Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Stifel Financial Corp. (NYSE:SF)

Stifel Financial at Bank of America Merrill Lynch Banking and Financial Services Conference Call

November 13, 2012 3:25 pm ET

Executives

Ron Kruszewski – Chairman, President and Chief Executive Officer

Unidentified Analyst

We are going to get started here with the next presentation. It is my pleasure to introduce Stifel Financial’s Chairman and CEO, Ron Kruszewski.

Stifel is a full-service regional brokerage and investment banking firm that provides services to both individual investors and institutions. Ron and his team have grown the firm significantly over the past decade and continue to build a premier middle market investment bank given its global organic and inorganic growth including the recent KBW transaction at a time when the industry has seen reduction in growth.

I’ll now turn it over to Ron to find out where he sees Stifel and the industry heading in the years ahead, after which we will have some time for Q&A. Ron?

Ron Kruszewski

Thank you and good afternoon. Forward-looking statements, let me get started. First of all, I’m excited to talk about our pending merger with KBW. I will talk a little bit about that. I’ll give you a brief overview of our quarter which seemed to have got lost in the shuffle of the announcement of this deal and then I’ll be glad to sit down and take some questions.

First of all, our stated goal was to build the premier middle market investment bank. We have been accomplishing this through both organic growth and acquisitions. We believe we are well positioned to take advantage of opportunities due primarily to the fact that we are unburdened by capital constraints. We have a low leverage business model primarily an agency based model, conservative risk management. We’ve build the company through nine acquisitions since 2005, but we prudently evaluate all opportunities. We passed some certain opportunities that we felt we couldn’t integrate.

We capitalize on the headwinds and the turmoil that has the impact to our industry. On the organic side, we are growing through the addition of high quality talent and we’ve driven revenue synergies by leveraging our global wealth and our institutional business depending on the transaction that we’ve been doing.

The next slide is how we look at the market and our place in the market. So I view that Bulge Bracket, the large firm have to deal with two cost current issues. First is that they need to deleverage from whatever it was 35 to 1 to 12 to 15 to 1 while at the same time raising common equity. And doing that against the backdrop with the ROEs were 18%. So when you deleverage and have to raise common equity, the end result maybe it’s difficult to earn your cost of capital. Therefore, in financial services, I think you need to shrink and I think that’s what you are singling on in the industry.

On the other end of the equation, you have the bouquet firm where regulation and lack of scale coupled with the fact that most boutique firms are institutionally focused firms today with the backdrop of very difficult volumes in the equity business makes it very difficult for them to also earn acceptable returns. We believe we are in the middle. This would be I believe will be our 17th consecutive year of record revenue. We’ve not had a year where we’ve ended with lots of people than we began the year and we believe that we have the right size and scale, stability, capital, distribution to be able to grow into a market that is facing a lot of turmoil. And that’s the position that we see ourselves and the position that I’m pleased to be in.

Throughout the year primarily since 2005, we have been a growth company as evidenced by these slides, net revenues we've grown 26% per year again 17 straight years of record revenue. I believe we might be going from a street that can say that we've grown core net income 23%, we’re very well capitalized with over a $1.45 billion of equity. We managed today nearly a $140 billion in our global wealth management business. We deliver that through over 2,000 advisors and 300 offices, and we've grown book value per share 22% per year.

On the acquisition side, we've had a lot of questions over the years about our acquisition strategy, but I can tell you that up until this last one, and I believe the fast one past will be prolog, but each merger has been accretive to Stifel and retention in each one of these deals is very high. Going back to 2005, Legg Mason Capital Markets, the Ryan Beck in 2006, we acquired a bank that was very small today, it’s a $3.5 billion very high quality, asset quality, very few problems in fact virtually no problem assets in our bank today.

