Regional brokerage and investment banking firm Stifel Financial Corp.’s second quarter results took a hit as the firm wrestled with ongoing legal issues, while its global wealth management business’ revenue fell from the first quarter with decreased trading volumes.
Stifel’s overall unaudited net income was $3.4 million, or $0.05 per share, for the second quarter, down from $21.1 million, or $0.40 per share in the second quarter of 2010. At the same time, revenue fell 2.1% from the first quarter to $358.9 million. But with second quarter revenue still up 9.4% compared to the same period in 2010, when it was $328 million, performance has still improved from last year, the firm said.
“Second quarter results improved over the year ago period, but were impacted by a challenging market environment dominated by macroeconomic factors, and significant non-core expenses primarily related to additional legal reserves,” Stifel Financial Chairman, President and Chief Executive Ronald J. Kruszewski said in a statement.
“Despite these factors, our investment banking group generated their second best revenue quarter, which was offset by pressure in our brokerage and private client business due to a lack of investor conviction," he said.
Stifel’s overall performance in the second quarter was weighed down by ongoing legal issues. The firm is currently wrangling with charges related to certain notes it sold, including civil litigation with five southeastern Wisconsin school districts. A related regulatory investigation is also ongoing. Those legal costs, as well as merger costs tied to Thomas Weisel Partners Group Inc., reduced net income by $27.9 million.
Stifel’s global wealth management business saw its net revenue slip to $225.6 million, down from $238.4 million in the first quarter as trading volumes decreased, the firm said in its earnings release on Monday. But the results were an improvement over the same quarter one year ago, which had net revenue of $199.9 million.
Stifel’s wealth management business’ revenue decline from the first quarter was the result of lower trading volume, and subsequently lower revenue from commissions and principal transactions.
Stifel attributed that increase in net revenue from 2010 to higher commission revenue with increased client assets and productivity, more asset management and service fees and greater equity underwriting sales credits. The firm credited the acquisition of Thomas Weisel Partners with providing more contributions toward its asset management and service fees.
The firm’s global wealth management unit includes the private client group, which had $213.5 million in net revenue for the second quarter, a 7% decrease from the first quarter and 12% increase from the second quarter of 2010. That unit also includes Stifel Bank, which had $12.1 million in net revenue, up 36% from the first quarter and also up 36% from the same quarter last year.
Stifel Financial’s institutional brokerage revenue came in at $73.2 million for the second quarter, down 19% from the first quarter and 17% from the second quarter of 2010. The firm’s investment banking business was a bright spot in its second quarter results, where revenue surged to $58 million, up 65% from the first quarter and up 62% from the same period last year.