Securities and investment banking firm Jefferies Group, Inc. (JEF) on Tuesday reported a 12 percent decline in profit for the first quarter from last year. The results reflect an increase in operating expenses that offset higher investment banking and fixed-income trading revenues. However, both earnings and revenue beat analysts' expectations.
Investment banking increased 20 percent from the year-ago period to $285.80 million, while fixed income revenues rose 7 percent to $339.15 million. Asset management fees and investment income from managed funds dropped 76 percent from the year-ago period to $5.63 million.
Jefferies' investment banking results are expected to bolster the confidence of other investment banking firms, including Goldman Sachs (GS) and Morgan Stanley (MS), have until recently been reporting lower investment banking revenue due to weak capital markets and Europe's ongoing debt crisis.
Richard Handler, chairman and chief executive officer of Jefferies said in a statement, "These solid results reflect our continued growth in investment banking and strong performance in fixed income."
Separately, Jefferies said its board of directors declared a quarterly dividend of $0.075 per share of common stock, payable on May 15 to stockholders of record on April 16.
New York-based Jefferies' net earnings for the first quarter were $77.14 million or $0.33 per share, lower than $87.34 million or $0.42 per share in the prior-year quarter.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues, less mandatorily redeemable preferred interest, increased 2.2 percent to $758.12 million from $741.94 million in the year-ago period. Analysts had a consensus estimate of $699.20 million.
Jefferies was under scrutiny after its peer MF Global Holdings Ltd. (MFGLQ.PK) collapsed last year.
MF Global Holdings, once run by former New Jersey Governor Jon Corzine, filed for bankruptcy on October 31 in the wake of credit rating downgrades and loss of investor confidence due to the company's massive exposure to European sovereign debt.
However, Jefferies later clarified information relating to its sovereign-debt positions in Europe and its interest-income expense. The company said that as at the end of August 2011, it had no meaningful net exposure to European sovereign debt.
In Tuesday's regular session, JEF is trading at $19.59, up $0.53 or 2.78 percent on a volume of 176,826 shares.
by RTT Staff Writer
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