Stifel Financial Signals Strong Momentum in Earnings Call

Stifel Financial ((SF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Stifel Financial’s Earnings Call Signals Strong Momentum Despite Pockets of Pressure

Stifel Financial’s latest earnings call struck a distinctly upbeat tone, underscored by record annual and quarterly revenue, powerful earnings leverage in both wealth and institutional businesses, and a notably strong quarter for investment banking. Management acknowledged some headwinds—including softer transactional and fixed income revenue, a first-quarter legal accrual, and a one-time revenue drag from recent business exits—but consistently framed these as manageable against a backdrop of record profitability, robust recruiting, solid capital returns, and confident guidance into 2026.

Record Annual Revenue Clears $5 Billion Barrier

Stifel reported firm-wide revenue of $5.5 billion for 2025, up 11% year over year and marking the first time the company exceeded the $5 billion milestone. The performance reflects broad-based strength across the franchise, driven by durable fee income and improving capital markets activity. Management highlighted that the growth came even as the firm repositioned some non-core businesses, suggesting that the core engines of revenue are expanding rather than merely benefiting from one-off factors.

Robust Profitability and High Returns on Tangible Equity

Profitability metrics were a focal point, with management emphasizing strong earnings power once one-time items are stripped out. Excluding a first-quarter legal accrual, 2025 EPS came in at $7.92, with fourth-quarter EPS at $2.63. Pretax margin was about 21% for the year and above 22% in the fourth quarter, demonstrating operating leverage as revenue scaled higher. Return on tangible common equity was roughly 25% for the year and topped 31% in Q4, levels that place Stifel toward the top tier of diversified financials in terms of capital efficiency.

Global Wealth Management Delivers Another Record Year

Global Wealth Management continued to be Stifel’s cornerstone, delivering its 23rd consecutive year of record revenue. The segment generated $3.5 billion of revenue in 2025, with record fourth-quarter revenue of $933 million. Client balances also set new highs, with total client assets reaching $552 billion and fee-based assets rising to a record $225 billion. Management pointed to meaningful growth in fee-based assets—previously referenced at roughly 17% growth—which enhances recurring revenue visibility and cushions the firm against short-term market volatility.

Institutional and Investment Banking Fire on All Cylinders

The institutional business turned in a standout performance, with revenue of $1.9 billion for the year, up 20% year over year, and $610 million in the fourth quarter alone, a 28% YoY gain. Investment banking led the charge: Q4 investment banking revenue hit $456 million, up 50% YoY. Advisory revenue grew 46% to $277 million, equity capital raising revenue doubled to $95 million, and fixed income underwriting climbed 23% to $76 million. The rebound in capital markets activity and strong positioning in advisory and underwriting underscore Stifel’s growing relevance across the deal and issuance cycle.

Beating Street Expectations and Demonstrating Operating Leverage

Stifel outperformed consensus on the top line in the quarter, with total net revenue about $50 million above Street expectations and up roughly 14% year over year. On the cost side, management kept a tight grip: the compensation ratio hovered around 58%, and the adjusted non-compensation operating ratio improved by 200 basis points in the quarter. That combination of revenue outperformance and efficiency gains highlighted the firm’s operating leverage, a key driver behind the strong margins and elevated returns.

Adviser Recruiting and Productivity Strengthen the Wealth Engine

The wealth platform benefited from one of its strongest recruiting years in recent memory. Stifel added 181 financial advisers in 2025, including 92 experienced advisers with trailing 12‑month production of $86 million. Management noted that 2025 was the best recruiting year since 2018, reinforcing the firm’s appeal as a destination for high-producing advisers. Supporting this narrative, J.D. Power ranked Stifel #1 in employee adviser satisfaction for the third consecutive year, a point management framed as a competitive advantage for sustaining growth and productivity in the wealth channel.

Capital Strength, Buybacks, and Higher Dividends

Capital levels remain comfortably above regulatory minimums, giving Stifel ample flexibility for growth and shareholder returns. The firm reported a Tier 1 leverage ratio of 11.4% and a Tier 1 risk-based capital ratio of 18.3%, with more than $560 million of excess capital. In the fourth quarter, Stifel repurchased 335,000 shares and still has 7.6 million shares remaining under its buyback authorization. The Board also approved an 11% dividend increase and a three-for-two stock split, signaling management’s confidence in the sustainability of earnings and its commitment to shareholder-friendly capital deployment.

