Jefferies swings to loss in ‘exceptionally volatile’ quarter

Jefferies Group swung to a loss during its first quarter, as trading revenues tumbled due in part to choppy markets and concerns over economic growth.

Jefferies sign

Jefferies: quarterly loss

The firm, a unit of Leucadia National Corp, reported a net loss of $ 166.8 million during its fiscal first quarter, compared with a profit of $ 12.9 million a year earlier. Revenues fell 49%, to $ 299 million.

Rich Handler, Jefferies’ chairman and chief executive, and Brian Friedman, chairman of the executive committee, wrote in a statement: “Our overall first-quarter results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter, although our core businesses performed reasonably, considering the environment. A quiet December was followed by an extremely challenging January and first few weeks of February.”

The first quarter extended a brutal stretch for the firm, whose debt-trading revenues plunged by 65% last fiscal year. Jefferies responded by shrinking its balance sheet. That continued during the first months of the new fiscal year.

“As we have done through many other turbulent periods in our history, we reduced our already smaller balance sheet to continue to reduce risk during this difficult period,” the executives said. “We are humbled by Jefferies’ quarterly loss and will strive to deliver the better results that our shareholders deserve.”

In the first quarter, trading revenue plunged 82% to $ 58.8 million. Fixed-income revenue fell to $ 56.8 million from $ 126 million. Stock trading dropped to just $ 1.7 million, from $ 203.5 million, largely on the markdowns of two equity block trades.

The results marked Jefferies’s first quarterly loss in more than a year.

One of the writedowns stemmed from the firm’s stake in KCG Holdings. Jefferies had acquired a stake in Knight Capital Group in 2012 following its near-death experience with a software glitch. The securities firm had helped rescue Knight, which later merged with Getco to form KCG Holdings.

Jefferies wrote down the value of the KCG stake by $ 37 million during the quarter. The firm didn’t disclose its second block position, which it reduced by 38% during the period.

On March 8, Citigroup’s chief financial officer John Gerspach dealt another blow to investors hoping for a rebound in trading revenue at major Wall Street banks. He said revenues from equities and fixed-income trading likely fell 15% in the first quarter.

In the fourth quarter, banks from JP Morgan Chase to Morgan Stanley posted weak trading results, with the latter cutting 25% of its fixed-income trading jobs.

In Jefferies’ statement, the executives said “it appears markets have not only stabilised, but aggressively snapped back” in the early days of the second quarter, beginning in March.

Write to Justin Baer at

—Austen Hufford contributed to this article

This story was first published by The Wall Street Journal

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