 2012.
(2)
Results for the three months ended March 31, 2013 and December 31, 2012 included realized and
unrealized gains on the Company’s investment in Knight Capital Group, Inc. of $2.2
million and $13.4 million, respectively.
_________________________________________________________
($ in thousands)
3/31/13
(1)
3/31/12
%
Change
12/31/12
%
Change
Net revenues:
Global Wealth Management
266,957
$
247,608
$
7.8%
255,084
$
4.7%
Institutional Group
(2)
176,437
149,244
18.2%
165,056
6.9%
Other
(1,614)
3,481
(146.4%)
(2,310)
(30.1%)
441,780
$
400,333
$
10.4%
417,830
$
5.7%
Operating contribution:
Global Wealth Management
69,499
$
68,878
$
0.9%
69,282
$
0.3%
Institutional Group
(2)
28,137
24,004
17.2%
21,490
30.9%
Other
(33,944)
(33,628)
0.9%
(29,705)
14.3%
63,692
$
59,254
$
7.5%
61,067
$
4.3%
Three Months Ended |
 Global Wealth
Management 14
($ in thousands)
3/31/13
3/31/12
% Change
12/31/12
% Change
Commissions
102,086
$
91,020
$
12.2%
93,045
$
9.7%
Principal transactions
56,307
58,381
(3.6%)
54,747
2.8%
Asset management & service fees
68,934
60,586
13.8%
68,631
0.4%
Net interest
21,486
17,642
21.8%
21,195
1.4%
Investment banking
11,103
12,402
(10.5%)
10,906
1.8%
Other income
7,041
7,577
(7.1%)
6,560
7.3%
Net revenues
266,957
247,608
7.8%
255,084
4.7%
Compensation and benefits
157,596
143,351
9.9%
147,029
7.2%
Non-comp operating expenses
39,862
35,379
12.7%
38,773
2.8%
Total non-interest expenses
197,458
178,730
10.5%
185,802
6.3%
Income before income taxes
69,499
$
68,878
$
0.9%
69,282
$
0.3%
Ratios to net revenues:
Compensation and benefits
59.0%
57.9%
57.6%
Non-comp operating expenses
15.0%
14.3%
15.2%
Income before income taxes
26.0%
27.8%
27.2%
Three Months Ended |
 Stifel Bank
& Trust (an operating unit of GWM)
15
As of
3/31/13
3/31/12
% Change
12/31/12
% Change
Assets
$
3,832,281
$
2,611,828
46.7
$
3,652,633
4.9
Investment securities
2,440,146
1,673,866
45.8
2,332,058
4.6
Retained loans, net
886,597
657,081
34.9
822,711
7.8
Loans held for sale
165,698
141,136
17.4
214,531
(22.8)
Deposits
3,556,568
2,357,912
50.8
3,346,133
6.3
Allowance as a percentage of loans
1.01
%
0.87
%
0.99
%
Non-performing assets as a percentage
of total assets
0.04
%
0.11
%
0.06
%
As of
Allowance for loan losses
5,781
9,406
62.7
8,145
15.5
Non-performing loans
2,144
1,063
(50.4)
(41.2)
1,809
Other non-performing assets
717
373
(48.0)
-
373
Non-performing assets
2,861
1,436
(49.8)
2,182
(34.2)
$
$
$
$
$
$
$
$
$ |
 Institutional
Group 16
`
($ in thousands)
3/31/13
3/31/12
% Change
12/31/13
% Change
Net revenues
176,437
$
149,244
$
18.2%
165,056
$
6.9%
Compensation and benefits
107,636
94,430
14.0%
108,371
(0.7%)
Non-comp operating expenses
40,664
30,810
32.0%
35,195
15.5%
Total non-interest expenses
148,300
125,240
18.4%
143,566
3.3%
Income before income taxes
28,137
$
24,004
$
17.2%
21,490
$
30.9%
Ratios to net revenues:
:
Compensation and benefits
61.0%
63.3%
65.7%
Non-comp operating expenses
23.1%
20.6%
21.3%
Income before income taxes
15.9%
16.1%
13.0%
Three Months Ended |
 Institutional
Group Revenues ($ in thousands)
3/31/13
3/31/12
% Change
12/31/12
% Change
Institutional brokerage:
Equity
52,000
$
44,171
$
17.7%
41,805
$
24.4%
Fixed income
45,500
45,964
(1.0%)
42,391
7.3%
97,500
90,135
8.2%
84,196
15.8%
Investment Banking:
Capital raising
Equity
24,380
31,550
(22.7%)
19,830
22.9%
Fixed income
15,715
10,881
44.4%
18,466
(14.9%)
40,095
42,431
(5.5%)
38,296
4.7%
Advisory fees
27,180
15,605
74.2%
26,644
2.0%
Investment banking
67,275
58,036
15.9%
64,940
3.6%
Other
(1)
11,662
1,073
*
15,920
(26.7%)
Total net revenue
176,437
$
149,244
$
18.2%
165,056
$
6.9%
Three Months Ended
17
_________________________________________________________
* Percentage not meaningful.
