JEFFERIES Financial Group’s profit soared on a rebound in mergers and acquisitions (M&A ) and a surge in equity-trading revenue, signs that the multiyear dealmaking slump is coming to an end.
Net income for the fiscal fourth quarter, which ended Nov 30, more than tripled off a 73 per cent jump in investment-banking fees and a near-doubling of advisory revenue, the company said on Wednesday (Jan 8).
The results cement a turnaround for the full year as well, fuelled by demand for investment-banking services after a prolonged drought in which high interest rates and geopolitical concerns muted the business. Firms have struggled through a two-year pullback in dealmaking and sales of new securities, prompting many to trim jobs and rein in costs. Jefferies continued to hire through the slump.
“The return of real interest rates is an underlying driver of a normalising environment,” president Brian Friedman said. “2023 was a transitional year, 2024 was a normalising year, and perhaps 2025 will be a normal year,” he said, pointing to a backlog of initial public offerings and M&A.
The results could also be a sign that the biggest Wall Street banks, which are scheduled to start reporting fourth-quarter and full-year results next week, also posted a banner three months.
Jefferies’s investment-banking revenue jumped to US$986.8 million, and full-year revenue from the business reached US$3.44 billion, the second-highest ever, the New York-based firm said. Advisory revenue for the quarter soared 91 per cent to US$596.7 million, a record.
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Fourth-quarter earnings totalled US$205.7 million, or 91 US cents a share, up from US$65.6 million, or 29 US cents, a year earlier.
The bank’s fiscal fourth-quarter revenue jumped 63 per cent to US$1.96 billion. The improved performance in investment banking was due in large part to a surge in advisory activity, which Jefferies attributes to market-share gains and increased global M&A activity.
Jefferies’s capital-markets unit recorded US$651.7 million of revenue for the quarter, up 34 per cent from a year earlier. The firm said the bump was due to strength in the equities business, which rose 49 per cent to US$410.8 million on “increased volumes and more favourable trading opportunities”. The firm’s debt-capital markets business also gained, with revenue climbing 15 per cent to US$240.9 million on stronger results across credit-trading businesses.
In 2023, Jefferies referenced a challenging landscape that cut into its overall performance, which it called a “trough year”. The firm has since reported earnings growth for all four quarters of 2024.
Even through the slump, Jefferies boosted its ranks of senior bankers, hiring hundreds of managing directors across the globe. That pace of hiring has slowed, but the bank still sees opportunity to selectively hire from outside the firm, though the majority is expected to come from within the company, according to Friedman.
While Jefferies does not give earnings guidance, he said the firm is optimistic about the year ahead.
“2024 was a year of increasing activity that is carrying over in 2025,” Friedman said. “We expect to see growth in the new issue, new buyout leveraged-finance market,” as private equity deals, strategic M&A and initial public offerings return in meaningful size, he said. BLOOMBERG
