Q2 2025 Stifel Financial Corp Earnings Call

Ron Kruszewski: Please stand by. Your conference is about to begin.

Please standby your conference is about to begin.

Joel Jeffrey: Good day and welcome to the Stifel Financial Corp. Second Quarter 2025 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.

Good day and welcome to the Stifel Financial's second quarter 2025 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.

Jim Marischen: Thank you, Operator. I would like to welcome everyone to Stifel Financial Corp. Second Quarter 2025 Conference Call. I am joined on the call today by our Chairman and CEO, Ron Kruszewski, our President, Jim Zemlyak, and our CFO, Jim Marischen. Earlier this morning, we issued an earnings release and posted a 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. 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 audiocast is copyrighted material Stifel Financial Corp.

Thank you operator.

I'd like to welcome everyone to Stifel Financial's second quarter 2025 conference call I'm joined on the call today by our chairman and CEO, Ron Kruszewski, our president, Jim <unk>, and our CFO, Jim Marish It earlier.

Earlier. This morning, we issued an earnings release and posted a slide deck and financial supplement to our website, which can be found on the investor Relations page at Www Dot Stifel Dot 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.

I'd 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 audiocast is copyrighted material of Stifel Financial Corp, and may not be duplicated reproduced or rebroadcast without the consent of Stifel financial I will now turn the call over to our chairman and CEO Ron Kruszewski.

Jim Marischen: and may not be duplicated, reproduced, or rebroadcast without the consent of Stifel Financial Corp. I will now turn the call over to our Chairman and CEO, Ron Kruszewski.

Jim Zemlyak: 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. That said, if we got clarity on these issues, conditions could improve quickly. That is exactly what happened. Investor sentiment improved significantly in the last two months of the quarter as greater clarity on tariff and tax policy emerged. The S&P 500 rallied 1,000 points since our last call, fueling record client assets in wealth management and sparking a rebound in M&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 are positioned for a strong second half.

Thanks, Joe 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 noticed that uncertainty around tariffs and the so called Big Beautiful Bell have created headwinds for the market.

But I said that in that if we got clarity on these issues conditions could improve quickly and that's exactly what happened.

That's where sentiment improved significantly in the last two months of the quarter is greater clarity on tariff and tax policy and merged the S&P 500 rallied to 1000 points since our last call fueling record client assets in wealth management, and sparking a rebound in M&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 1.28 billion 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.

Jim Zemlyak: Our second quarter results included a very challenging April, yet we still delivered over $1.28 billion 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 $0.20. Our balance model continues to deliver across market cycles. Global Wealth Management hosted 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 Financial Corp. ranked number one overall in the J.D. 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.

Scott.

Our balanced model continues 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.

Late quarter pickup in investment banking.

Global wealth Stifel ranked number one overall in the J D power adviser 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 product and marketing and technology.

Jim Zemlyak: That recognition reflects our commitment to advisor support. It is not just a cultural point; it is a recruiting advantage. This was our strongest recruiting quarter since Q4 of 2015, with 82 new advisors added, including 36 through B. Reilly and 21 experienced advisors, representing $51 million in trailing 12-month production. Strategically, we completed our acquisition of Brian Garnier, a European boutique investment bank with deep expertise in healthcare and technology. As Jim Marischen will discuss later, this acquisition supports our broader effort to reposition our European operation, deemphasizing sales and trading while expanding our focus on Advisory Services and Investment Banking. Combined with ongoing efficiency initiatives, this positions Stifel Financial Corp. to contribute more meaningfully to the firm's long-term profitability. Moving on to the numbers, our record second quarter net revenue grew 6% year over year with gains across the board except for a modest decline in Advisory Services.

That recognition reflects our commitment to advisor support.

Just a cultural point its a recruiting advantage. This was our strongest recruiting quarters since Q4 of 2015, but 82, new advisors added including 36 <unk>.

B Riley in 'twenty, one experienced advisors.

Representing.

Representing $51 million in trailing 12 months' production.

Strategically we completed our acquisition of Bryan Garnier, <unk>, a European boutique investment bank with deep expertise in health care and technology.

Jim will discuss later this acquisition supports our broader effort to reposition our European operation Deemphasizing sales and trading while expanding our focus on advisory and investment bank.

Combined with the ongoing with ongoing efficiency initiatives dispositions Europe to contribute more meaningfully to the firm's long term profitability.

Moving on to the numbers.

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.

Jim Zemlyak: Commissions and principal transactions rose 11% with gains in both Global Wealth Management and Institutional Equities. 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 costs. Our compensation ratio was 58%, consistent with the high end of our full-year guidance as we continue to accrue compensation conservatively. Operating pre-tax margin was 20.3% and operating EPS was $1.71, up 7% from last year. Before I turn the call over to Jim Marischen, 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.D. Power isn't just a badge; it's a recognition of our foundation, which drives results.

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.

Our compensation ratio was 58% consistent with the high end of our full year guidance as we continued to accrue compensation conservatively operating pre tax margin was 23% and operating EPS of $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 D power isn't just a bad it's a recognition of our foundation, which drives result since 2020, we've added nearly 800 financial advisers with.

Jim Zemlyak: Since 2020, we've added nearly 800 financial advisors with $420 million in trailing 12-month production. Recruiting accelerated in 2025. In the first half alone, we brought in 66 experienced advisors with $63 million in production. That includes a major team from B. Riley and 30 organic recruits with $43 million in production, many in the million-dollar-plus category. For perspective, in all of 2024, we added 50 experienced advisors with $37 million in production. These highly productive advisors 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 billion and $206 billion, respectively. The sequential increases were due to stronger equity markets and strong asset inflow, including the advisors from B. Riley.

$420 million in trailing 12 month production.

<unk> accelerated in 2025 in the first half alone. We've brought in 66 experienced advisors was 63 million in production and includes a major team from B Riley and 30 organic crudes with a forward with $43 million in production many of the million dollar plus category for perspective in all of 2024.

We added 50 experienced advisors with $37 million in production.

Highly productive advisors bring more client assets and those assets are increasingly fee based.

It's more stable recurring revenue from asset management and net interest income.

We ended the quarter with record total client in fee based assets of 517.

Billion dollars and 206 billion, respectively. The sequential increases were due to stronger equity markets and strong asset inflows, including 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%.

