Jefferies Slides Most in Almost Two Years on Trading Decline
Jefferies Makes Investment-Banking Push as Revenue Advances
(Bloomberg) -- Jefferies Financial Group Inc. shares slid the most in almost two years after the firm said fixed-income trading revenue tumbled 50% from a year earlier.
The fixed-income slump contributed to a 28% drop in overall revenue from the firm’s trading operation during the three months through November, the company said in a statement Wednesday.
The declines were “primarily due to challenging market conditions for fixed-income trading leading to lower volumes, as compared with the prior year quarter, which benefited from high levels of client activity,” Jefferies said in the statement.
The firm’s performance is closely watched as a leading indicator for results from larger rivals including JPMorgan Chase & Co. and Citigroup Inc., which report fourth-quarter results Friday.
The shares fell 9.6% to $37.40 at 11:03 a.m. in New York, paring the gain in the past 12 months to 41%. They dropped as much as 10.7%, the biggest intraday decline since March 2020.
Jefferies said investment-banking revenue rose in the fourth quarter, and it plans to keep expanding that business while winding down the merchant bank.
Revenue from investment banking and capital markets clocked in at $1.61 billion, a 5% increase from a year earlier. Total net revenue fell 3% to $1.81 billion.
“We believe Jefferies’ future growth will be fueled by the continued build-out of our investment-banking effort, enhancing our capital-markets businesses, and further developing our Leucadia Asset Management alternative asset-management platform,” Chief Executive Officer Rich Handler and President Brian Friedman said in the statement.
The company will keep working to wind down its merchant-banking portfolio “prudently and patiently,” they said.
The executives also highlighted increased headcount at the New York-based firm, with the investment bank upping the number of managing directors 24% to 278 and overall headcount growing by 15% in 2021.
The results cap off a fervent year of mergers and acquisitions that set off an investment-banking boom across Wall Street. The Jefferies executives said the bank’s investment-banking backlog is “robust” and similar to levels from the prior year.
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