Jefferies’ Investment Bankers Notch a Record Quarter in Sign of M&A Upswing

Richard Handler, Jefferies’ longtime chief executive officer, speaks in 2013. (Peter Foley/Bloomberg)

Investment bankers advising clients at Jefferies Financial Group turned in their best quarter on record, a performance that reflected higher values on merger and acquisition deals and helped lift firmwide profit by 34%.

The firm’s investment-banking and capital markets businesses both turned in higher revenue from a quarter ago and a year ago, which should be welcome news for investors anticipating larger U.S. banks’ quarterly results in mid-October.

Jefferies typically reports earnings ahead of big commercial lenders such as JPMorgan Chase and Citigroup, offering an early window into clients’ dealmaking appetite.

Jefferies’ report on Monday, however, did little to impress investors who have watched the firm’s stock underperform the broader market for much of this year. Shares fell between 1.5% and 2.6% in after-hours trading.

In a statement, Chief Executive Officer Richard Handler and President Brian Friedman struck an optimistic tone.

They said they are encouraged by “the rebound in global market sentiment,” and that the higher revenue from advisory work was thanks in part to “an improvement in the environment for mergers and acquisitions and capital formation.”

Handler and Friedman added, “While the world will remain volatile and full of challenges, we are increasingly optimistic about the near and long-term outlook for Jefferies.”

The New York-based bank said that it generated $224 million of net earnings during its third quarter—the three months through Aug. 31—up from $167 million in the same period a year ago.

That amounted to $1.01 per share, topping Wall Street’s forecast of 80 cents, on revenue of $2.05 billion. The consensus call among analysts was for $1.9 billion of revenue, per FactSet data. Jefferies said the $656 million of revenue from the investment-banking advisory business marked its best quarter ever.

The upbeat results marked a rebound from the quarter prior, when Jefferies reported firmwide per-share earnings that fell short of expectations and dropped from a year earlier.

Shares of Jefferies have fallen 15% this year while the S&P 500 and the Financial Select Sector SPDR Fund have risen 13% and 12%, respectively. Jefferies doesn’t hold a quarterly earnings call, though it has scheduled a day of investor presentations on Oct. 16.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com