Stifel Financial Corporation

Good day and welcome to the Stiefel Financial 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.

Thank you, Operator. I'd like to welcome everyone to Stiefel Financial Second Quarter 2025 Conference Call. I'm joined on the call today by our chairman and CEO, Ron Krzyzewski, our president, Jim Zimlak, and our CFO, Jim Marishen. 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 audio cast is copyrighted material of Stiefel Financial Corp. 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 Pichessi.

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. But I said then that if we got clarity on these issues, conditions could improve quickly. That's 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 and 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%. Our balanced model 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, and a late quarter pickup in investment banking. In global wealth, DEEPL 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. That recognition reflects our commitment to advisor support. It's not just a cultural point. It's a recruiting advantage. This was our strongest recruiting quarter since Q4 of 2015, with 82 new advisors added, including 36 through B. Riley 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 will discuss later, this acquisition supports our broader effort to reposition our European operations, de-emphasizing sales and trading while expanding our focus on advisory and investment banking. Combined with ongoing efficiency initiatives, this positions 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 management revenues rose 6%, reflecting both market appreciation and improved organic growth. Net interest income was up 8% and 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.