Jim Zemlyak: 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 are confident in continued growth. While recruiting can vary from quarter to quarter, we expect a strong second half with new advisors transitioning clients to our platform. Our clients continue to hold over $15 billion in money market funds and $6 billion in short-term treasuries, providing a potential liquidity source for Stifel deposits. Let me move to the institutional group. Total revenue for the segment was $420 million, which was up 7% from the prior year. Firm-wide Investment Banking revenues totaled $233 million, driven by year-on-year and sequential increases in Capital Raising revenue. Fixed Income underwriting revenue was $54 million and increased 18% sequentially, driven by a solid increase in public finance activities.

[noise] ahead, we're confident in continued growth our recruiting can vary from quarter to quarter. We expect a strong second half with new advisors transitioning clients to our platform. Our clients continue to hold over $15 billion in money fund money market funds and $6 billion in short term treasury providing potential.

What are the source for steeple deposit.

Let me will be the institutional group total revenue for the segment was $420 million, which was up 7% from the prior year.

Wide investment banking revenues totaled $233 million driven by year on year, It's a couple of and sequential increases in capital raising revenues fixed income underwriting revenue was $54 million in.

And increased 18% sequentially driven by a solid increase in public finance activity Stifel continues to rank number one by the number of negotiated issues ladder, So our senior managers.

Jim Zemlyak: Stifel continues to rank number one by the number of negotiated issues led as sole or senior managers. Equity Capital Raising totaled $46 million in the quarter. The market effectively shut down for six weeks following Liberation Day, with only a handful of pipes and advisory link deals. Activity returned mid-May alongside tariff relief, and we entered the third quarter with meaningfully stronger conditions. While industry-wide ECMPs were in line with the first half of 2024, the mix shifted. Financials and fintech were strong. Healthcare was down more than 50%. We are seeing early signs of a broader IPO recovery, and follow-on activity remains sponsor-driven, with private equity continuing to lead issuance. As M&A paths narrow, late-stage private placements, continuation vehicles, and IPOs are increasingly being used to create liquidity. Advisory revenue was $127 million.

Equity capital raising totaled $46 million 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 return mid mail alongside tariff relief and we entered the third and we entered the third quarter with meaningfully stronger.

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While industry wide ECM fees were in line with the first half of 2024, the mix shifted financials and Fintech restaurant health care was down more than 50%. We're seeing early signs of a broader IPO recovery in follow on activity remains sponsor driven private equity continuing to lead issuance.

As M&A past narrow late stage private placements continuation vehicles in ipos are increasingly being used to create liquidity.

Advisory revenue was $127 million.

Jim Zemlyak: We continue to get a strong contribution from financials despite the increased volatility early in the quarter. In the second quarter, we also got solid contributions from industrials and industrial services. We are also seeing improvement in healthcare and technology, and overall, the accelerating activity levels bode well for the second half of the year and into 2026. Taking a step back and looking back at our acquisition of KBW now more than 10 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. 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.

To get a strong we've continue to get strong contribution from financial.

Despite the increased volatility early in the quarter and the second quarter. We also got solid contributions from industrial and industrial services.

We're also seeing improvement in healthcare and technology and overall, the accelerating activity level bode well for the second half of the year and into 2026.

Taking a step back.

And looking back at our acquisition of <unk> now more than 10 years ago. We made a deliberate decision then to preserve the K BW brand within Stifel that integration has been a resounding success with nearly all of the original K VW investment banking managing directors still with cable.

<unk> Stifel.

Staying focused on successful integration have helped us build a franchise with deep expertise and longstanding client trust that commitment is now paying off in 2025, we advised on 84% of total disclose bank and thrift deal value, an extraordinary market share and a testament to the strength of our plan.

Jim Zemlyak: 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&A. Bank M&A, frankly, is accelerating, and 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 to participate and lead at every level. As to our trading businesses, equity transactional revenue totaled $61 million, which was up 16% year-on-year, driven by increased market volatility. Fixed Income revenue of $129 million was up 21% year-on-year, with increased contributions from our rates, 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.

Farm and positions us as the first call in Bank M&A Bank.

Bank M&A, frankly is accelerating and the strategic needs for larger banks to come by is also increasing giving the improved market dynamics, we expect that trend to continue and I am confident in our ability to participate and lead at every level.

As to our trading businesses equity transactional revenue totaled $61 million, which was up 16% year on year, driven by increased market volatility volatility.

Fixed income revenue of $129 million was up 21% year on year with increased contribution from our rate aircrafts 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.

Jim Zemlyak: 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. We've already seen early wins in areas like Investment Banking analytics and advisor 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. 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?

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 accelerated insights. We are systemically reviewing workflows across the firm more intelligent agents can amplify our professionals productivity and decision, making we've already seen early wins in areas.

Like investment banking analytics and advisor support examples where the right AI tools can create real leverage.

That said, we're clear eyed about the role of technology and enhances what are people too it doesn't replace them. Our business is built on trust relationships and judgment.

I will help us work faster and smarter, which should not replace the human side of Stifel. Let.

Now, let me turn the call over to Jim to walk you through the details of our second quarter results, Jim 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.

Jim Marischen: 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 million, on stronger Investment Banking and transactional revenue, as well as higher net interest income. Investment Banking revenue came in at $233 million, which is more than $20 million 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 would also highlight that Fixed Income underwriting beat the street estimate by more than 18% on strong public finance activity. Transactional revenue was 9% above the street, primarily because of higher Institutional Fixed Income and equity revenue.

Looking at our quarterly revenue, we beat the street estimate by 4% or $50 million on stronger investment banking and transactional revenue as well as higher net interest income.

Investment banking revenue came in at $233 million, which was more than $20 million 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.

Transactional revenue was 9% above the street, primarily because of higher institutional fixed income and equity revenue.

Jim Marischen: 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 million 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 suite 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. 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.

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 million 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.

Non compensation expenses roughly in line with the consensus and we're at the midpoint of our adjusted non comp operating expense guidance range and roughly 20% of revenues.

Provision for income taxes came in above the consensus number but was within our expected level of 25% to 26% due to nondeductible foreign losses.

Jim Marischen: Global Wealth Management revenue of $846 million was a second quarter record, as each line item improved from the same period a year ago. Pre-tax margins were 36%, which was in line with our performance over the past year. During the quarter, we added a total of 82 advisors to our platform. This included 57 experienced advisors with trailing 12-month production of $51 million. The 36 FAs acquired from B. Reilly were included in the experienced higher total. On slide eight, I will discuss our bank results. Net interest income of $270 million came in at the high end of our guidance. 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.

