* Stifel shares lose 10 percent in Monday trading
* St Louis broker's Q2 earnings fell 84 percent
* Adjusted Q2 earnings rose 30 pct before charges
(Adds CEO comment from conference call)
By Joseph A. Giannone
NEW YORK, Aug 8 Stifel Financial Corp (SF.N) on
Monday said second-quarter profit fell 84 percent as the
investment bank and brokerage absorbed charges related to a
lawsuit and a regulatory probe as well as costs stemming from
its Thomas Weisel Partners takeover last year.
Positive results across most of Stifel were wiped out by an
ongoing lawsuit related to its sales of collateralized debt
obligations to five Wisconsin school districts. Stifel on
Monday said it purchased notes with a face value of $162.5
million at a significant but undisclosed discount.
The charges also reflect estimated future litigation costs
and a related regulatory investigation into these sales, which
generated substantial losses for the schools. Stifel is suing
Royal Bank of Canada (RY.TO), which underwrote the securities.
The Securities and Exchange Commission is investigating
Stifel to determine whether the CDO deals were suitable for the
The St. Louis-based investment bank, which bought Thomas
Weisel Partners Group last year, said profit for the quarter
ended June 30 fell to $3.42 million, or 5 cents a share, from
$21.1 million, or 40 cents, in the year-earlier period.
Excluding charges, Stifel said net income rose 30 percent
to $31.3 million, or 50 cents a share. Quarterly revenue rose
9.4 percent to $358.9 million.
Analysts on average had forecast 54 cents a share in
earnings, according to Thomson Reuters I/B/E/S estimates.
"Our investment banking group generated their second-best
revenue quarter, which was offset by pressure in our brokerage
and private client businesses due to a lack of investor
conviction, coupled with lower industry-wide volumes," Stifel
Chief Executive Ronald Kruszewski said in a statement.
Stifel's brokerage business boosted revenue by 13 percent
to $226 million from a year earlier, reflecting increased
assets, higher broker productivity and management fees.
The ranks of financial advisers climbed 2.2 percent from
the previous year to 1,958, while client assets surged 26
percent to $116 billion, reflecting acquisitions.
Capital markets and investment banking revenue by 7 percent
to $133 million from the year earlier, paced by an increase in
Still business was down from the first quarter, as negative
headlines about the economy, Europe's debt markets and
Washington budget battles drove investors to the sidelines.
"Starting in June, the markets began to feel like they did
last summer -- a lack of conviction, then a ton of uncertainty
starting with the European debt crisis and into the debt
ceiling. It has contributed to a cyclical turn away from
risk-based assets," Kruszewski said in a conference call.
Kruszewski said investors are devoting large parts of their
cash into deposits and money markets earning no interest.
"You can make an argument that today presented a buying
opportunity, but I see a lot more caution than I see risk
taking. So fear is still trumping greed at this point," he
Stifel has boosted its revenue five-fold since 2005, fueled
by a series of acquisitions. Last month it announced the
takeover of Stone & Youngberg, a municipal finance specialist,
and in June agreed to buy restructuring firm Miller Buckfire.
Stifel also is speculated to be in the hunt for Morgan
Keegan, a broker dealer unit of Regions Financial (RF.N).
Kruszewski said the firm is still capable of pursuing deals.
"These kinds of markets present opportunities, and I
believe we're positioned in all respects to evaluate and take
advantage of opportunities as they present themselves," he
Shares of Stifel closed Monday trade at $29.48, down nearly
10 percent and back to its November 2010 levels, on a day when
investors unnerved by Standard & Poor's downgrade of the United
States' sovereign credit rating fled stocks and snapped up
safe-haven bonds. Stifel stock is down 29 percent this year.
(Reporting by Joseph A. Giannone; editing by Gunna