Stifel Financial Corp. SF is in discussion with B. Riley Financial to acquire its wealth management business for more than $100 million. This was reported by Reuters, citing a source familiar with the matter.

The discussions arise as B. Riley seeks to raise capital following a second-quarter loss warning. Also, the company is facing pressure for its involvement in a management-led buyout of Franchise Group in 2023.

Potential Benefits of SF’s Acquisition

Through this acquisition, SF could gain 400 independent and employee brokers, adding to its existing network of roughly 2,400. 

This potential buyout aligns with Stifel Financial’s CEO Ron Kruszewski’s strategy of making opportunistic acquisitions, which has been a key factor in the firm’s growth and expansion in the wealth management space.

Also, acquiring B. Riley’s wealth management unit while the company is under financial pressure will allow Stifel Financial the opportunity to secure an asset at a favorable price. This would enable it to scale up without stretching its finances unnecessarily, ultimately strengthening its market position.

SF’s Efforts to Boost Its Wealth Management Business

Stifel Financial has been actively expanding its wealth management business through strategic acquisitions. In 2015, the firm acquired Barclays’ Wealth & Investment Management business. With this agreement, Stifel became the United States private wealth distribution partner for certain of Barclays’ equities and credit new issue securities in the United States.

In the same year, Stifel Financial also acquired Sterne Agee. This acquisition increased SF's Global Wealth Management professionals by 35% to more than 2,800 financial advisors and independent representatives. In addition, it expanded the client assets under management of SF to more than $200 billion. Apart from strengthening the wealth management capabilities, the acquisition also enhanced the Fixed Income platform, adding depth and extending its service offerings.

Such opportunistic buyouts position SF to enhance and diversify its Global Wealth Management Business. However, this strategy could lead to a significant rise in its expense base due to integration and implementation costs, which could limit the bottom-line growth. 

Over the past six months, shares of SF have gained 21.4% compared with the industry’s growth of 9.1%.

Image Source: Zacks Investment Research

Currently, SF carries a Zacks Rank #4 (Sell).

Stocks Worth Considering

Some better-ranked bank stocks worth considering are Robinhood Markets, Inc. HOOD and Interactive Brokers Group, Inc. IBKR. Currently, HOOD sports a Zacks Rank #1 (Strong Buy), while IBKR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

Estimates for HOOD’s current-year earnings have jumped 38.2% in the past 60 days. The company’s shares have jumped 19% over the past six months.

Estimates for IBKR’s current-year earnings have moved marginally upward in the past 60 days. The company’s shares have climbed 23.9% over the past six months.