Feb 25 Fueled by a 48 percent rise in
fourth-quarter earnings, Stifel Financial Corp's top
executive defended his aggressive acquisition spree on Monday.
The St. Louis-based securities firm, which has bought four
investment banks and trading firms in fewer than three years,
will continue to make investments and build its profile with the
public as larger investment banks shrink, Chairman and Chief
Executive Ron Kruszewski told analysts after the company said
its quarterly net income rose to $40 million, or 63 cents a
share, from $27 million, or 43 cents a share, a year earlier.
"The financial market is huge, highly fragmented and under
tremendous disarray," he said. "There is a lot of market share
to gain without overburdening the balance sheet."
Stifel last week completed its purchase of KBW Inc,
a smaller investment bank that specializes in raising capital
and arranging mergers for small financial companies, for about
$575 million in cash and stock.
Kruszewski dismissed criticism that the deal would be marred
by overlapping research coverage, personnel and branding
problems at a time when few financial deals are being executed
and KBW has been recording losses
"I believe 2012 was a trough year in financial services," he
said of the opportunity to benefit from KBW, adding that he
expects duplicative expenses to be eliminated by the first
quarter of 2014.
Stifel disclosed that KBW booked $70.6 million in the fourth
quarter, a number that JMP Securities analyst David Trone said
exceeded his estimates by $12 million.
A lot of work remains on the integration, Kruszewski said,
but the company will continue to hire brokers and traders in the
year ahead and increase its advertising and branding budget, an
area where it has been lax in the past. Stifel began a
television campaign aimed at the public and its fellow bankers
Stifel's fourth-quarter profit was boosted by shares it
purchased in Knight Capital Group last August to help
bail out the trading firm. Stifel booked $13.4 million of
quarterly gains and $39 million for the entire year from its
Excluding the 2 cent-per-share quarterly gain from Knight,
Stifel earned 61 cents a share, above analysts' expectations of
60 cents a share, based on Thomson Reuters I/B/E/S estimates.
Kruszewski said Stifel is expanding in both its retail
brokerage business and its smaller institutional banking
business, with a particular emphasis on adding fixed-income
capabilities. Neither he nor the firm commented on reports that
Stifel is buying Knight's credit brokerage business.
In all of 2012, Stifel hired 152 financial advisers in its
wealth management unit and 77 fixed income sales and trading
Its fourth-quarter, Stifel's net revenue rose 17 percent to
$417.8 million from a year earlier, below Wall Street
expectations of $418.4 million, according to analysts surveyed
by Thomson Reuters I/B/E/S. Total compensation and benefits
costs in the fourth quarter rose 14.6 percent to $262.2 million.
Wealth management revenue climbed 13.6 percent to $255
million, lifted by growth in asset management and services fees
on rising client assets. The firm's financial adviser count grew
by just 54 on a net basis from a year earlier to 2,041 advisers
in 340 offices at the end of 2012.
Total client assets rose 12.6 percent to $137.9 billion.
Revenue from trading and banking in the institutional group
rose 23 percent to $165.1 million, despite a drop in municipal
Kruszewski said that in spite of Monday's 216-point drop in
the Dow Jones Industrial Average on news related to the Italian
election, retail investors have been moving money from
low-return fixed-income products to equity markets.
"People forgot there was risk in the market, and we saw a
little of that today," he said.
Monday's news, however, is unlikely to reverse a "trend of
improvement in the Eurozone," he added.