Global wealth management revenue of $846 million with a second quarter record as each line item improved from the same period a year ago pre.

Pre tax 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.

This included 57 experienced advisors with trailing 12 month production of $51 million.

The 36 FAA has acquired from B Riley were included in the experienced higher total.

Yeah.

On slide eight I will discuss our bank results net interest income of $270 million came in at the high end of our guidance.

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.

Jim Marischen: The 12 basis point increase in bank NIMs 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 million 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 million to $275 million. Our bank balance sheet remains relatively rate neutral, though we experienced some modest benefit from lower funding costs, as we had a slight mix shift in our deposits towards lower cost funding. I would also note that we anticipate an incremental $1 billion of loan growth in the second half of 2025. Client cash levels decreased during the quarter due to a $1.4 billion decline in smart rate balances and a nearly $460 million decrease in suite balances.

The 12 basis point increase in bank NIM was a function of lower cash balances and higher yields on our loan book as well as lower deposit costs.

As I mentioned earlier, we generated $4 million 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 million to $275 million.

Our bank balance sheet remains relatively rate neutral. So we experienced some modest benefit from lower funding costs, because we had a slight mix shift in our deposits towards lower cost funding.

I'd also note that we anticipate an incremental $1 billion of loan growth in the second half of 2025.

Client cash levels decreased during the quarter due to a $1 $4 billion decline in smart rate balances and the nearly $460 million decrease in sweep balances.

Jim Marischen: In terms of the decline in smart rate balances, roughly two-thirds of the decline occurred in April, and I note that suite balances improved late in the quarter, as June suite balances increased $300 million. Since quarter end, we have seen client cash balances essentially flat. As you can see in the chart, we have also included non-wealth deposits, which primarily include our venture and fund channels. While these are commercial deposits, they 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 $1.1 billion and have increased more than $2.2 billion 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.

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 million.

Since quarter end, we've seen client cash balances essentially flat.

As you can see in the chart. We have also included non wealth deposits, which primarily include our venture and phone channels.

Well these are commercial deposits that 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 1 billion and have increased more than $2 2 billion year to date as these gross initiatives growth initiatives continued to accelerate.

Our credit metrics and reserve profile remains strong.

Nonperforming asset ratio stands at 51 basis points.

Jim Marischen: Our credit loss provision totaled $8 million for the quarter, and our consolidated allowance to total loan ratio was 83 basis points. 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 million, 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. I would also note that we incurred $28 million in severance and other restructuring charges during Q2 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 credit loss provision totaled $8 million for the quarter and our consolidated allowance to total loan ratio was 83 basis points.

Moving onto 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, million% to 7% increase from the same period last year.

Non comp operating ratio was 23%.

Would expect a similar non comp ratio for the third quarter.

I'd also note that we incurred $28 million in severance and other restructuring charges during Q2 and our European operations.

As Ron mentioned earlier this is part of the plan to shift our European focus more.

More towards investment banking.

These costs represented the majority of the non-GAAP expenses incurred during the quarter.

Jim Marischen: 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 Q4. If the stock price holds at current levels, we would expect the full year effective tax rate to be between 20% and 22% for 2025. On slide 10, I will review our capital position. Our balance sheet continues to be well-capitalized. Tier 1's leveraged capital was in line with first quarter levels at 10.8%. Our Tier 1 risk-based capital ratio declined by 10 basis points to 17.5%. Based on a 10% Tier 1 leverage ratio target, we have approximately $315 million of excess capital. In terms of capital deployment during the quarter, we completed the acquisitions of B. Reilly and Brian Garnier.

Our tax rate for the quarter was 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 <unk>.

If the stock price holds at current levels, we would 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%.

Tier one risk based capital ratio declined by 10 basis points to 17, 5%.

Based on a 10% tier one leverage ratio target, we have approximately $315 million of excess capital.

In terms of capital deployment during the quarter.

We completed the acquisitions of B Riley <unk> Bryan Garnier, this added approximately $90 million to goodwill and intangible assets.

Jim Marischen: This added approximately $90 million to goodwill and intangible assets, and we repurchased roughly 970,000 shares, with 8.2 million shares remaining on our current authorization. Absent any assumption of additional share repurchases and assuming a stable stock price, we would expect the third quarter fully diluted share count to be 110.2 million shares. With that, let me turn the call back over to Ron.

And we repurchased roughly 970000 shares with $8 2 million 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 2 million shares.

With that let me turn the call back over to Rob.

Jim Zemlyak: 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. 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 8.2 million shares remaining under our repurchase authorizations, and we'll continue to pursue both organic and inorganic growth opportunities in Global Wealth Management and the Institutional group.

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're 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.

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 eight 2 million shares remaining under our repurchase authorization and we'll continue to pursue both organic and inorganic growth.

<unk> and global wealth management and institutional group.

Jim Zemlyak: 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 meme stocks behavior, a sharp rise in margin debt, and pockets of speculation that feel disconnected from fundamentals, certainly in my view. 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 strong markets 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. But either way, we'll keep doing what we've always done, serving clients, underwriting growth, and allocating capital with a long-term lens.

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 of 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 that in pockets of speculation.

That feel disconnected from fundamentals certainly in my view.

<unk> are now pricing in near perfect outcome, and while we're not in the business of predicting pullback, we do believe and staying disciplined.

We've been through an up market cycles to know that a strong markets 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, but either way, we will keep doing what we've always done serving client underwriting growth and allocating capital with a long term ladder taking.

Jim Zemlyak: 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 and inflation appear better contained than many feared just a few months ago. 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 Advisor Satisfaction. That recognition isn't just about today; it positions us for continued recruiting success going forward. In institutional, we're leading in bank M&A and believe that the current environment creates even more opportunity. 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.

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 key macro risks like tariffs inflation appear better contained in many peer just a few months ago. Additionally, our recruiting activity year to date has been extremely.

And we've built the platform to support it reflected in our third consecutive number one ranking in J D power.

The satisfaction that recognition isn't just about today that positions us for continued recruiting success going forward in institutional we're leading in bank M&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 boundaries.

In emerging growth companies across innovation driven sector. These are early wins, but they're strategic and they are building real momentum for the future.

