Stifel 1Q16 Earnings Call Notes

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Stifel Financial (SF) Ronald J. Kruszewski on Q1 2016 Results

Only 8 IPOs in Q1 compared to 34 last year

“To give you some color on the environment in equity capital markets in the first quarter, there were only eight IPOs in the quarter compared to 34 in the prior year. And for us, two of our largest sectors are financial and technology, media and telecom. The total fee pool for financials was down 95%, a decline from $203 million in the first quarter of 2015 to $9 million this quarter. And in TMT, or technology and media, the fee pool was down nearly 90% from $227 million to $24 million in the first quarter of 2016. Consequently, our equity underwriting revenue declined 58% year-over-year.”

There hasn’t been a marked improvement in the equity capital raising environment

“I would just say that I feel that sort of the malaise that surrounds the equity capital raising is still evident. It’s kind of hard to envision 90% declines in the fee pool continuing throughout the year but I wouldn’t say there’s been a marked improvement certainly in April. And it’s sort of a quandary in my mind between the overall view of the economy and what’s going on in capital markets generally. So it feels – it not only feels, it is slow and as I look at the pipeline, I believe that it will get better, but it’s not a marked improvement in April.”

DOL guidelines will impact financial products, which will evolve. DOL discourages brokerage

“I think the industry will evolve and I think that you’re going to see manufacturers of product evolve as well, meaning that there will be more products that are available for advisory relationships because that’s certainly – make no mistake about it. The DOL rule certainly in my opinion is not – discourages, let me put it that way, discourages brokerage relationships. And so many firms are going to move to an advisory or flat fee arrangement that’s outside of brokerage. And the manufacturers obviously see that as well and will be creating product that is appropriate for fee-based accounts versus brokerage accounts. So you’ll see share classes without 12b-1s. You may very well see annuities that are structured in a way that they can have a fee versus the upfront charges on annuities. So I think you’re going to see an evolution of this business.”