We acquired Butler Wick in that same timeframe, 56 branches from UBS back in 2009. And then the last three transactions have been institutionally focused or at least sell to niche. When we looked at back in 2009, when we looked at our business model we had a very significant research platform and a very significant Global Wealth Management business that’s we are under size in the investment bank. When we look at investment banking, we thought we had the investment technology that lead to the Thomas Weisel transaction which has done a very good transaction, growth focused and technology, consumer healthcare and energy in Canada. We've achieved all the cost efficiencies, everyone is still with us and it's been a very good transaction.

Last year, we had the opportunity with Stone & Youngberg opportunity. I can just say at this way that in 2011 or 2010, we did not do negotiate underwriting with State of California and then 2011 we were the Number One negotiated underwriter in the state of California. When you look at our quarterly results and investment banking a lot of that growth, which was significant must been driven by the fact of Stone & Youngberg is beginning to kick in on the fixed-income side.

And then on most recent transaction, which I'll talk more about is KBW, but I will say that it’s a tremendous boutique specialist in FIG, many of you know this is the FIG conference when you look at Thomas Weisel, on technology, and KBW, and FIG, I think we've put stakes down to two biggest verticals and investment banking and we believe its going to help us drive a lot of shareholder value.

Our balance sheet facilitates our growth, most of the growth as you can see we have over $6 billion in assets today, but almost all of that growth in terms of leverages in the bank, or our bank has levered 13 to 1, but our broker deal was only 2 to 1. So we have – put this really we're very really conservative funded investment bank most of our leverages in the bank which we fund with customer deposit. Our total capitalization is about a $1.7 billion, $1.4 billion of equity and about $300 million of debt so again a low leverage model.

We've done all of these acquisitions, well at the same time since 2002 having stock depreciation of 7.5 times compared to the next which is little less than two times, so I think that we have not only grown those company, but we've grown the company on the top line and more importantly growing the equity value per share. And I can tell you that when I look at most measures I look at are not growth revenues and growth earnings, its revenue per share and earnings per share is what really matters.

So opportunities will continue to drive our growth, our initiative are to attract and retain talent, expand our private client, private client will be always be a growth business at Stifel, we have made significant investments and fixed income. We are going to expand our investment banking, we see a lot of opportunity to gain market share, evidence our KBW announced deal. We will focus on growing the bank but with quality asset, we're not going to do wholesale asset generation. We will look at asset management capabilities if and when they arise to date. None of them had return on investment hurdles and it’s been difficult to expand an asset management. And I think that underscores what we’ll always do is approach our acquisition opportunities with discipline.

So talking about KBW, why this combination makes sense? It simply creates the dominant force with financial services, including research, equity, fixed income, sales and trading and banking. It’s highly complementary to what we do, we believe that we have significant synergies, but we are going to maintain KBW’s premier brand and financial services.

I believe that the financial sector is poised to benefit from improving fundamental; I don't know it will occur next year or in a few years, but I do believe that there is a lot to do in this sector and that we will benefit from that. And that’s also will leverage our Global Wealth Management platform and I believe this deal is accretive to the shareholders of Stifel.

This slide just I won’t go over it again, but it is really you can look over this. It's a background of the two firms. Stifel has grown significantly back in 2005 we’re really about the same size of KBW, but today about $1.6 billion in revenue almost 5,500 associates. And you can see on the investment banking we've been Number One U.S. equity underwriter with issuers, we define as small caps less than $500 million and you can look at the rest of the accolades, but I think from KBW’s perspective we think they are the leader, leading global investment bank, and Number One across almost all categories with small and mid-cap banks.

If you are looking at how those changes our revenue mix, I’ve always felt that Global Wealth Management in the 55% to 60% is probably our optimum revenue mix. It’s a stable business that offsets the cyclicality of our institutional business, and you can see on a pro forma basis our annualized revenues over $1.8 billion 54% Global Wealth Management, 46% institutional.

