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Stifel Financial (SF) Q2 Earnings Beat on Higher Revenues

Stifel Financial Corp. SF reported second-quarter 2017 adjusted earnings of 90 cents per share, comfortably beating the Zacks Consensus Estimate of 76 cents. Further, the figure was significantly higher than 57 cents earned in the prior-year quarter.

The results largely benefited from top-line growth. The company’s credit quality was mixed. However, a rise in expenses and increase in provisions were the undermining factors.

On a GAAP basis, Stifel Financial reported net income available to common shareholders of $50.5 million or 63 cents per share compared with $9.7 million or 13 cents in the year-ago quarter. The results included certain non-recurring items.

Increased Revenue Offsets Higher Expenses

Net revenue came in at $725.6 million, up 11.3% year over year. The increase was mainly driven by higher net interest income along with higher investment banking revenues as well as asset management and service fees. Further, the revenue figure breezed past the Zacks Consensus Estimate of $686.1 million.

Global Wealth Management segment’s net revenue increased 17.1% year over year. Also, Institutional Group’s net revenue rose 5.8%.

Stifel Financial’s non-interest expenses were $642.5 million, 1% higher than the year-ago quarter.

Credit Quality: A Mixed Bag

Allowance, as a percentage of loans, increased to 0.88% from 0.86% in the prior-year quarter. Further, provisions came in at $5.86 million, 221% higher than the prior-year quarter.

However, non-performing assets as a percentage of total assets decreased to 0.15% from 0.37% in the year-earlier quarter.

Capital Position

Stifel Financial’s capital position was strong during the quarter. As of Jun 30, 2017, total assets increased 2.1% sequentially to $19.5 billion. Stockholders’ equity increased 2.4% from the prior quarter to $2.85 billion. Book value came in at $39.47 per share, up 5.51% from the prior-year quarter.

As of Jun 30, 2017, the company’s Tier 1 leverage capital ratio was 10.3% compared with 11.5% as of Jun 30, 2016. Further, Tier 1 risk-based capital ratio was 20.5% compared with 20.6% as of Jun 30, 2016.

Our Viewpoint

Stifel Financial, with its solid business model and strategic acquisitions, is well poised for growth. The company’s sound capital position and robust top-line performance should boost its profits.

However, higher expenses and increased provision for loans losses remain major concerns.

Stifel Financial Corporation Price, Consensus and EPS Surprise

Currently, Stifel Financial carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Brokerage Firms

Interactive Brokers Group, Inc. IBKR reported second-quarter 2017 adjusted earnings of 32 cents per share, which lagged the Zacks Consensus Estimate by a penny. Also, earnings were 20% below the prior-year quarter figure of 40 cents. Higher expenses and lower trading volume hurt the results. On the other hand, an increase in revenues, improved Electronic Brokerage segment performance and a rise in DARTs acted as tailwinds
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The Charles Schwab Corp.’s SCHW second-quarter 2017 earnings of 39 cents per share were in line with the Zacks Consensus Estimate and up 30% from the prior-year quarter. Schwab’s shares were down nearly 1.1% in early market trading.

E*TRADE Financial Corporation ETFC reported second-quarter 2017 adjusted earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents. The results reflected increased net revenue and a benefit to provision for loan losses. Daily average revenue trades (DARTs) increased year over year. Further, the quarter witnessed a rise in customer accounts and reduced delinquencies. However, higher operating expenses acted as dampeners.

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