Jefferies Financial Group Inc.’s fiscal second-quarter revenue from investment banking plunged 26% amid a global slump in dealmaking, pulling down profit for the period and sparking an initial share selloff as much as 5%.
(Bloomberg) — Jefferies Financial Group Inc.’s fiscal second-quarter revenue from investment banking plunged 26% amid a global slump in dealmaking, pulling down profit for the period and sparking an initial share selloff as much as 5%.
Investment-banking revenue declined to $510 million in the period ended May 31, the firm said Tuesday in a statement. That fell short of the $663 million average estimate of analysts in a Bloomberg survey. The results were “consistent with a significant decline in global mergers and acquisitions volume,” Jefferies said.
Jefferies’ earnings offer a look into how Wall Street performed during a period of turmoil as several regional banks collapsing into government receivership. Investment banks also have taken a hit as corporate dealmaking and sales of new securities waned. The bank said those pressures cut into its performance.
“We believe our second-quarter results reflect a cyclically low period and a particularly challenging environment,” Chief Executive Officer Richard Handler and President Brian Friedman said in the statement. They said the period was marked by the regional banking crisis and the government-supported takeover of Credit Suisse Group AG by UBS Group AG.
Jefferies parent company posted earnings of $12.4 million, or 5 cents a share, for the period, down 89% from $114 million, or 46 cents, a year earlier. Sales and trading revenue gained 30% in the quarter to $543 million.
The shares fell as low as $30.25 in extended trading following the announcement. They ended regular trading at $31.94, down 2.5% for the year.
Revenue from Jefferies’ equities trading business posted $283 million in the second quarter compared with $255 million a year ago. Fixed-income revenue rose to $259 million amid volatility across markets caused by economic uncertainty and rising interest rates.
Analysts had expected sales and trading revenue would rise 13% to $470 million, including a 23% jump in fixed-income and 6.6% rise in equities trading results.
“Our trading businesses navigated this challenging environment very well and we believe we have continued to increase market share in all of our businesses,” Handler and Friedman said.
Jefferies non-interest expenses fell from a year earlier to $1.01 billion. Costs have been a focal point for investors with persistent inflation putting pressure on spending and wage growth across the globe.
Read more: Jefferies Shares Surge as Sumitomo Mitsui Agrees to Boost Stake
Jefferies announced in April that Sumitomo Mitsui Financial Group Inc. had agreed to triple its stake in the New York-based bank. The firms said they will collaborate on future corporate and investment-banking opportunities, as well as equity sales, trading and research.
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