By Chelsey Dulaney
Jefferies Group LLC said it is considering strategic options for
the commodities and financial-derivatives unit it bought from
Prudential Financial Inc. in 2011, while also reporting volatility
and a tepid trading environment dragged down results in its
November quarter.
Jefferies bought the Bache unit--one of the most storied names
on Wall Street--in mid-2011 as the firm sought to grow from a
securities-industry boutique focused on stock trading into a
full-service investment bank that helps clients raise money and
trade stocks, bonds and derivatives, where investors and big
industry players transfer the risks of future price movements.
The New York securities firm, a unit of Leucadia National Corp.,
said Tuesday that the business has faced growth and margin
challenges, and the firm is in talks with third parties about a
potential combination with a similar business to improve its
competitive standing.
Jefferies also said it swung to a heavy loss in the quarter
ended Nov. 30 as revenue fell 43.5% from a year earlier. Overall,
Jefferies posted a loss of $92.4 million, compared with a
year-earlier profit of $109.9 million.
Results included a $52 million goodwill write-down and an $8
million write-down related to the Bache business. Excluding Bache,
Jefferies said it would have posted a profit of $19 million.
Fixed-income revenue fell 73% in the quarter, hurt by the weak
trading environment. Distressed trading revenue were particularly
challenged in the quarter due to a selloff in distressed and
post-reorganization securities following a Sept. 30 court decision
on Fannie Mae and Freddie Mac.
A group of Wall Street investors had attempted to sue the
federal government over its treatment of the shareholders of
mortgage finance giants Fannie and Freddie after the financial
crisis, but a judge dismissed the claims.
Investment-banking revenue slid 24%, as dampened capital markets
activity led to the postponement of deals.
Jefferies has posted strong results in recent quarters, driven
by gains in fixed-income trading and mergers advice.
The New York securities firm is considered by some to be a
harbinger for how other Wall Street banks, particularly Goldman
Sachs Group Inc. and Morgan Stanley, may be faring in trading,
mergers and acquisitions and other businesses. Its quarter ends one
month earlier than the other banks.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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