STIFEL FINANCIAL CORP (SF) stock intrinsic value fair value estimate & owner earnings analysis

Stifel Financial is a St. Louis-based wealth manager, investment bank and bank holding company. Its Private Client Group had more than 2,200 financial advisors in 402 branches at the end of 2025, and client assets stood at $551.9 billion. Stifel Bank held $21.9 billion of loans against $29.8 billion of deposits. In 2025 net revenue was $5.53 billion: roughly 31% fees on client assets, 23% investment banking ($1.25 billion), 20% net interest income ($1.09 billion), 15% commissions and 12% principal transactions. Because this is a lender and broker, interest paid on deposits is treated as an ordinary cost of doing business, and no debt is subtracted from the values below. Earnings measure. We measure what the business earns for common owners after stock compensation, loan-loss provisions, capital spending and preferred dividends, and we strip out the large swings in broker-dealer inventories and receivables that make operating cash flow lurch from year to year. Cash handed to newly recruited advisors as forgivable loans is a recurring cost of staying in business, so we leave it in. On that basis owner earnings per share (adjusted for the February 2026 three-for-two split) were: 2016 $1.04, 2017 $1.93, 2018 $1.85, 2019 $1.14, 2020 $2.25, 2021 $3.98, 2022 $3.73, 2023 $2.98, 2024 $3.82, 2025 $3.49. The early years describe a much smaller firm, so the starting level is the median of 2020 through 2025, $3.61. That window holds the 2021 boom, the 2022-2023 slump in deal-making and the years since. The four years 2022 through 2025 give the same median. These figures are not comparable with our earlier estimates, which used a different earnings measure. Year-one reconciliation. Owner earnings fell about 9% in 2025 ($3.82 to $3.49). The base case starts at $3.61, 3.5% above 2025. The reason is specific: 2025 absorbed legal provisions for the March 2025 FINRA arbitration award against Stifel ($132.5 million, about $143.5 million with interest; Stifel has petitioned to vacate it and a magistrate judge recommended denial in February 2026), which the 10-K says cut 2025 earnings by $1.16 per share on the pre-split basis, about $0.77 on today's shares. In the first half of 2026 net income was $477.9 million against $208.0 million a year earlier, investment banking revenue was $673 million against $471 million, and net interest income was steady at about $552 million against $532 million. We do not lift the starting level for these two quarters. Nineteen further claims from customers of the same former advisor are unresolved, which is a reason not to set the level higher. Base case: $67.18 per share. $3.61 in year one, growing 2% a year for years two to six and 1% a year for years seven to ten, reaching $4.15, then flat. What we credit: Stifel paid out only about a third of owner earnings as dividends in 2025 ($1.84 per pre-split share, about $1.23 today), has made small acquisitions regularly (for example $75 million of cash in 2025 and $112 million in 2023) and grew its bank loans 5.8% in 2025, so a small rate of growth is funded from its own cash. What we leave out: more advisors (the count was 2,200 in 2018, 2,227 in 2021 and just over 2,200 in 2025, so headcount is flat), rising markets, a deal-making recovery above the median, and any margin gain. The business continues at a flat level after year ten because a 28-year record supports it: advisors grew from 262 in 1997 to over 2,200 and client assets from $11.7 billion to $551.9 billion, through several downturns. Intangible amortisation is small ($34 million in 2025), so no extra adjustment was needed. Bear case: $44.53 per share. Year one is $3.06: another adverse award of roughly the size of the first, about $0.55 a share after tax, from the nineteen open claims. Year two follows the 2008-2009 financial crisis pattern, which hit firms with large investment banking and trading arms: investment banking revenue down 50%, client-asset fees down 20%, commissions and trading down 30% and net interest income down 20% (net interest income fell about 16% in 2020 when rates were cut, from $547 million to $458 million). About 35% of the lost fee and trading revenue falls through to profit (the rest is lower pay), the lost interest income falls through in full, and credit provisions rise by $110 million, so owner earnings are about $(0.28) a share. Years three to five recover: $0.65, $1.73 and $2.72, with extra loan provisions of $110 million, $80 million and $30 million. That is about $330 million of extra provisions in all, sized to the bank's mix: 42% residential mortgages, 19% commercial and industrial, 19% capital-call fund lines, 11% securities-based loans, 5.5% construction and 2% commercial real estate; its $6.5 billion of held-to-maturity securities are rated AAA or AA. From year six net interest income stays 10% lower for good, giving $3.09 a share. Years nine and ten repeat the 2022-2023 slump: 6% and then 25% below the recovered level, the same declines seen in 2022 and 2023 against 2021. A $330 million credit hit and one loss year are small against about $3.7 billion of tangible common equity (roughly $24 per share), so we do not assume new shares are issued. The bear value is above tangible book because earnings stay positive in every year but one and come mostly from advisor relationships and client assets, not the loan book. Bull case: $84.71 per share. Year one is $4.00, close to the best of the last five years (2021: $3.98) and below the roughly $4.26 that 2025 would have shown without the arbitration provision. Growth is 4% a year for years two to five and 3% for years six to ten, reaching $5.42, then flat. This assumes the loan book keeps growing near its 2025 pace, small acquisitions and share buybacks continue (diluted shares fell from 171.9 million in 2020 to 165.1 million in 2025), and the arbitration claims are resolved at modest cost. What would make these wrong. If the true level were the ten-year median ($2.60) rather than $3.61, the base would be about $48. If net interest income settles permanently 10% lower, the base falls by about $10. If the arbitration claims turn into repeated nine-figure awards, results fall below the bear case. We tested the assumption that the advisor franchise persists: advisor numbers have held at about 2,200 for seven years. We could not reconcile the pre-tax cost of the arbitration award from the filings, so we use the per-share impact the company reports. Stifel is leveraged in the usual bank way: $41.3 billion of assets against $5.3 billion of common equity, plus $685 million of preferred stock ranking ahead of the common and $672 million of senior notes and debentures. Margin-of-safety price: $30.00. We are fairly confident of the earnings level but not precise: the last four years range from $2.98 to $3.82, and about a fifth of revenue is net interest income that moves with rates. The worst plausible outcome is a deal-making and market slump like 2008 with falling deposit spreads and further large arbitration awards. The bear case models most of that, but not a string of awards or a loss on the $6.5 billion securities portfolio or the fund-banking loans. The business would survive it: the bear path loses money in only one year and the common equity is large relative to the credit and legal hits modelled. If we are wrong about both the starting level and net interest income, the shares are worth roughly $39 on the base path. The price assumes a three-to-five-year holding period, during which the dividend (about $1.23 a share on today's share count, over 4% a year on $30) is paid. From $30 the base path implies roughly 20% a year including dividends and the bear path implies roughly 12% a year, so the price leaves room for error. A higher price relies on the median outcome and leaves little room for the bear outcome. Previous figures (bear $37.79, base $74.83, bull $104.01, margin-of-safety price $26) were built on a different basis and are not comparable. What has changed in the business: first-half 2026 earnings and investment banking revenue rebounded strongly, net interest income is stable, and the March 2025 award is still being contested with nineteen similar claims unresolved. Sources: Stifel's annual reports for 2016 to 2025 and its second-quarter 2026 report.