Market Leadership in Depository M&A

Stifel’s KBW unit further cemented its position as a leader in depository M&A. In 2025, KBW participated in roughly 75% of depository M&A advisory transactions by deal volume, a striking market share in a specialized and strategically important niche. Management also highlighted additional depository M&A engagements already announced in early 2026, reinforcing the franchise’s ongoing deal pipeline and its influence within the financial institutions sector.

Transactional and Fixed Income Revenue Under Pressure

Not all revenue lines moved higher. Transactional revenue came in 4% below expectations for the quarter and declined 10% year over year, while fixed income revenue fell about 18% YoY. Management attributed the fixed income softness to disruptions from the government shutdown and the timing of gains booked in prior periods. While these headwinds weighed modestly on results versus consensus, they were portrayed as cyclical and episodic rather than structural, with the broader mix of fee and advisory income helping to offset volatility in these areas.

Business Exits Create Near-Term Revenue Drag but Boost Margins

Stifel is reshaping its business portfolio, exiting lines that offer less attractive returns. The sale of Stifel Independent Advisors and the closure of the European equities business together remove about $100 million of annual revenue from 2026, creating a visible top-line headwind. However, management emphasized that these actions should improve the firm’s margin profile and simplify operations. The tradeoff is a slightly lower revenue base in the near term, but with higher profitability and better strategic focus.

Legal Accrual, Tax Nuances, and Adjusted EPS

A first-quarter legal accrual weighed on reported EPS, prompting management to highlight adjusted earnings metrics to better reflect underlying performance. The firm’s effective tax rate for the quarter landed at 14.1%, a bit above prior guidance and consensus, due in part to foreign tax return-to-provision adjustments. While these items added some noise to quarterly comparisons, they were described as non-recurring or technical in nature rather than indicative of broader profitability issues.

Net Interest Income Slightly Below Street, Still at High End of Guidance

Net interest income (NII) finished the quarter at the high end of management’s guidance but approximately $2 million below Street expectations. The outlook for NII remains closely tied to balance-sheet growth and asset mix assumptions, with management stressing the importance of deposit flows and deployment into interest‑earning assets. While the modest miss versus consensus was noted, the broader message was that NII remains a key growth lever as the firm expands its balance sheet and leverages its deposit base.

Expense Timing and Reorganization Costs Blur Near-Term Benefits

Non-compensation expenses increased 6% year over year in the quarter, partly due to investment banking deal-related “gross-ups” and transitional costs. Management cautioned that the full benefit of cost savings from the SIA sale and the European reorganization will not be immediate, and some technology and cloud-efficiency gains may not fully materialize until later in 2026 or into 2027. The message to investors was to expect incremental, rather than instantaneous, margin benefits as the restructuring and investment cycle plays through.

Macro and Market Uncertainty Still Looms

Throughout the call, management acknowledged that market volatility, geopolitical tensions, and policy uncertainty could influence deal activity, capital markets volumes, and client behavior. The 2026 guidance is built on a constructive market backdrop, but the company was clear that these external risks remain a swing factor. Stifel’s diversified revenue mix and strong capital base, however, provide some resilience if conditions become more turbulent than anticipated.

Forward-Looking Guidance Points to Continued Growth and Margin Expansion

Looking ahead to 2026, Stifel guided to total net revenue of $6.0–$6.35 billion, excluding roughly $100 million of prior-year revenue from the SIA sale and European equities exit, implying solid underlying growth on a normalized base. Firmwide net interest income is forecast at $1.1–$1.2 billion, supported by about $4 billion of balance-sheet growth and roughly $2 billion of additional interest‑earning assets. Within Global Wealth, NII is expected to reach $275–$285 million, with an implied net interest margin near 320 basis points. Management also projected continued deposit momentum, targeting roughly $750 million to $1 billion of incremental deposits per quarter, while aiming to improve operating leverage with a compensation ratio of 56.5%–57.5% and a non‑compensation operating ratio of 18%–20%. The firm enters 2026 with more than $560 million of excess Tier 1 leverage capital, giving it flexibility to support growth, absorb shocks, and continue returning capital to shareholders.

In closing, Stifel’s earnings call painted a picture of a firm in strong shape: record revenues, elevated margins, and industry-leading returns, underpinned by a powerful wealth platform and resurgent institutional and investment banking activity. While headwinds such as transactional softness, fixed income pressure, one-time legal and tax items, and near-term revenue loss from business exits remain in view, management’s confident guidance and ongoing capital returns suggest a constructive outlook. For investors tracking the financial sector, Stifel’s combination of growth, efficiency, and capital strength positions the stock as a notable name to watch in the coming year.