The deal is – we will acquire 100% of KBW, they had excess capital significantly overcapitalized will effectively use $250 million of their own cash to fund the majority of the cash consideration of the deal. The public shareholders will receive $17.50 at cash that's in stock and value $10 in cash and 750 in stock, we have a color on it, you can read more it's really colored between $0.29 and $0.35 exchange ratio will flow and outside the band it becomes fixed.

We believe there is a significant synergy opportunities, I'm pleased that Tom Michaud, well remain the CEO of KBW, who joined the Board. We went to some 95 key associates of KBW. We ask them is important, we ask them to have their restricted stock not that going to change the control, which was the legal right, they agreed to roll it on the original best in terms, and they find retention agreements that gives us 14 months, but these deals around five years. So I believe the people are here to really drive this business, Tom and one outside director will join our Board. The deal is subject to customary approval, close we have to the file a proxy, and it will depend on whether we get a review of that, but they will probably close early in 2013 if I had the gas today.

If you look at the transaction, this is – that's how we looked at it. Again, I won't go over lot of this, you can look at this for asking questions, but we really took out the excess capital and then value of the business after effectively dividend ending out their excess cash to them, and then look at those on our effectively and adjusted purchase price a little over $327 million. And we think based on these metrics this deal meets the attractive, meets our investments hurdles.

We believe that on a cash on cash basis this transaction delivers 10% to 16% ROE between $250 million and $300 million of revenue. We think the business will run both domestically and internationally on $64 million of incremental non-cap OpEx, and we've also believe that this transaction is 5% to 7% accretive to our earnings per share after cost save fully implemented. As I’ve said, this is the time to invest in financial services. We [think] it’s a time of kind of late to change my mind, but we believe FIG is the large driver of the U.S. economy, and almost any way you want to look at it, we believe that there is significant business potent M&A, capital restructuring and capital raise into do in the fixed pace.

Looking at Stifel and KBW combined with a dominant force in financial services. We’ll be the leading financial services IPO and follow on book runner of our Number 1 depository book run or Number 1 conversion advisor. Number 1 FIG M&A advisor, large we are going to maintain what I believe a real strength of KBW, which is especially sales and trading sales force. We will be Number 1 in U.S. equity research coverage, Number 1 in depository equity coverage. We will cover over 400 companies and I believe significant revenue enhancements will occur in fixed income and we take our fixed income platform to KBW’s client base I believe there is going to be significant revenue opportunities.

The one thing I found little confusing, I’ve been talking a lot today about is how we are going to integrate KBW in different that we’ve done most deals in the past. We intend to maintain the KBW brand in financial services and face our clients through this brand. It’s confusing because people say, how do you achieve the cost savings, and I just want to reiterate that how we face the clients through our sales and trading and research products.

So its going to be branded KBW have very little to do with what happens in the back of the shop in terms of how we clear and manage the business. And we can do both and we have a plan to do that, but we do not want to decimate the KBW brand and frankly their focus on small cap and middle cap banks and their expertise, which is phenomenal. So we believe that in the slide attempts to show how we look at Stifel’s private client group of about a billion. Our institution of 600 million and then KBW 250 million to 325 million that faces the mark, but it’s all overlaid against one common infrastructure.

Rest of this is just simply again the culture and the brand we think is colorful. When you look at overall, we will be the Number 1 provider of domestic research of all the firms, whether its boutique, regional or above the bracket, we significantly improve our trading capabilities on a combined basis. The slide looks at all managed equity offerings on all managed equity offer since 2005. We pro forma will be seventh and in terms of [Brooklyn] equity offerings in our target market, which is less than $500 million we end up being second jumping from 9 today. So we again believe that helps us with both scale and capability. As I’ve said, if you look at just depository across almost any metric, we are number one on a combined basis. Again I think that this is going to really help us.

I competed with KBW, in fact my entire careers to be a big investment banker, and I appreciate their capabilities combined with Stifel we are going to have we believe a very, we’ll create a very powerful competitor. I won’t spend a lot of time on these slides, but it just shows that there is not as much overlap as you might think there is M&A or in capital markets.

