Analyst Calls Stifel Financial Corp's Sterne Deal 'Sound'

Stifel Financial Corp.'s

plan to acquire the privately held brokerage Sterne Agee for $150 million is strategically sound and financially attractive, an analyst said Tuesday. St. Louis-based Stifel, which unveiled the plan Monday, changed hands recently at $54.73, up 5 percent. http://www.stifel.com/investor-relations/press-releases Credit Suisse's Christian Bolu boosted his price target on Stifel 17 percent to $53, maintaining a Neutral rating. Given recent troubles at Birmingham, Alabama-based Sterne, along with Stifel's acquisitions track record, Bolu said the deal comes as little surprise. Although Bolu praised Stifel's plan, he also said "growing complexity" at Sterne's independent dealer channel will place increased compliance burdens on Stifel, while the addition of Sterne's fixed income business will add to its earnings volatility. Sterne gets about half its revenue from its institutional business, 40 percent from wealth management and the remainder from a mortgage business. Stifel will retain the wealth management business and the fixed-income portion of the institutional business, selling the remainder of Sterne. Citing added profits from the acquisition as well as balance sheet growth, Bolu boosted his 2015 earnings estimate for Stifel by more than 5 percent to $3.22 a share. Analysts on average expect Stifel to earn $3.10 a share in 2015.