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Stifel’s Wealth Segment Offsets Decline in Institutional Business in 2011; FA Recruiting ‘Muted’

Despite a bad year for its institutional group caused by the uncertain market environment, financial services firm Stifel Financial’s 2011 results were propped up by the stability in its global wealth management segment, which reported record net revenues of $908 million, a 7.7 percent jump over 2010. For 2011, Stifel, parent company of Stifel Nicolaus, posted its 16th straight year of record revenues of $1.42 billion and net income of $84.1 million, compared with net income of $1.9 million on net revenues of $1.38 billion for 2010. The year was not as strong, however, for advisor recruiting, adding only 52 reps over 2010.

“In general, as a result of the operating environment, the stability of our global wealth management segment buffered the decline generated by our institutional group, which is frankly the core of our business model,” said Ronald J. Kruszewski, chairman, president and CEO, during an analyst call Wednesday. “We have a more stable global wealth management and the profit margins in the institutional group can be higher, yet their more volatile.”

Kruszewski admitted that advisor recruiting was “muted” and lower than usual during 2011, but he said 2012 has already seen marked improvement in recruiting. When Kruszewski was asked on the call about the types of firms that are interested in joining Stifel in 2012, he declined to comment.

As of the end of the fourth quarter, advisor headcount was at 1,987, compared with 1,935 at the end of 2010 and 1,961 at the end of the third quarter. This included about 30 FAs from Stone & Youngberg, an investment firm that Stifel acquired in October.

“It’s been a competitive and difficult market,” Kruszewski said.

Within the global wealth management segment, total client assets rose 8 percent for the year, while broker productivity was up 5 percent for the year. For the fourth quarter, income remained flat compared to the year-ago quarter at $62.9 million, Net revenues for the quarter were down 5 percent from the year-ago quarter to $224.6 million, due to lower trading volumes, but up 2.3 percent sequentially.

Overall, the firm reported net income of $27 million on net revenues of $356.9 million for the fourth quarter, compared with net income of $41.4 million and revenues of $401.6 million for the fourth quarter of 2010. On a sequential basis, however, net revenues were up 6.8 percent and net income up 21.1 percent.

Stifel was reportedly in the running to acquire regional b/d Morgan Keegan from Regions Financial, but Raymond James announced it was purchasing the firm in early January. When asked whether the firm was under a non-solicit agreement as a result of the negotiations, Kruszewski declined to comment on that specifically. He would say that in general, he doesn’t feel any restraints on Stifel’s recruiting.

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