Jim Zemlyak: 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 Nesi. As many of you know, Victor recently stepped down from his day-to-day responsibilities as Co-President and Head of our institutional group after 16 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. With that, Operator, please open the call for questions.

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 NESI.

As many of you know Victor recently stepped down from his day to day responsibilities as co president and head of our institutional group after 16 years of extraordinary leadership.

At the same time I am 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 a continued insight and guidance of the Stifel director.

So with that operator, please open the call for questions.

Joel Jeffrey: Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to signal for a question. We will take our first question from Devin Ryan with Citizens. Please go ahead.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.

You're using a speaker phone. Please make sure your mute function is turned back to allow your signal to reach our equipment.

Once again that is star one.

A question.

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

All right, Great, Hey, Ron Hi, Jim and Jim how are you.

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

Unidentified Speaker: Morning.

Good morning, gentlemen.

Unidentified Speaker: Hi, Devin.

Jim Marischen: I 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 non-depository subsectors. But with bank M&A seemingly reaccelerating here and probably picking up more into the back half, then you had a nice deal that KBW was advising on last week. What are you expecting there in terms of activity? If you can, maybe just frame out a little bit more around the opportunity and 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&A over the past four years.

Want to start with a question just on <unk> and <unk>.

I appreciate financials investment banking <unk> already been I think pretty strong just from a non depository subsectors, but with bank M&A seemingly re accelerating here and probably picking up more into the back half and then you had a nice deal K B W is advising on last week, what are you expecting there in terms of activity and.

If you can maybe just frame out a little bit more around the opportunity in the order of magnitude of kind of revenue potential or maybe what you've maybe been missing because theres been such a dearth of depository M&A over the past four years.

Jim Zemlyak: Well, part of your question answers your question, Devin, in that the dearth of activity over the last several years is driven by many factors. The economic, the rate environment, a certain amount, certainly, of uncertainty. The regulatory backdrop was not, shall we say, conducive, certainly not conducive to timely M&A approval. As those things, all of them have improved, hence the environment for M&A. 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 is technology or market share or just, frankly, the sheer growth of the CIFIs bodes well, I think, or speaks to the need for some consolidation. We have been talking about this for years, but the environment today is conducive to that. Certainly, the boardroom talks, they understand the benefit of doing smart strategic M&A.

So part of your question and answers your question Gavin in that.

North of activity.

Over the last several years driven by many factors.

Economic the rate environment.

Certain amount certainly of uncertainty the regulatory.

Backdrop was not shall we say can do so certainly not conducive to timely.

M&A approval.

So as those things they'll all have improved.

The environment for M&A and you couple that with.

I need for.

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 share growth.

Of the 50 <unk>.

<unk>.

Bodes well I think or speaks to the need for some consolidation that we've been talking about this for years.

Got you.

The environment today.

<unk> is conducive to that uncertainty.

Or talks.

I understand.

The benefits of doing smart strategic M&A as it relates.

Jim Zemlyak: As it relates, that is the environment's good. That is a long answer to say the environment is good. With respect to, we do not talk about our share or whatever. We have done very well. I think KBW STIFEL has shown that it is the way we have approached that deal and the way we have maintained the culture and the brand and the research and the sales and the trading and everything that goes with that has paid some dividends here. I never am expecting a business at all. We have earned it, but we are well positioned. That is, I am not going to give you any revenue numbers. Heck, I do not know. I just expect to get our fair share.

So that the environment's good that's a long answer to say the environment is good.

With respect to you know we don't talk.

Talk about.

Right now our share or whatever we've done very well I think.

<unk> Stifel a house.

As you know.

Yes.

Joan.

So the way we've approached that deal and the way, we maintain our culture and the brand and the research sales and trading and everything that goes with that and it has paid some dividends here. So.

Never am.

Expecting business at all we've earned it but we're well positioned so that's.

I'm not going to give you any revenue numbers.

I guess expect to get our fair share.

Jim Marischen: Yeah. KBW is hosting a depository, I am sorry, KBW is hosting a depository conference in New York right now. Hopefully, they are signing up deals as we speak.

Yes, okay.

Depository, sorry, VW, so listen the Depository conference in New York right now so hopefully they are signing up dealers.

Jim Zemlyak: Yeah, yeah. We got a deal.

Yes.

Yes.

Jim Marischen: will keep an eye out. Thanks for that. Then, just as a follow-up, in the wealth business, nice to see the strong financial advisor recruiting. Ron, I heard the comment about net new assets kind of increasing through the quarter and ending June around 5%. If you are seeing an acceleration in advisor recruiting, and there is 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 or just more broadly, what are some of the puts and takes you are seeing in the formula for net new assets? Thanks.

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 adviser recruiting and.

Ron I heard the comment about net new assets kind of increasing through the quarter and then in June around 5%.

If youre seeing an acceleration in advisor recruiting and theres, often a bit of a lag of assets relative to when advisors joined could we expect further acceleration in net new assets from kind of mid single digits or just more broadly what are some of the puts and takes you're seeing in the formula for net new assets.

Jim Zemlyak: We are in the business of getting net new assets. That is just what our business is. It is always somewhat hard to understand what is really going on because we are not a custody firm. Sometimes net new assets will appear while you are custodying assets. That is relatively lower margin in terms of what happens with net new assets. I am very pleased with our recruiting, especially high-end big teams, and the net new assets bodes very well. Stepping back and looking at what we have been doing and looking at our momentum, I have been pleased, Devin. We have been doing this a long time, and this is, I think we are doing very well on this front.

Well look we're in the business of getting net new assets and that's just what our business is so.

Yes.

It's always somewhat hard to understand what's really going on because we're not a custody firm and so you know sometimes net new assets.

It will appear while your custody asset that's relatively lower margin in terms of what happens with net new assets, 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.

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 I think we're doing very well on this front.

Jim Marischen: Okay. Appreciate it. Good catching up.

Okay I appreciate it good catching up.

Jim Zemlyak: Yeah. Hey, have a good day.

Yeah, Hey, you have a good day.

Jim Marischen: Thanks, Devin.

Unidentified Speaker: Thanks.

Thanks.

Joel Jeffrey: If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We will go next to the line of Steven Chubak with Wolfe Research.

If you find that your question has been answered you may remove yourself from the queue by pressing star two.