(1)
Includes net interest and other income. Other income for the three months ended March 31, 2013
and December 31, 2012 included realized and unrealized gains on the Company’s
investment in Knight Capital Group, Inc. of $2.2 million and $13.4 million pre-tax, respectively. |
 Financial
Financial
Condition
Condition |
 Capital
Structure As of March 31, 2013
(in thousands, except ratios)
($ in thousands)
Total Assets
8,133,755
$
Stockholders' Equity
1,903,666
$
6.70% senior notes, due 2022
175,000
$
5.375% senior notes, due 2022
150,000
Non-recourse debt, 6.75%, due 2016
55,934
Debentures to Stifel Financial Capital Trusts II, III, & IV
82,500
Total Capitalization
2,367,100
$
Ratios:
Debt to Equity
13.5%
Leverage Ratio
3.4x
Equity Capitalization
4.3x
19
_________________________________________________________
(1)
(2)
(3)
(1)
Debt to equity ratio includes the debentures to Stifel Financial Capital Trusts ($82.5m),
non-recourse debt ($55.9m), and Senior Notes ($325.0m) divided by
stockholders’ equity.
(2)
Leverage ratio = total assets divided by total capitalization. (3)
Equity capitalization = total assets divided by stockholders’equity. |
 20
Other Financial Data
(1)
Includes 148, 155 and 151 independent contractors as of March 31, 2013, March 31, 2012 and
December 31, 2012. (2)
Includes money-market and FDIC-insured balances. Prior period amounts have been
adjusted to conform to the current period presentation.
_________________________________________________________
As of
3/31/13
3/31/12
% Change
12/31/12
% Change
Total assets (000s):
Stifel Nicolaus & Stifel Financial
4,301,474
$
2,853,866
$
50.7%
3,313,507
$
29.8%
Stifel Bank
3,832,281
2,611,828
46.7%
3,652,633
4.9%
Total assets
8,133,755
$
5,465,694
$
48.8%
6,966,140
$
16.8%
Total shareholders' equity (000s):
Stifel Nicolaus & Stifel Financial
1,620,204
$
1,144,532
$
41.6%
1,226,824
$
32.1%
Stifel Bank
283,462
198,410
42.9%
267,837
5.8%
Total shareholders' equity
1,903,666
$
1,342,942
$
41.8%
1,494,661
$
27.4%
Leverage ratio:
Stifel Nicolaus & Stifel Financial
2.1
2.0
1.4%
2.0
5.5%
Stifel Bank
13.5
13.2
2.6%
13.6
(0.9%)
Total leverage ratio
3.4
3.4
0.6%
3.6
(3.3%)
Book value per share
30.13
$
25.07
$
20.2%
27.24
$
10.6%
Financial advisors
(1)
2,063
2,013
2.5%
2,041
1.1%
Full-time associates
(2)
5,680
5,135
10.6%
5,343
6.3%
Locations
357
326
9.5%
340
5.0%
Total client assets (000s)
147,119,000
$
130,550,000
$
12.7%
137,855,000
$
6.7%
As of |
 Q&A
Q&A |