A Recovery in Capital Markets Revenue Should Offset Headwind of Lower Interest Rates for Stifel

Stifel Financial’s revenue and earnings took a step back in 2022 and 2023 as higher net interest income from tightening monetary policy couldn’t offset the effects of fear of a recession on client assets and investment banking revenue. About 20%-25% of the company’s revenue is from net interest income, which grew about 80% in 2022 to $900 million and 25% in 2023 to $1.1 billion as the Federal Reserve increased interest rates. Net interest income will be a relative area of strength until the Fed reduces rates in response to either a recession or lower inflation. We currently forecast mid-single-digit revenue growth over the next couple of years as winds reverse, with capital markets revenue growth offsetting the effect of interest-rate headwinds on net interest income.