‘Stock picking matters now,’ Stifel Financial CEO says

Ron Kruszewski, Stifel Financial Chairman and CEO, joins Yahoo Finance Live to discuss earnings, investor sentiment, markets, and sponsoring the St. Louis hockey team.

Video transcript

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JULIE HYMAN: This is "Yahoo Finance." Investment banking and financial services firm Stifel reporting earnings this week and had the company's second highest first quarter results in their history, backed by a big quarter in the Global Wealth Management department. The firm also announcing a deal to become the official jersey sponsor of the St. Louis Blues of the NHL. We're going to get into that in just a bit.

But joining us to break down the deal as well as the firm's successful first quarter is Ron Kruszewski, Stifel Financial Chairman and CEO. And you're ready in the jersey, I see. We we'll get to in a moment.

RON KRUSZEWSKI: We got a big game tonight.

JULIE HYMAN: Yes, I know. You must be pumped. But we'll talk about that in a second. I do want to start with the numbers, though, and in particular what you're seeing in that Global Wealth Management division, because obviously, when you look at the markets right now, we are hearing a lot of cautious tone from a lot of investors. And so I'm wondering what you're hearing from your investors as we are already in and set to continue a rocky period.

RON KRUSZEWSKI: Well, our investors have and continue to be engaged and invested. We're not a firm that relies on trading and activity. We're a firm that provides advice. And the main thing is that in turbulent times like this, you need to hold the course. And stock picking matters now.

You just don't throw a dart at a growth stock, and it goes up. You need to have some advice, be buying some value stocks, writing call options, and doing a number of things. And our investors are. And I would say that they're engaged.

BRIAN SOZZI: Ron, do you want to see-- are you in the camp that wants to see the Fed move faster with rate hikes?

RON KRUSZEWSKI: Well, if I talk in my own book, I do, because Stifel is an asset-sensitive company. So as the Fed raises rates fast, we do better as a company. So on one hand, I would like to see them do that.

On the other hand, what happened, Brian, was that in 2021, the Fed didn't act fast enough. And what we have to be careful about-- and this seems counter-intuitive. But the Fed needs to be cautious. I think of them as driving an 18-wheeler down the highway. And they can't just swerve to the left and just say, oh, we're going to rates so fast, because that can be very upsetting to the markets.

They need to put their turn signal on and just start raising rates gradually. I'm not one that's looking for consecutive 50 basis points or 75 basis points increases. I think it has to be measured. It has to be done, but it has to be measured.

BRIAN SOZZI: You think these rate hikes, Ron, will inject a next wave of volatility into markets?

RON KRUSZEWSKI: Well, any time you change financial conditions, you find out where the excesses are in the markets and the economy, any time you do it. The old adage, as Warren Buffett used to say, you find out who doesn't have a swimsuit on when the tide goes out. And that's kind of what will happen. As rates go up, the excesses and where there's too much leverage will come out. So I do expect that. And that wouldn't be unusual. It happens every time this happens.

JULIE HYMAN: You mentioned you were talking your own book when you talked about rates going up being beneficial for you. I'm just looking at the numbers within your Global Wealth Management division. And indeed, net interest income provided quite a wind at your back, if you will. You saw some other areas see a year over year decline, transactional revenues, investment banking.

So how are you guys going to manage this mix kind of going into this interest rate increase cycle? Do you expect to see, in other words, continued leaning on that net interest income, as maybe other parts of the business continue to see some year over year declines?

RON KRUSZEWSKI: Well, in 2020, our net interest income declined over $100 million, and we had record revenue. It's the balance of our business. Today, net interest income, we're projecting it to go from $500 to the low end of $800 up to $900 million. That's $300 to $400 million of increase revenue just from net interest income.

That will absorb a fair amount of volatility in other revenue items. Although, I personally am optimistic about our other businesses too. So I think the market's a little nervous here on all stocks. And financials are not doing as well as I think they should be doing, considering this environment.

BRIAN SOZZI: Ron, I didn't think I would ever see you in a hockey jersey on an earnings week talking about markets. So there's a lot going on for me here. I'm still processing it. But why'd you sign that deal with the Blues?

RON KRUSZEWSKI: Well, why not? I mean, that's the fun part of the job. We're trying to-- we have a strategy here at Stifel. Let me put it that way here. This is the cover of our annual report, which is Success.

And what it means is that we're a firm that combines with success or tries to find success. We're trying to find the next successful company. We're trying to associate with success. And the Blues are a very successful St. Louis franchise. Stifel's been around since 1890. So everyone's doing it now.

There's a lot of purists that don't like it. But it's the way it is. And I'm just thrilled to be able to associate Stifel, since 1800s and St. Louis, with the Blues, an iconic hockey franchise. And it is the way of the world here.

BRIAN SOZZI: Well, you're looking good in that jersey. Congrats on that partnership. Stifel Chairman CEO Ron Kruszewski, always good to see you.