Fixed income, I will tell you that we will increase our combined fixed income revenues to depository institutions, I have been surprised at how fragmented this market is and frankly how little business we do at Stifel and combined we are going to do a lot of business in fixed income.

It’s already helping in the Global Wealth Management side. It helps our brand, we have financial advisors calling us today and saying, keys of KBW has a private client group and I love to work here. I have a lot of clients then on banks. I want to talk to you about joining your firm. Those calls go on every day, but they are going on more now that we’ve announced this transaction. So the rest of this I will take the questions. This is what we’ve done and how we’ve grown Stifel. Again, we’ve just had tremendous growth into a market that’s shrinking, but again that’s our business strategy.

If you look at the institutional business whilst it’s been difficult on the street we have, we remain profitable and continue to add people in this business.

Finally, just quickly we had a great quarter, no one is even mentioned it to me today or since we announce the quarter, let's some little disappointed and I guess note itself, don't announce the major merger of the same time you’re announcing great financial results, but as you can see quarter-to-quarter our revenues were up 25%, income up significantly, but I'm really pleased with the revenue number and what was the difficult market. In that number was about $0.09 a share relating to our investment in Knight Capital, but even absent that we significantly beat expectations both on the revenue and bottom line.

So the great quarter on the nine months same thing you can see that were poised as I said for another record year in revenue and I believe it will be a record year in net income, lot of detail here that I wont spent time, but I will talk quickly about our Global Wealth Management business which has been very strong quarter-over-quarter, revenue growth of 15%, but also significant improvement 12% on our contribution for Global Wealth Management.

Our institutional group also showed significant results, significant improvement, but that's where we recorded the Knight transaction. So if you would want to normalize that would take out about $25 million in revenue and about $0.08 a share in profit to give the sense for the impact of Knight.

And finally, and then I'll take questions, I talked last quarter about the impact on our margins and our investments, and we’ve made significant investments because we are not cutting people to sort of meet the new normal. We are adding people to gain market share, it's contrarian, it's certainly what we've done in the past, but I talked last quarter about the fact that it caused us about $0.13 a share in margin, and you can see these are investments that we made in the private client, hiring fixed income people, a few underperforming businesses that we had exited.

But as you can see in the third quarter to the revenues grown from $5 million to $15 million, and our per share impact on those investments have gone from $0.07 to $.06 to now $0.02 and I believe will be – will make money on these investments. But if you take those out even in a difficult market, we are achieving our stated goal of 15% pre-tax margins in a market that has been very difficult.

So at the end, with the thought that sometimes in our careers we’ll see another ball market, and if we do I think we're very well positioned to significantly add shareholder value at Stifel.

So thank you and I'll be glad to take some questions.

Question-and-Answer Session

Unidentified Analyst

Hopefully you’re right on the environment for Stifel, but maybe I’ll kick off and then we’ll open it up to Q&A. So if you typically in this industry when you go through acquisitions from an investor standpoint, synergies cost take outs what’s more tangible you understand it, when it’s based on revenue upside and it's little bit more challenging to foresee, so just given the structure that you foresee KBW within Stifel, one is that is unique or could we see overtime another subsector, maybe it's not financial, but it's material, and that was actually have its own place in Stifel. So just any color on why that structure versus I guess what would be the typical in the structure?

Ron Kruszewski

Well, first of all that the structure has meant first maximize client interaction, and that serve the client, and so we always think about what is the best way to maximize revenue, and serve clients when start with those games about, and like in the [LIBOR] case we integrated the business all the way kind of we didn't really integrate the investment banks to put them together, but there was really virtually no overlap. In this case, FIG is such a homogeneous, tons of companies the fact that there is KBW covers 450 companies and does it very well in small and mid cap.

