Stifel Financial Corporation

Good day and welcome to the Stiefel Financial Second Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead.

Thank you, Operator. I'd like to welcome everyone to Stiefel Financial Second Quarter 2024 Conference Call. I'm joined on the call today by our Chairman and CEO, Ron Krzyzewski, our Co-Presidents, Victor Nisi and Jim Zemlack, and our CFO, Jim Maraschuk. Earlier this morning, we issued an earnings release and posted a slide deck and financial supplement to our website. It can be found on the investor relations page at www.steeple.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. I will now turn the call over to our chairman and CEO, Ron Krzyzewski. Ron?

Thanks, Joel. Good morning. Thanks to everyone for taking the time to listen to our second quarter 2024 earnings conference call. I'm pleased to be with my partners here this morning in New York and look forward to seeing them as well. Stiefel Strong results in the second quarter reflected our operating leverage as market conditions improved, particularly in our institutional business. People's second quarter net revenue totaled $1.22 billion, up 16% from 2023, and represents the second-best quarter in our history. All revenue line items showed improvement, except for our predicted decline in net interest incomes. Commissions and principal transactions increased 24 percent as a result of stronger client activity levels in both wealth management and our institutional group. Investment banking increased 40 percent as advisory revenue was up 50 percent, and capital raising rose 29 percent. Record asset management revenue was up 19 percent, reflecting organic growth and market appreciation. Net interest income declined 40 million, or 14 percent. However, although NII decreased, both quarterly and in the first half of the year. The declines were within our guidance. The efficiency of our diversified business model is illustrated by our second quarter pre-tax margin of 21%, operating earnings per share of $1.60, which was a 33% increase from the prior year, as well as an annualized return on tangible common equity of 22%. We generated record first half net revenue of nearly $2.4 billion, an increase of 10% as improving institutional revenue more than offset the predicted decline in NII. Our consistent growth and significant cash generation also gives us increased financial flexibility. This is highlighted by our recent retirement of $500 million in senior notes. We raised the $500 million 10 years ago to support our bank growth strategy. However, our bank is now of the size and scale that it can more than fund its own growth, and therefore, in the current rate environment, we felt that retiring the debt made sense financially. Retirement of these notes not only reduces our long-term liability, but also eliminates $21 million in annual interest expense. While comparisons of the prior year are informative, we also like to review our results next to street consensus estimates, which we do apply to. Our EPS of $1.60 was $0.06 higher than the street estimate as net revenue came in above expectations by $34 million. Looking at the specific line items that drove our earnings fee, first, transactional revenue came in $14 million above expectations, primarily driven in fixed income. Investment banking came in $10 million above consensus on stronger advisory revenue. I'd also note that underwriting revenue was stronger than consensus as the environment for capital raising has improved. The only revenue item that we fell short of three estimates was net interest income. However, NII still came within our guidance range. We stated on last quarter's quarter that we believed NII may have hit a low point, and the modest incremental decline in the second quarter was the result of higher net interest margin, which I note is positive, but this was more than offset by a slight decline in interest-earning assets. On the expense side, we were essentially in line with the street, as our compensation ratio was 58%, same as consensus, while non-comp operating expenses totaled $260 million, $1 million above consensus. We've used slide three in recent earnings announcements to illustrate the benefits of our complementary businesses in various markets. Over the past five years, we've been able to offset much of the volatility of our institutional business with the stability of our fee-based businesses. and our increased net interest income. Looking at the most recent three quarters, you can see the rebound in institutional pre-tax income that now has helped counter the decline in net interest income. Putting this into context, in the first half of the year, our pre-tax income is up 58 million as the improvement in institutional margins and growth in PCG revenues has more than offset the 85 million decline in NII. As we look forward, expected continued improvement in wealth management and institutional revenue will help. Additionally, stable net interest income achieved by higher interest earning assets should offset incremental cash sorting and result in higher pre-tax margins and return on tangible common equity. I know there are a lot of questions on sweep cash and advisory accounts for all firms. Well, Jim will address some of the specifics on how we view this as default. Let me just state that people anticipated and prepared for this rate cycle, both on the asset side of our balance sheet, as well as offering clients options for savings accounts, primarily our smart rate. As such, we do not see a material impact relating to this matter. And to underscore this point, we are not changing our NII guidance for the remainder of this year. Before I turn the call over to Jim to discuss our financial results, I want to talk a little bit more about the long-term success of our global wealth management business. As I mentioned earlier, for the second consecutive year, Steeple was ranked number one in the employee segment of the J.D. Power U.S. Financial Advisor Satisfaction Study. In addition to ranking first overall, Steeple was also ranked number one in three of six categories, leadership and culture, products and marketing, and operational support. The results of this survey further proves our core values of respecting our advisors and continually improving the advisor experience, which in turn leads to better client experience. Focusing on these values enables people to continually attract and retain high-quality advisors to our platform, provide exceptional client service, and has been a foundation to our history of strong revenue growth. With that, our CFO, Jim Marisham, will discuss our most recent quarter results.