By Saabira Chaudhuri and Tess Stynes
Jefferies Group LLC's fiscal second-quarter earnings rose 55% as
the firm reported strong results in its investment-banking and
equities-trading units, outweighing a drop in fixed income trading
revenue.
The investment bank's results, often seen as a barometer for
results to follow from larger rivals, come after J.P. Morgan Chase
& Co. and Citigroup Inc. in recent weeks warned that
second-quarter trading revenue would be down sharply on continued
weakness in fixed income, currencies and commodities trading.
For the period ended May 31, the Leucadia National Corp.-owned
securities firm reported a profit of $61.3 million, up from $39.5
million. Net revenue increased 9.8% to $723 million.
Trading revenue increased 6.5% to $394.9 million, as Jefferies
offset a 5% drop in revenue from its fixed income unit with a 25%
jump in its smaller equities-trading business.
Jefferies Chairman and Chief Executive Richard B. Handler said
the bank's strong results reflect market share gains but noted
clients during the second quarter were "cautious and generally less
active in trading due to the unsettled markets."
Investment banking net revenue jumped 19% to $331.1 million,
driven by gains in equity and debt capital markets as well as
advisory revenue.
Capital markets revenue climbed 23% to $230.7 million, while
advisory revenue was up 12% to $100.4 million. In a statement, Mr.
Handler said Jefferies is continuing to add staff to its investment
banking team.
Jefferies's results indicate that big banks possibly could
report strong investment-banking results in the second quarter,
helping offset what undoubtedly will be a weak quarter in fixed
income. Wall Street's trading businesses, a major source of profits
for big banks, have been muddling through a difficult slump.
Last month, Citigroup said its trading revenue likely would drop
20% to 25% in the second quarter from the year earlier. Separately,
J.P. Morgan said it expects its own markets revenue to drop 20% in
the second quarter, while the bank's investment banking head,
Daniel Pinto, has noted that volatility levels are at 10- to
15-year lows.
Also on Tuesday, Jefferies reported negative revenue for its
asset management business, as the bank logged an $8 million
investment loss from managed funds. Overall, asset management
revenue was negative $3.1 million, compared with revenue of $10.5
million a year earlier.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Tess
Stynes at tess.stynes@wsj.com
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