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Wells Fargo upgrades Stifel on shift to wealth management, bank M&A hopes

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Wells Fargo upgrades Stifel on shift to wealth management, bank M&A hopes

Wells Fargo analyst Christopher Harris has upgraded Stifel Financial Corp. to "outperform," writing that the company is benefiting from a shift toward wealth management and could see more advisory revenue if bank regulation reform sparks M&A activity.

Wealth management and banking now account for about 64% of Stifel's revenue, compared with 54% in 2014. Investors tend to value wealth management businesses more highly, the analyst wrote.

The possibility of regulatory reform could also work to Stifel's advantage. One of the key changes under consideration in Congress is raising the asset threshold for stricter oversight, a move that could lead small and medium-sized banks to make more deals. That would benefit Keefe Bruyette & Woods Inc., the bank M&A adviser affiliated with Stifel, Harris wrote. KBW worked on just under a third of all the bank deals in 2017 to date, he noted.

Stifel could also see a $1-per-share bump to earnings if tax reform goes through, Harris said.

The analyst raised his price target for the stock to $64. His EPS estimates for 2017 and 2018 are $3.45 and $4.00, respectively.