We'll go next to the line of Steven <unk> with Wolfe Research.

Good morning, Ron and good morning, Jim Hi, how are you guys doing good morning.

Steven Chubak: Good morning.

Jim Marischen: Good morning, Ron. Good morning, Jim. Hi. How are you guys doing?

Jim Marischen: Morning.

Jim Zemlyak: Great.

Eight.

Jim Marischen: I wanted to start off with a question on the NII outlook. Just looking at slide 11 in the deck, you noted that you expect to see a meaningful ramp across the majority of fee and revenue categories, 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 is 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.

So 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 a 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.

Started the year.

I think thats, a fair way to think about it. It is the right interpretation and I'd say, if you take a step back and think about <unk>. 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.

Jim Marischen: I think that's a fair way to think about it. It is the right interpretation. I would say if you take a step back and think about Q2, we certainly benefited from some of the fee income we talked about. In terms of NIM, that probably equates to about 4 basis points. Then you think about some of the deposit mix shift, given the fact that typically the non-wealth deposits, so venture fund banking to commercial, are typically a lower-cost funding mechanism than smart rate. That has been about 10 basis points cheaper. There is 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.

The non wealth deposits, a venture fund banking or commercial or typically a lower cost funding mechanism. The smart rates, that's been about 10 basis points cheaper theres not necessarily a rate sheet. We can point to two 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 as a benefit there. So you think about our guidance for <unk> was $265 million to $275 million that equates somewhere around $3 10 to $3 20, NIM that being said, we did sell probably about 500 million of middle market C&I loans, which carried higher yields so it's a bit of a headwind going forward.

Jim Marischen: So you think about our guidance for Q3 as $265 million to $275 million. That equates somewhere around a $310 million to $320 million NIM. That being said, we did sell probably about $500 million of middle-market CNI loans, which carried higher yields. So that is a bit of a headwind going forward. But that will be offset as we continue to grow the balance sheet. You know, $1 billion is the guidance we gave. That certainly, that number can move up from here. We could see more additional growth in the back half. Really, then it is going to come down to what happens with the funding mix.

That will be offset as we continue to grow the balance sheet. You know a $1 billion is the guidance. We gave that certainly that number can move up from here, we could see more additional growth in the back half and really then it's going to come down to really what happens with the funding mix. So I think youre reading the chart right, we're not ready to change our full year.

Jim Marischen: I think you are reading the chart right. We are not ready to change our full-year NII guidance, but there is a path with more loan growth, with more deposit mix shift, and those various different components to get to the bottom of that as well.

NII guidance, but there is a path with no more loan growth with more deposit mix shift and those various different components to get to the bottom of that as well yeah look I'm I'm really I'm pleased with where we are always trying to look forward and discern trends.

Jim Zemlyak: Yeah. Look, I'm really pleased with where we are. I, you know, always trying to look forward and discern trends, you know, in NII as if there's some long-term, you know, health trend is not how I look at it. I just want to tell you, we've done some balance sheet shifts. For instance, selling some portions of our loan portfolio that were higher yielding, but we did not view as necessarily as strategic as to where we're placing other assets. So that has a short-term impact on NII. Look, what do I like? I like the fact that our deposits have grown, our liquidity source for deposits has grown. We do not have a problem generating loans here, all right? It's a matter of doing it right.

And NII as if there is some long term.

<unk>.

Health trend is it's not how I look at it on tell you I know 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 it necessarily as strategic.

As to where we're placing other assets. So it has a short term impact on NII, but look like what do I like I like the fact that our deposits have grown are built our liquidity source for deposits to grow we do not have a problem generating loss here all right. So it's a matter of doing it right.

Jim Zemlyak: 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. It's just as we're remixing things, you know, 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. That's just where we're going here. On that path, we're doing really well.

So I think that you are reading the chart right, but I wouldn't I'd tell you to be careful not to read that as some limiter on growth. It's just as we're re mixing things up.

You're seeing us not trying just to hit a target we're trying to build a high earning stable risk adjusted NII and that's just where we're going here and I were in on that path.

We're doing really well.

Jim Marischen: No, I appreciate all that detail. Maybe just to follow up on Devin Ryan's earlier question around bank M&A and some of the structural tailwinds that you outlined, I think it is consensus, but I think there is a strong case to be had that we are poised to see a meaningful ramp in bank consolidation activity. Certainly, we are seeing a meaningful uptick in deal activity in recent months. One of the concerns that has started to emerge is just some of the weaker performance in the share prices of 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.

No I appreciate all that detail on the maybe just a follow up on Kevins earlier question around bank M&A and some of the structural tailwind that you outlined I think it's it's consensus. So I think there's a strong case to be had that we're poised to see a meaningful ramp in bank consolidation of <unk>.

Activity, certainly we're seeing a meaningful uptick in deal activity in recent months one of the concerns that has started to emerge as just some of the weaker performance in the share prices of the both the acquirer bank as well as the target and was hoping to get some perspective on whether you view.

Some of that price.

Price action is being somewhat anomalous or whether that could actually disrupt some of the recent momentum in bank consolidation activity.

Jim Zemlyak: Great question. You know, it is so deal-specific that that is hard to answer generally. When you take, potentially, two high-performing banks in the middle market whose stock is discounting growth as they gain market share and combine them, you are going to take that growth premium initially out of those stock prices. That is what we just saw, in my opinion. It is just, but what came out of that will be a stronger bank, a stronger competing bank, and a bank that can deliver returns. I think that the bigger question is putting deals together that are sustainable and that are competitive over the next number of years. 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 stocks. Stocks are highly valued here, in my opinion, in terms of historical valuations.

Great question.

So.

Deal specific but that's hard to answer generally.

You know what what.

When you take.

You know potentially.

Two high performing banks in the middle.

Middle market, whose stock has.

Counting growth.

And they gain market share and combine them youre going to take that growth premium initially out of the stock prices and Thats. What we just saw in my opinion.

Uh huh.

Just but what came out of that will be a stronger bank stronger competing bank a bank that can deliver returns so I.

I think that I think that the bigger question is is <unk>.

Putting deals together that are sustainable and that our competitive over the next number of years and I think board.

Management teams are clear eyed about that is the goal not necessarily worrying about taking a little.

Growth premium out of out of stocks stocks are talks are highly valued here in my opinion.

