By Daniel Huang And Chelsey Dulaney
Jefferies Group LLC said earnings plunged in its fiscal first
quarter amid a 56% drop in fixed-income trading revenue.
Jefferies, the investment-banking unit of Leucadia National
Corp., said the fiscal year got off to a slow start owing to a
tepid fixed-income trading environment, but revenue increased from
the prior quarter and the firm expressed optimism about its
prospects for the remainder of the year.
Chief Executive Richard Handler and Brian Friedman,
executive-committee chairman, described "an improving environment"
and said in a statement that "fixed income trading markets appear
to have stabilized."
Viewed by some in the industry as a harbinger of results for
other Wall Street firms because its fiscal period ends a month
earlier, Jefferies reported Tuesday that its profit fell to $11.7
million from $112.4 million a year earlier. Revenue fell 34% to
$591.7 million for the quarter ended Feb. 28.
Shares of Leucadia fell about 3% in afternoon trading.
The latest results from Jefferies follow a downtrodden fourth
quarter for many of the largest U.S. banks, with four of the six
biggest--J.P. Morgan Chase & Co., Bank of America Corp.,
Citigroup Inc. and Morgan Stanley--missing analysts' estimates. A
surge in volatility last quarter spooked many investors into
pulling out of the market, causing a steep drop in trading revenues
at banks with sizable trading platforms. The big six U.S. banks saw
their first annual profit drop since the financial crisis,
according to SNL Financial.
More recently, some bank executives have said trading has picked
up during the first two months of the year. March isn't included in
Jefferies' quarterly results, which were released Tuesday morning
and are considered by some to be indicative of how other Wall
Street investment banks will fare, especially in trading
businesses.
Some analysts said the slow quarter at Jefferies may not
translate to other banks, due to the firm's unique niche in
high-yield bonds. "I'd be careful extrapolating what's weighing
down [Jefferies] to the larger banks," said Marian Kessler,
portfolio manager at Becker Capital Management, Inc.
Shares of Goldman Sachs Group Inc. and Morgan Stanley were down
less than 1% in afternoon trading Tuesday.
Jefferies also reported lower investment-banking revenue of $272
million, down 34% from the same period a year earlier. Most of the
decline came from the firm's capital markets business, which
dropped to $139.9 million from $267.8 million a year ago, while
advisory revenue edged down to $132 million, from $146.5
million.
Fixed-income revenue fell to $126 million from $285.9
million.
Write to Daniel Huang at daniel.huang3@wsj.com and Chelsey
Dulaney at Chelsey.Dulaney@wsj.com
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