In Warning To Wall Street, Jefferies Fixed Income Revenue Tumbles 33%
by Tyler Durden
ZeroHedge.com
Jun 20, 2017
On one hand, the Q2 earnings reported by the last “pure play” investment bank – one with a 1 month leading quarter end as per the pre-new normal tradition and thus a key indicator of what is to come for the rest of Wall Street – were not bad: Jefferies reported a 29.4% increase in overall quarterly profit (even with a recent 6% increase in the company’s tax rate) thanks to a 39% bounce in investment banking revenue, i.e. M&A and underwriting fees, to $351.9 million in the quarter, primarily reflecting an “improved environment” for debt and equity new issuance according to CEO Dick Handler.
That was the good news.
The neutral news is that revenue from equities (when stripping away one-time benefits from the sale of KCG) was roughly flat, at $175.5MM in the quarter, up fractionally from $167.5MM one year ago. Total equity revenues were $271.5 million but including $96 million in mark-to-market gain on Jefferies’ 24% equity ownership of KCG Holdings vs $223.5 million a year ago (with $56m KCG markup). According to Handler, the core equity sales/trading business “enjoyed a solid quarter and, despite quiet market activity and low volatility, our global cash businesses continued to gain market share.”
But the bad news, and a confirmation of recent warnings from JPM and BofA, was that the recent boost in fixed income revenue, Wall Street’s most profitable segment, tumbled by 33% in the second quarter, dropping from $238.5 million to $158.6 million Y/Y, and down from $221.9 million last quarter.
The Rest…HERE
