November 5, 2012 / 8:21 PM / in 5 years

Stifel quarterly profit rises, firm announces merger

Nov 5 (Reuters) - Stifel Financial Corp said on Monday its third-quarter profit rose 69 percent from a year ago, boosted by gains from its retail brokerage business.

The St. Louis-based regional investment bank and brokerage reported a quarterly net income of $37.7 million, or 60 cents a share, up from $22.3 million, or 35 cents a share, a year earlier.

Excluding a 9 cent-per-share gain from the company’s investment in Knight Capital Group Inc, Stifel earned 51 cents a share, still above analysts’ expectations of 47 cents a share, based on Thomson Reuters I/B/E/S estimates.

Quarterly net revenue rose 25.7 percent to $420.1 million from a year earlier, against expectations of $366.5 million.

“Our results highlight the soundness of our balanced business model, particularly against a challenging economic backdrop,” Chief Executive Ronald Kruszewski said in a statement.

Revenue from Stifel’s wealth management division climbed 14.7 percent to $251.7 million, in part from higher transaction revenues, offset by a decrease in commissions revenue.

Stifel also said on Monday it would buy smaller rival KBW Inc in a cash-and-stock deal valued at about $575 million, creating a middle-market investment bank focused on the financial services industry.

The merger will provide investment banking, sales and trading, and research to financial services companies through KBW’s Keefe, Bruyette & Woods broker-dealer unit.

Stifel has focused primarily on selling stock, bonds and financial advice to individual investors.

By expanding further into investment banking, as most of Wall Street is retreating, Stifel is making a bet that mergers and acquisitions in the middle-market financial space will grow, said Liz Nesvold, managing partner of Silver Lane Advisors, a New York-based boutique investment bank.

The company’s institutional group net revenue rose 49.8 percent to $169.7 million, including $25.6 million in realized and unrealized gains from Stifel’s investment in Knight Capital Group Inc.

Stifel’s financial adviser ranks grew by 81 advisers from last year, bringing its total to 2,042, while client assets rose 22.8 percent to $136 billion.

The firm has made several big adviser hires since the start of the year, adding veteran brokers from major brokerages to its adviser force. Among those new hires were three big teams from Morgan Stanley Wealth management in Connecticut, Hawaii and Washington.

The company’s shares rose 2.8 percent to $32.80 on the New York Stock Exchange late Monday afternoon.

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