Jefferies Financial Group Inc.’s third-quarter revenue missed analyst estimates as the bank continued to weather a challenging environment for dealmaking, sparking an initial share selloff of as much as 7%.
(Bloomberg) — Jefferies Financial Group Inc.’s third-quarter revenue missed analyst estimates as the bank continued to weather a challenging environment for dealmaking, sparking an initial share selloff of as much as 7%.
The firm’s revenue from investment banking fell, driven by a 30% drop in advisory revenue, it said in a statement on Wednesday. Overall, net revenue was $1.18 billion, lower than the $1.25 billion analyst estimate.
“2023 has been a challenging one in investment banking, with much of the new issue market shut or subdued until the last few months,” Chief Executive Officer Richard Handler and President Brian Friedman said in the statement.
Jefferies results offer an early snapshot of how Wall Street’s biggest banks may fare as they navigate the prolonged slump amid concerns about inflation and the trajectory of interest rates. Investment banks have taken a hit as corporate dealmaking and sales of new securities waned. Last quarter, Jefferies said those pressures also cut into its performance.
For the three months ended Aug. 31, Jefferies capital markets revenue came in at $524 million, which the bank said reflected normal seasonal slowness.
And while those pressures have prompted some larger rivals to trim staff, Jefferies said it continues to hire senior bankers, with plans to begin next year with more than 360 managing directors, up 20% from the 299 managing directors in investment banking it began this year with.
The shares fell as much as 7% in late New York trading after closing at $36.24, up 10% for the year.
The bank also pointed to increased momentum in mergers and acquisitions activity, saying the green shoots noted in the prior quarter “have multiplied.”
“We are increasingly optimistic that we have come off the bottom of the cycle and that momentum in investment banking will continue,” Handler and Friedman said.
Jefferies’ asset-management revenue plunged 97% from a year earlier, in part from a $25 million loss in the merchant banking portfolio it’s aiming to wind down. The firm has previously said that category includes results from its “real estate development, oil and gas and other manufacturing activities.”
(Updates with further details from earnings statement from sixth paragraph.)
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