In terms of historical valuations, but I don't think that Thats a concern regarding the long term.

Jim Zemlyak: But I do not think that that is a concern regarding the long-term rationale, therefore, the underpinning of future bank consolidation. Does that make sense to you?

Rationale therefore the.

Under penning of future bank consolidation that makes sense to you.

Jim Marischen: Yeah, that makes perfect sense. I appreciate that perspective.

Yeah.

Makes perfect sense.

Appreciate that and the overall roughly.

Jim Zemlyak: Overall, these are being done for strategic questions. You know, you need to grow, and some of these banks need to grow. They need technology, their deposits, all of the things that are driving this. The strategic underpinnings are there. That is what I think these companies are focusing on, which is the right thing. I do not really share that concern.

Well these are being done for strategic question. You know you need you need to grow in some of these mainly to grow they need they.

They need technology their deposits all of those things that are driving this.

Jake underpinnings are there and that's what I think these companies are focusing on which is the right thing.

And so.

I don't really share that concern.

Jim Marischen: 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 is the right jumping-off point for that core fixed brokerage number.

Great and if I could just squeezing one more <unk> tack modeling question was hoping you could quantify the aircraft's leasing gains just so we can gauge what's the right jumping off point for that core FIC brokerage number.

Jim Marischen: I think that's a good question. The gain in the quarter was about $28 million. As we sit here and think about this going forward, $100 million 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. It's a good way to think about it. That group is still active. You'll see additional gains in the future. But that's a good way to think about the normalized run rate.

I think that's a good question so the gain in the quarter was about $28 million as we sit here and think about this going forward.

<unk> million dollars 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.

Do you think about it but that group is still active you'll see additional gains in the future.

But that's a good way to think about the normalized run rate.

Jim Zemlyak: Yeah. Jim's been pointing this out as a one-time item for about five times now, so I just want to point that out. Anyway, it is a little more lumpy, but they take it. That's a fair question.

Yeah.

You know given Jim's I'm pointing this out as a onetime not onetime item for about five times now so.

What else is pointing to that out okay.

So anyway.

It is it is a little more lumpy.

And then you know, but it's.

Take it but that's a fair question.

Jim Marischen: We'll be mindful of the recurring one-timers. Thanks so much to both of you.

We'll be mindful of the recurring one timers. Thanks, so much good luck.

[laughter].

Jim Zemlyak: Thank you. Thank you.

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

We go next to Alex <unk> with Goldman Sachs. Please go ahead.

Jim Marischen: Hey, guys. Good morning. I have a two-part question, but we can lump it into one, and you guys could kind of take it in parts. It is related to the overall profitability of the franchise. I guess on the cyclical part, as you think about recovering in Investment Banking, I think that is pretty well expected by the market at this point. How do you think the incremental margins from higher Investment Banking revenues will come through the P&L, both in terms of the impact on institutional margins, but also firm-wide? My second question, 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, that would be helpful. Thanks.

Hey, guys good morning.

I have a two part question, but we can lump it into one 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, how do you think the incremental margins from higher investment banking revenues will come through the P&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 know you guys put a slide out there.

As you think about what profitability inefficiencies that could create to the organization over time.

How that would show up in how we could measure that from the outside looking in and out that would be helpful. Thanks.

Jim Zemlyak: Well, look, I will take the second question first and then talk about the other one, although they are kind of related too. I am glad you put them together. As it relates to AI, probably the thing that we see is an ability to use a lot of these agent models on things that in our business, so much of what we do administratively is comparing inputs to rule books, okay? Whether it is advertising, supervisory analyst type stuff. 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.

Yeah, well look I'll take the second question first and then talk about the.

The other one although they are kind of related to.

Somebody to put them together as it relates to AI.

The probably the.

The thing that we see is an ability to use a lot of these AI agent model on things that in our business. So much of what we do administratively as comparing inputs to rulebooks, okay, whether it's advertising.

You know a supervisory analyst type stuff.

A lot of things that I can go on an adequate through our workflows and identify productivity not unlike what the personal computer did in many areas.

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

So what I see happening.

As our productivity increases where we.

We can continue to grow.

And not driving profitability by reducing workforce by being able to be much more efficient and reassign people to other tasks, whether it's in again.

Onboarding marketing compliance AML.

Investment banking analytics all.

All of these things, which I frankly, you know I read what you are doing over at Goldman as well and.

I see it.

The key is to train people and two to make sure that.

My concern would be that we somehow.

Work to a lowest common denominator, which can be a yeah. I mean, my my goal is that AI is an amplifier.

Not a not just.

Something that you just plug in and people can work from home that's not the viewpoint here and so we see and I personally see.

Rig efficiencies not just at Stifel, but across the industry, primarily in productivity as it relates to your first part of your question look I think.

Jim Zemlyak: As it relates to your first part of your question, look, I think we have, we are restructuring in Europe. Our Fixed Income margins this quarter were very good. Our equity margins were less than optimal. But we have a clear path toward improving our equity business, both our focus shift in Europe, plus some of the productivity things that we have been putting into place. We see meaningful improvement in the margins in that business. That will impact overall the margin capability of the business. When we talked about getting, I hate to bring it up because no one brought it up, but we did have a talk in about $8 a share. 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. I am optimistic about that, Alex.

We were restructuring in Europe.

Our fixed income margins this quarter were very good yeah, our equity <unk>.

Margins were less than optimal.

But we have a clear path toward.

Improving our equity business, both our focus.

<unk> in Europe, plus some of the productivity things that we've been putting into place.

C.

We see meaningful improvement.

And in the margins in that business and that that will impact overall.

The.

The margin.

<unk> capability.

The business and you know when we talked about.

Getting.

I hate to bring it up because only brought it up but we did have a talking about $8 a share.

That that differential versus where we are to that is simply some of that low hanging fruit and margin improvement.

The institutional primarily equity part of our business, so I'm optimistic about that and Alex just to.

Jim Marischen: To put some simple math behind that, when you look at the institutional group, we were sub 15% pre-tax margins this quarter. That number really should be north of 20%. You can look at a normalized operating environment in terms of revenue and that kind of margin capability. That is the kind of lift we are talking about here in terms of the operating leverage, particularly within equities.

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 terms of.

The operating leverage, particularly within equities, yeah, and we have and you know.

Jim Zemlyak: Yeah. We have a clear path to how to get there. We know exactly what, where, what we need to do.

