Jefferies profit tumbles as deal slump persists

JEFFERIES Financial Group said profit fell 57 per cent in the fiscal fourth quarter, amid a persistent deal slump that looks poised to crimp a key profit engine across Wall Street.

Total investment banking revenue declined about 52 per cent to US$568.5 million in the period ended Nov 30, the New York-based firm said on Monday (Jan 9) in a statement. That exceeded the US$550.4 million average estimate of analysts in a Bloomberg survey.

Jefferies’ earnings offer an early snapshot of how Wall Street’s biggest banks may fare as they report earnings from Friday this week. Investment-banking revenue plummeted in the first nine months of last year after corporate dealmaking and sales of new securities waned amid 2022’s market swoon. The bank said its full-year investment-banking revenue was its second-best ever.

“We have never been more optimistic about our human capital, product capabilities, industry expertise and geographic breadth, which we intend to continue to aggressively deliver to our clients going forward,” chief executive officer Richard Handler and president Brian Friedman said in the statement. “Our goal is to continue to gain market share.”

The shares fell about 5.2 per cent to US$35.80 in extended New York trading after the announcement. They have climbed 10 per cent since the beginning of the year. The stock surged last week on a report that Japan’s Sumitomo Mitsui Financial Group was seeking to boost its Jefferies stake.

Jefferies didn’t announce any changes in the Sumitomo stake on Monday. In a letter to shareholders, it said that the two are developing “further ways to work together to better serve our clients globally”.

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Revenue from Jefferies’ equities trading business in the quarter declined 13.7 per cent from a year ago. Fixed-income revenue in the period jumped 71 per cent to US$226.7 million amid continued volatility across markets caused by economic uncertainty.

“We carried that momentum through the first month of fiscal 2023,” Handler and Friedman said.

Jefferies has hired former Barclays banker Sam Dean to beef up its senior ranks in London, a person with knowledge of the matter said earlier on Monday. Dean is joining as a vice chairman of investment banking with a focus on equity capital markets, according to the person, who asked not to be identified because the information is private. BLOOMBERG