The idea that you would give little bit sales force that knows that are integrated into a more generalized sales force, doesn't make a lot of sense, and doing significant revenue. So we’re not married to anyone’s strategy, we try to do what maximizes revenue. And we believe maintaining the brand and maintaining the sales and trading in research, in the way they interact with clients is the way to go. But that does not mean that we are not efficient on our cost, we'll be very efficient on the cost we just believe this is the way to maximize the revenue. And frankly the client experience.

Unidentified Analyst

Okay. I think there was a question with questions.

Unidentified Analyst

Hello, can you give us an insight is to how we can understand your numbers, your purchased numbers. So how do we begin to (inaudible) them, how well the old parts you are doing within the new setting and what the management has been adding to total corporation?

Ron Kruszewski

You're talking about our past acquisitions?

Unidentified Analyst

I'm talking about the numbers presented that show the effects of the acquisition on a purchased basis, but unless we now on a pro forma basis that the growth, lack of growth with a very bad environment that you’ve been through it doesn't reflect in the understanding of what's been accomplished or what we should worry about?

Ron Kruszewski

It’s a fair question. I’m not sure I can answer it. I can only answer from the perspective that, we don't measure when we took Weisel, I don't keep track of their business, or doesn’t – first of all think it's culturally dangerous to do that. Ryan Beck I don't really have any idea of what Ryan Beck of the UBS brand should have performed versus expectations, I know they done well, because our earnings per share and our revenue and everything has grown into a market less than 20% these acquisitions had done very well, but we quickly integrate and then don’t report on any of them separately. So I'm not sure I can answer your questions, I'm not sure whether would accomplish frankly.

Unidentified Analyst

I think it would have might accomplishes allowing us to development of a multiple so that the market can distinguish whether there is a difference between being Weisel had acquisitions and actually growing the core of the company and having and showing that it performs differently than your competitors?

Ron Kruszewski

Like, again, I can't tell I’ve have been ask this question in past, before KBW between 2005 and 2012 half of our growth has been organic, and the other half has been via acquisition, and that's just by taking the numbers of the time of acquisition, and adding them to the result versus where we ended up. So it's half organic and half acquisitions. Whether or not you’re adding by organically hiring people are doing math, hires through acquisition there will be a key as of keeping and retaining people and driving earnings per share, and I think we've been doing those for 15 years, so I would hope our operating history has built into our multiple.

Unidentified Analyst

Thank you. I can just further up for another question, but you gave the example of Weisel and with respect to that, I can understand the divisiveness could be caused by measuring how each branches doing, but on the other hand how do you measure whether the branches are worth keeping or not the people keeping if you're not measuring individual units and subunits?

Ron Kruszewski

Of course, we do. I mean we measure businesses for compensation purposes, so we do that but whether or not the Weisel are using our private sponsors group that services everyone else, I just don't get into trying to remember or keep track what was Weisel and what was Stifel. I find it to be an exercise that yields in our results, but trust me people get paid according to their productivity.

Unidentified Analyst

And in terms of potential acquisitions in the years forward, do you feel that the historic rate can be perpetuated of acquisitions?

Ron Kruszewski

Well, I would I mean certainly the law of largest fall numbers were, I wouldn't think that we will do nine large transactions in the next nine years as we've done in the past nine years I wouldn't predict that.

Unidentified Analyst

We have another question behind.

Unidentified Analyst

Ron, I think you’ve done a pretty good deal, but my question is very response premium was less than 10%, 7% or 8%, you are paying the cash portion with their cash, I believe KBW’s employee shareholders have a majority interest. Is there any opposition from the public and KBW shareholders, the place is build with the offering price was and then went public a few years ago. Why do they sell, why they agreed to sell to you?

Ron Kruszewski

You are asking me that question?

Unidentified Analyst

Yeah. I don't see any KBW people here maybe they can tell me if they hear? It seems like you're going to get fantastic deal if that group performs going forward?

