Jefferies Revenue Slides on Challenges in Fixed-Income Business
December 15 2015 - 8:50AM
Dow Jones News
Jefferies Group LLC said revenue slid in its fourth quarter,
dragged down by weakness in the investment firm's fixed-income
business.
Results didn't meet expectations, Chief Executive Rich Handler
said. Fixed income, "a solid to excellent business for Jefferies in
prior years, did not perform well," Mr. Handler said, amid ultralow
interest rates, a collapse in global energy markets and low trading
volume.
The boutique investment firm, which is part of Leucadia National
Corp., is viewed by some in the industry as a harbinger of results
for other Wall Street firms as its fiscal period ends a month
earlier than most banks.
In Jefferies' fourth quarter, revenue from fixed income dropped
82% to $8.4 million. Revenue in the firm's equities business also
fell, sliding 22% to $123.7 million. Those declines resulted in a
41% drop in total sales and trading revenue.
Amid record deal activity this year, though, Jefferies saw
investment banking revenue rise 18% as advisory revenue soared.
Performance in that business helped to partially counter declines
elsewhere.
Facing more challenging market conditions particularly in fixed
income, Jefferies said earlier this year that it would sell its
Bache commodities and financial derivatives unit to Socié té Gé né
rale SA. The exit of that business, which it acquired in 2011,
"removes a significant drag on Jefferies profitability," said Mr.
Handler.
Overall, the firm reported a profit of $24.7 million, versus a
loss of $100.1 million a year earlier. Revenue decreased 19% to
$146.3 million. Excluding the Bache business, Jefferies said it
earned $37 million on $513 million in revenue.
A number of banks and investment firms also pointed to
whipsawing markets for disappointing results in their third
quarters, and some have outlined plans to scale bank. Last month,
The Wall Street Journal reported that Morgan Stanley would slash
hundreds of jobs from its debt and currencies division, a sign that
the firm expects a prolonged slump in trading revenue.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
December 15, 2015 08:35 ET (13:35 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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