Trading Revenue Surges at Jefferies
December 18, 2012
Sales and trading revenue at the Jefferies Group surged 64 percent in its fiscal fourth quarter, to $469.6 million from a year earlier.
Driving the increase was revenue from fixed-income trading, which more than doubled to $293 million. Equities revenue rose 42 percent to $176.6 million.
The Federal Reserve’s quantitative easing program, where it buys $40 billion in mortgage debt each month, has resulted in “reasonably robust” trading volume, Handler said on the call.
“Across the products within fixed income, I think we’re gaining market share,” chief executive officer Richard Handler said. “The fact that the Fed is cooperating is added gravy.”
Revenue from investment banking was $283 million, an 8.3 percent jump from a year earlier. Capital markets revenue rose to $198.7 million from $89 million, while advisory revenue fell 51 percent to $84.3 million.
Total revenue for the year ended Nov. 30 was $3.87 billion, a 9.7 percent increase from the previous fiscal year.
Jefferies, which led a rescue of market maker Knight Capital in August, is itself about to be acquired by Leucadia National Corp., its largest shareholder.
Overall, the investment banking and financial services firm said fiscal fourth-quarter profit rose 48 percent.
Net income for the three months ended Nov. 30 was $71.6 million, or 31 cents a share, from $48.4 million, or 21 cents, a year earlier, the New York-based firm said today in a statement.
Earnings per share excluding some items was 35 cents, compared with the 32-cent average estimate of nine analysts surveyed by Bloomberg. Profit for the fiscal year fell to $282.4 million from $284.6 million a year earlier.
“Trading markets and volumes were reasonably robust during September and most of October, but slowed for the U.S. election for the remainder of our fiscal year,” Handler said on a conference call after results were released. “Activity and volumes have been solid for the first few weeks of December.”
Jefferies gained 0.9 percent to $18.41 at 10 a.m. in New York. The shares have advanced 34 percent this year.
Jefferies has vowed to pay year-end bonuses in immediately available cash, according to a Dec. 7 memo obtained by Bloomberg News, distinguishing itself from larger Wall Street competitors that are paying more compensation in deferred stock.
The firm set aside $460.4 million, or 60 percent of net revenue, for compensation expense in the fiscal fourth quarter, compared with $308.1 million, or 56 percent, a year earlier.