Stifel Financial Corporation

2024 conference call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Mr. Joel Jeffrey, Head of Investor Relations of Stiefel Financial. Please go ahead.

Thanks, Operator. I'd like to welcome everyone to Stiefel Financial's first quarter 2024 conference call. I'm joined on the call today by our Chairman and CEO, Ron Koshefsky, our Co-Presidents, Victor Nisi and Jim Zemlack, and our CFO, Jim Marichan. 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.stiefel.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 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 audio cast is copyrighted material of Stiefel Financial and may not be duplicated, reproduced, or rebroadcast without the consent of Stiefel Financial Corp. I will now turn the call over to our chairman and CEO, Ron Krzyzewski.

Thanks, Joel. To our guests, good morning, and thank you for taking the time to listen to our first quarter 2024 conference call. The momentum we had exiting 2023 continued as we generated the second highest quarterly revenues in our history. We benefited from market conditions that included strong equity markets, recovering capital markets, and an improving US economy. Total net revenue of more than $1.16 billion was driven by record global wealth management revenue, as well as the continued improvement in our institutional group. As revenues improved, we maintained a focus on expense discipline, and this approach resulted in a 20% pre-tax margin, operating earnings per share of $1.49, which was a 6% increase year on year, as well as a return on tangible common equity of 21%. This resulted in another quarter of substantial excess capital generation, which we deploy primarily via share repurchases. Even with the substantial share repurchase activity and our increased dividend, our tier one leverage ratio increased by 10 basis points during the quarter. I'd also note that the strength of our business was recognized by the credit agency upgrade we received from Standard & Poor's earlier this month. Slide two is a variance table to consensus estimates. Our EPS of $1.49 was three cents higher than consensus and was the result of net revenue that came in 20 million above expectations. We beat on all revenue items except net interest income, which I note came within our guidance range. I think it's important to note that our NII for the quarter of 252 million may very well be the low point of the year as we anticipate balance sheet growth and less impact from cash sorting during the remainder of the year. In terms of where we beat consensus, I'd note that investment banking came in nearly 30 million above expectations on stronger advisory and underwriting revenue, both as compared to consensus, as we are beginning to see increased activity levels. Transactional revenue came in $5 million above the street on stronger wealth management and institutional equity revenue. Total expenses were higher than consensus. However, much of that was reflected in compensation expense as a result of higher revenues. I would note that the comp ratio remained consistent at 58% and was slightly below expectations. Non-comp expenses were $8 million higher than expectations, which Jim will discuss in greater detail later in the call. But I'd point out that excluding credit provision and investment banking gross-ups, our non-comp operating ratio was essentially in our guidance. Slide three compares operating metrics since 2019. Starting with net interest income, I would note that this has increased over 100%. This is noteworthy because it represents a consistent source of revenue that, along with our other fee-based revenues, offset the volatility of our institutional business. In 2019, global wealth management revenue was $2.2 billion, which compares to approximately $3.2 billion based on our annualized first quarter 2024 global wealth revenue. On a percentage basis, global wealth management is up 45% since 2019. This growth offset a deep industry-wide recession in capital markets that reduced the pre-tax income of our institutional group. from $560 million in 2021 to essentially break even in 2023. Our results in the first quarter indicate the onset of a rebound in investment banking, but it is far from a normalized run rate. As market conditions improve, we anticipate returning to more historical levels of profitability in this segment. For example, in 2022, we generated $254 million in pre-tax income, which I would note was not even a particularly strong market for investment banking. As revenue and margins continue to return to more historical norms, we will also benefit from the investments we've made in our wealth management segment. One item I would like to note is the benefits we've seen from our smart rate product, which enabled us to maintain our client cash within Stifel as interest rates rose. The increased levels of cash and smart rate makes TIFO less sensitive to the impact of lower interest rates when the Fed begins to cut. Last year, we noted that a 100 basis point decline in rates would result in a $65 million reduction in net interest income. Given the growth in smart rate, which carries a higher deposit beta, our updated disclosure in 2024 reduces the impact on net interest income to $15 million on the same 100 basis point decline in rates. So as we look to the future, we see improving results from our institutional group, consistent growth from our wealth management franchise, and elevated levels of NII contribution. This combination leads me to believe that we will continue to generate strong performance for 2024 and as we transition to 2025. With that, let me turn the call over to Jim Marish to discuss our most recent quarter results.