This isn't just 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 the what where.

What we need to do.

Jim Marischen: Okay. Thanks.

Okay. Thanks.

Joel Jeffrey: will move next to Bill Katz with TD Cowen. Please go ahead.

Well move next to Bill Katz with TD Cowen. Please go ahead.

Jim Marischen: Hey, Bill. Great. Thank you. Good morning, everybody. Thank you so much for taking the questions. Just circling back to the NNA discussion on the new assets coming in the door, I was wondering if we 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 bit about what is actually going well? Is it just better recruitment? 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 am just sort of curious if you could just speak to what's driving that good growth.

Hey, Bill Great. Thank you very much good morning, everybody. Thank you so much for taking the questions just circling back to the M&A discussion of net new assets coming in the door I was wonder if you could click maybe a level deeper you mentioned that things are going well.

It was great to hear and certainly appreciate the accelerated momentum into the second half of the year could you unpack a little bit about what is actually going well is it just better recruitment is it better packages is there a pickup of market share just given what's going on with some larger scale transactions are out there just sort of curious if you could.

Just speak to whats driving that growth.

Yeah.

Jim Zemlyak: I think it's overall the platform of what we do. As we always say, what drives business is net new assets. We are in the business of getting net new assets. It's a core basis of what we do. I do not know, Bill Katz, that it is necessarily quarter to quarter. You can get a couple of nice accounts. Across a firm now with some scale, and we have some scale, we just need to put in place the culture and the systems and the technology, all of the things.

I think it's I.

I think it's overall the platform.

What we do is we always say and all the what does business isn't that new assets, Okay and.

And we are in the business of all.

Getting net new assets high it's a core basis of what we do and.

And so I don't know bill that it's necessarily quarter to quarter. You can you can get a couple of nice accounts, but across our firm now with some scale and we have some scale, we just need to put in place.

The culture and the systems and the technology all of the things that you see in.

Ron Kruszewski: You see, you know, that you saw come through the J.D. Powell. I know I've said it a couple of times, but that underscores what we are doing in terms of recruitment and the fact that we are bringing in some very large teams now. They are quite productive. You know, we are going to continue to grow. When I say we are going to grow, we have grown for, you know, shoot, 28 years. You go back, we have had record. I cannot remember when the last time we did not have a record year in wealth management. It is because we have a culture and a system to grow our business, which means growing net new assets. It moves around, you know, you got to sometimes have noise in those numbers, mostly around the custody side, is what I would say.

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You saw come through the J 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 team now and and they are quite productive so.

We're going to continue to grow and when I say, we're going to grow and we've grown for 28 years you go back we've had record.

Remember when last time, we didn't have a record year in wealth management.

It's because we have a culture in our system.

To grow our business, which means growing net new assets.

It moves around and Oh.

You've got to sometimes there is noise in those numbers, mostly around the custody side, what I would say but anyway.

Ron Kruszewski: Anyway, I want to just tell you that I am not sure how much I can unpack it, but we are pleased with the growth. You see it in recruiting first and NAA later.

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 in NAA later.

Operator: Okay, thank you. Then just maybe a follow-up on capital allocation that hasn't come up yet on the call. Just wondering if you could sort of speak to priorities. 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?

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

Ron Kruszewski: Yeah, I feel like we have come full circle here. We talked about, we started the year and when our, when the equity values and including financial, were at this level, we said we would focus on bank growth because we view the risk-adjusted returns and the franchise value that we get by allocating. It is just turning the dial. It is not like we are going to do one or the other. We are going to do bank growth. Then we run into Liberation Day and our stock in the whole industry corrects down a significant amount, really.

Yeah, I feel like we've come full circle here.

We talked about.

We started the year and when or when and all are.

When the equity values, including financials.

This level, we said, we would focus on bank growth because we view the risk adjusted returns in the franchise value that we get by allocating its just turning the dials not like we're going to do one or the other.

But we're gonna do bank growth and then we <unk>.

Run into Liberation day in our stock and the whole industry.

Next down.

<unk> amount really we got on the call and said Hey, we're going to 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 we're going to.

Ron Kruszewski: We got on the call and said, "Hey, we are going to focus on buying back our stock and not do bank growth." So now we are sort of all the way back to where we were at the beginning of the year, and we are going to look at bank growth. You might not see it in the numbers because we are restructuring the bank a little bit in our loan mix. We are going to focus relatively compared to the first quarter, we will focus more on bank growth. We will still do stock buybacks, but we see the numbers being more accretive in bank growth. It is just a function of where the market is from an equity valuation perspective.

Look at.

Bank growth you might not see in the numbers because we are restructuring the bank a little bit in our in our loan mix, but we're going to focus.

Relatively compared to the first quarter, we will focus more on banks were all well still do stock buybacks, but we see the numbers being more accretive and bank growth.

It's a function of where the market is from an equity valuation perspective.

Operator: Thank you, guys.

Thank you guys.

Ron Kruszewski: Thank you.

Thank you.

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

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

Hi, good morning, Thanks for taking my question.

Operator: Hi, good morning. Thanks for taking my question. I am going to just go ahead and ask an AI question as well. Ron, you kind of laid out the various areas you are looking to improve. You are clear that it is not just a profitability kind of focus. I am just kind of curious, with the dozens or even hundreds of things that are out there in terms of how AI can improve your own business and your own client experience, how are you prioritizing some of these initiatives? Maybe you can kind of talk through the pace of focus or pace of investment that you are thinking about when it comes to AI. Are you doing this all in-house or are you using vendors? I am just kind of, again, just curious about the magnitude and pace as you are thinking through these AI initiatives.

AI question as well.

Ron you kind of laid out the various areas.

You look at them through.

And then you were clear that it's not just a profitability tended to focus I'm just kind of curious.

What's that.

Dozens or even hundreds of things that are out there in terms of how AI can improve your own business and your own client experience how are you.

Prioritizing.

Some of these initiatives and maybe you can kind of talk through that the pace of focus our pace of investment.

Thinking about when it comes to AI and I know you don't want it all in house or using vendors or just kind of again, just curious about the magnitude and pace and really thinking through these AI English.

It does.