Ron Kruszewski

I mean that's really a question with KBW, it is not I don't want to speculate on what they did or didn't,, but I can’t tell you that they are stronger part of us and we're stronger firm with them and there's a lot of things that go into a deal, so I'm just not going to answer a question directly to them I hope do you appreciate that.

Unidentified Analyst

Okay. Ryan, Beck, they’ve operated as a separate division Ben Plotkin joining it, they’re going to be focused in the KBW going forward, because there can be other standard businesses?

Ron Kruszewski

Ryan Beck is not a separate division and Ben is not running it although he runs me from times. Obviously I think we see things be does, but Ryan Beck is fully integrated as part of Stifel, but in cases there is couple of brands like the Ryan Beck name and they keep it up, and it doesn't matter to me, but Ryan Beck is not in any way separate from what we've done with Stifel.

Unidentified Analyst

You're going to continue with the first conversion business?

Ron Kruszewski

We're Number One and we continue to – we plan to continue to be Number One.

Unidentified Analyst

Thank you.

Unidentified Analyst

One area that you mentioned expanding, which is kind of a contrary to maybe the entire industry, just in the fixed income area, could be just partially decide that you were – you have players that are exiting, so I guess when you are looking at the fixed-income market, and based on your footprint your franchise, we are the opportunities viewing that space and when you look at capital intensity versus non-capital intensity how do you make those two measure still generate a decent return?

Ron Kruszewski

The fixed-income business, first of all, I think has been a very good business, obviously by what's happened to the yield curve and the short-term rates, it's been above market. But going forward when I look at many client portfolios, I see relatively short duration that will need significant adjustments as the yield curve shifts up and flat to Stifel or whatever it's going to do, but it's not going to stay like for ever, but I think the fixed-income business the prognosis for that business was good.

When I looked at and its come down to stand some of the potential client bases that we were not penetrating one that jumped out to me significantly were depositories. It's a huge market with dominated really by a few players and we set out, and we've hired some 60 people to go after the depository business, and we are in process of doing that and I would bring KBW in and KBW has one thing they have great relationship with – 1,000 CEOs and CFOs and we intend to penetrate that with fixed-income.

Unidentified Analyst

And just given your business mix, you are currently – when you think about growth from this point forward and it can be whether to organic, in organic, but when you look at the trends that you’re seeing on the wealth management side versus the institutional side, something that's more attractive and I guess on the inorganic it's really the opportunity that present itself, but when you look at the outlook for Stifel over the next five years it still going to be about the same relative contribution or do you foresee in one of those gaining?

Ron Kruszewski

Well, in terms of market growth, I think the institutional business has more opportunity to rebound just in terms of improvement market even more the Global Wealth Management business has done well. But in terms of our organic growth going forward, I think private client business will outpace the institutional business organically. We made a lot of investments, we are going to digest some of these investment. So as we add organically its going to be much more in global wealth management going forward, but the impact on the revenue line item in fixed month or two year period, can be more significantly institutional business because frankly – so an improvement there could be significant.

I want to say though again our entire business model, I think we've been contrarian in that we haven't had a lay off and we are not cutting back. Our business model is best upon the believe that the large universal banks as I said have to delever raise capital and restructure the businesses to achieve market returns on equity, most of that is going to occur by cutting people and cutting people is going to cost not just excess capacity but revenue and we believe that we're well positioned to gain that market share in a market that could otherwise look flat. And so that's what we intend to do.

Unidentified Analyst

We'll take a follow-up question.

Unidentified Analyst

Ron, let me say if I understand on the restricted stock, 95 KBW employees have restricted stock, they have agreed to extend that for 14 months and as part of stock situation between $29 and $35 a share of Stifel stock at the end of 14 months when they can sell it, and they have five-year contracts with the company. Is that what you said in the presentation?