Ron Kruszewski: Yeah, it's a great question. We, you know, we're starting, I would say, with basics across the firm. AI, you've got to train people. I keep saying, I say it all the time that AI is an amplifier. It makes smarter people smarter. On the converse side, if you're not so smart, it makes you look really organized, not so smart. We have to, you know, we obviously do in the basics that are in our system, Copilot, you know, all of the things. We've rolled that out. We're very productive, high productivity for people that are using that. We're focusing on training and then scaling that up. We've implemented a number of seats on LLMs that are much more sophisticated.

Yes, that's a great question I mean, we were.

Starting I would say with with basics across the firm you know AI you've got too.

You've got to train people I keep saying I say it all the time that its AI as an amplifier it make smarter people smarter on the converse side, if youre not so smart. It makes you look really organized not so smart and so you know we have to.

Obviously doing the basics there that are in our system co pilot you know all.

All of the things we've rolled that out we very productive product.

Hi productivity for people that are using that we're focusing on training and.

Then scaling that up.

We've implemented a number of seats on <unk> that are much more sophisticated and but.

Ron Kruszewski: What I would say is that in our business, you know, the regulatory aspect doesn't say that AI can sign off on Series 24, you know, certain things that require human elements. We're being a little careful to make sure that our workflows, you know, have human interaction at the end. The point 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 productive. 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." A lot of that is off-the-shelf type stuff.

But what I would say.

Is that in our business there.

<unk> aspect doesn't say that AI can sign off on.

Series 'twenty four 'twenty, you know certain things that require human.

Element, so were being a little careful to make sure that our workflows have have human interaction.

At the end, but the point 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.

<unk> <unk> and so I I personally sat down and our workflows and identify like 70 or am I. Just said there was like 70 me I'm sitting in my office I'm, not even getting into some of the stop and go Oh My Gosh. We can do this this this and this and and a lot of that is off the shelf type stuff.

Where 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's evolving so fast that we can get so much lift off of doing stuff that's pretty much.

Ron Kruszewski: 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'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 some of these firms. Let them give it to us. There is so much we can do on the productivity front. That's what we're doing. I think the difference is, you know, from my perspective, the biggest impediment to AI is bureaucracy. Bureaucracies have a way of protecting bureaucracies. Here at Stifel, you know, I'm taking the lead on pushing through what I think are relatively simple productivity enhancements utilizing AI.

Much off the shelf and then we customize it a little bit we don't need to be.

Developing our own or competing with some of these firms.

Let them give it to US there is so much we can do on the productivity front. So that's what we're doing I think the difference as you know from my perspective.

The biggest impediment to AI is bureaucracy.

Bureaucracy to have a way of protecting bureaucracies and.

So here at Stifel I'm, taking a lead on on pushing through what I think are relatively simple productivity enhancements utilizing AI.

That's great I appreciate all that all that color.

Operator: That's great. Appreciate all that color. I want to touch on your, for my second question. You have talked through the business makeshifts there a couple of times and certainly in the past as well. I recognize you just closed the deal, but going from here, where do you see the kind of the incremental focus from here as it relates to the expansion and makeshift there? Either in terms of from an industry perspective or geography focus, I am curious where you think the next incremental focus is at given where you are at.

Just I wanted to touch on Europe for my second question can you talk through the business mix shifts there a couple of times and certainly in the past as well.

That's just closed the deal but Glenn.

From here you know what what do you see the kind of incremental sockets from here as it relates to expansion and mix shift there.

Just from a industry perspective, do you have a team focus just kind of curious where you think the next incremental focus.

Is that given to me.

Ron Kruszewski: I wouldn't call it incremental. I'd call it a shift in focus a little bit. What we learned, if you will, the sales trading, anytime you touch markets in any market, but in Europe, the overhead associated with that from a legal compliance, market structure, making sure, settlement, risk, all of those things on the sales and trading side is, it's a scale business in the U.S. and it's really a scale business in Europe. As we've looked at it, we've decided that we would de-emphasize that and then focus on where we see real synergies, which is in banking. We'll still have sales and trading. You need to have it because we're going to take, we're going to help companies access the U.S. markets or underwrite as we have in the past. We're going to not be as much in the day-to-day trading businesses.

Wouldn't call it incremental I'd call it a shift in focus a little bit, but what we what we.

Learned if you will.

You know the the sales trading anytime you touch markets in any market, but in Europe.

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The overhead associated with that from a legal compliance market structure, making sure.

And risk all of those things.

On.

The sales and trading side as you know, it's a scale business in the U S and it's really a scale business in Europe, and so as we've looked at it.

We decided that we would deemphasize that and then focus on where we see.

Real synergies, which is in banking and we're still have sales and trading we need to have it because we're going to take.

We're gonna help companies access the U S market or underwrite as we have in the past.

We're going to not be as much in the day to day trading business says, we're going to focus on advisory in banking, which is a natural extension of what we do in the U S. So.

Ron Kruszewski: We're going to focus on Advisory Services and banking, which is a natural extension of what we do in the U.S. So anything we do in Europe will have, it will be, if you will, linked to what we do in the U.S. That focus and that shift will improve our profitability because we were not nearly as efficient as we should have been over there, and we're addressing it.

Anything we do in Europe, or how it will be if you will linked to what we do in the U S 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 that.

Over there and.

We're addressing it.

Operator: Perfect. Thanks, Ron.

Okay. Thanks, Rob.

Ron Kruszewski: Yeah, thank you.

Yeah. Thank you.

Jim Zemlyak: We have no further questions at this time. I would like to turn the floor back to our speakers for any additional or closing remarks.

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.

Well I would just say that certainly as I sit here today.

Ron Kruszewski: I would just say that it's certainly, as I sit here today, I'm optimistic and feel good about how things are positioning for 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 are happening. You know, we maybe always talked about 2025 being a transition year, and I think maybe it'll be the back half of 2025 transitioning into 2026 because the first half was certainly slower. But I'm excited about that. I appreciate everyone getting on for the call. I look forward to reporting back to you in the third quarter. Thanks for your interest in STIFEL, and we'll be in touch. Thank you.

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Hum.

I'm optimistic and feel good about how things are positioning for the second half of the year. It's amazing how things have changed since the first quarter in terms of perception and a lot of things.

That are happening.

So are we.

We may be always talked about 25, being a transition year and I think maybe it'll be the back half of 'twenty five transitioning into 'twenty six.

Because the first half was certainly slower, but I am excited about that I appreciate everyone getting on the call. They 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.

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

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

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