Ron Kruszewski

I don't think that's what I said, but I’ll say it again, okay. The KBW – more than 95 people had restricted stock, but the 95 people that we identified as absolutely key with this transaction. We went to and said that, instead of U.S. stock investing upon a change of control meaning to be freely tradable, we want you to let it bet has otherwise would bet which will be over another one year to three years in that timeframe. And you might ask why someone would do that, and the answer is we weren’t going to do the deal almost did, and these people see the power transaction in all of them, but the vast majority agreed to extend or not have their stock invest on a change in control.

In addition to that, they are agreed to effectively work for just KBW for the next 14 months, not with anywhere else regardless of what happened. I’m effectively non-compete for 14 months plus we then put five-year retention stock on top of that. So the combination of those three things is the return of aspects of those transaction, which I can tell you are extremely high. I'm not worried about, I wasn't worried I want to done the deal on the first phase. I'm not worried about people leaving and not [working] harder to gain market share my primary worry of the overall market. And my biggest worry is what's going on in Washington.

Unidentified Analyst

So, how long there’s an non-compete go for now?

Ron Kruszewski

14 months.

Unidentified Analyst

14 months. Thank you.

Unidentified Analyst

(inaudible) here. Just back on the wealth management side, you mentioned that organic growth in the private client base outpace other parts of the business. Just elaborating within wealth management where you see particular areas of growth and how your position relative to others to capitalize on that growth?

Ron Kruszewski

Well, primarily our growth has been financial advisors and it's primarily without talking about one business model versus another business model effectively thousands of financial advisors have been consolidated up in the universal bank model from firms that used to look a lot like Stifel and AG Edwards, Macdonald, Piper, J.C. Bradford and I can just name and what's happening today is that as those business models change these large firms.

Many of these financial advisors want to go back to the firm that they used to work at and more entrepreneurial, more freedom for them and unfortunately their firm doesn't exist any more, so the firm that looks lot, where they use to look work as Stifel, and we see a lot of people that want to come back to their old environment not everyone obviously, but that's going to drive a lot of our growth, that coupled with we report our bank and our global wealth management segment and the bank has and will continue to be a significant contributor to our profitability as a growth.

Unidentified Analyst

One last one. It seems like based on what you’re saying in terms of may be you're in some improvement in financials, in that environment, your position to do well, the sluggishness continues then maybe you are right in terms of the big banks continue to delever cutting costs, and so you can gain market share. So I need a scenario looks all right, which one do you hope for, which one do you feel like you're better positioned or in the meantime either way is fine.

Ron Kruszewski

The one I hope for is, as I said all day in our meetings, I have not in my 30 years in the business have ever witnessed the economy or frankly the capital formation and wealth management business held as hostage to what's going on in Washington as I do today and the uncertainties caused by the fiscal cliffs inability to deal with the deficit and all the uncertainty has really put a damper on confidence and therefore our business. I believe that that will get resolved. I believe a big factor that's going to help get capital in motion will be corporate taxes form I believe that’s a by part of an issue.

I will say that from Stifel's perspective corporate tax reform have to help us in that repay the highest marginal tax rate to possible in the United States nearly 40% which I find is ridiculously high and the highest in the world. So I believe we are going to be a net beneficiary but just corporate tax reform a long-term solution to our long-term debt issues I think reignite confidence and makes no sense to me the 10 year yield versus the yield on the S&P 500 in any growth environment with confidence.

I believe you’ll see money rotate out of fixed income back into equities which will allow investment volumes to improve, the market to improve and I believe we're well positioned for that. The corner side is that nothing happens, we go off the fiscal cliff, Europe goes into the best, it’s going into the deflationary cycle and I've made some bad investments in that environment, but I’m not counting on that one.

Unidentified Analyst

Okay. I think we’ll wrap it up there. Thanks again, Ron.

Ron Kruszewski

Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Stifel Financial's CEO Presents at Bank of America Merrill Lynch Banking and Financial Services Conference (Transcript)
This Transcript
All Transcripts