Jefferies Net Income Increases 68% as Underwriting Gains

Dec 17, 2013 10:37 am ET

(Updates with investment-banking record in first paragraph.)

Dec. 17 (Bloomberg) -- Jefferies Group LLC, the securities firm owned by Leucadia National Corp., said profit rose 68 percent as stock underwriting more than doubled and investment- banking revenue reached a record.

Net income for the fiscal fourth quarter, which ended Nov. 30, climbed to $120.1 million from $71.6 million a year earlier, New York-based Jefferies said today in a statement. The firm was acquired in March by Leucadia, whose quarter ends Dec. 31.

Jefferies, run by Chief Executive Officer Richard Handler, posted a 47 percent increase in investment-banking revenue on the equity-underwriting gains. Global corporate-bond underwriting jumped 58 percent to $1.08 trillion in Jefferies’s fiscal fourth quarter from the previous three months, and global equity underwriting rose 77 percent to $221.1 billion, according to data compiled by Bloomberg.

“Our results reflect exceptional quarterly performance in our investment-banking efforts, a solid performance from our core global equity businesses and a very significant improvement in our fixed-income results versus the third quarter,” Handler, 52, who also runs Leucadia, said in the statement. Fixed-income trading plunged 88 percent in the three months ended Aug. 31 from a year earlier.

Stock Underwriting

Investment-banking revenue totaled $417 million, led by a 41 percent gain in capital-markets fees, which jumped to $280.4 million. Equity underwriting rose to $118.3 million and advisory revenue climbed 62 percent to $136.7 million.

Fees from buying and selling securities advanced 7.9 percent to $506.6 million from a year earlier. Revenue from trading fixed-income securities declined 28 percent to $212.3 million, and revenue from stock trading jumped 67 percent to $294.4 million.

Jefferies said results included a $110 million pretax unrealized mark-to-market gain from its holdings in KCG Holdings Inc. and Harbinger Group Inc., which runs businesses from life insurance to pet supplies. Jefferies owns a 13 percent stake in Harbinger, according to data compiled by Bloomberg. Those shares jumped 31 percent in Jefferies’s fiscal fourth quarter.

Jefferies owns about 14 percent of KCG, the company formed when Getco LLC bought Knight Capital Group Inc., according to data compiled by Bloomberg. The investment bank increased its stake to 16.5 million shares as of Nov. 25 from 11.1 million shares at Sept. 30, regulatory filings show. KCG’s stock surged 38 percent in Jefferies’s fiscal fourth quarter after falling 17 percent in the previous three months.

Nine-Month Results

For the nine months ended Nov. 30, profit was $171.3 million, compared with $282.4 million for the 12 months ended Nov. 30 last year.

Jefferies’s profit tumbled 83 percent in the fiscal third quarter as rising interest rates roiled fixed-income markets, pushing trading revenue to the lowest since the 2008 financial crisis. Yields on the 10-year Treasury, which touched 2.99 percent in September, have dropped to 2.88 percent.

Leucadia rose 0.5 percent to $27.57 in New York at 10:23 a.m. The shares gained 19 percent this year through yesterday, trailing the 29 percent advance of the 81-company Standard & Poor’s 500 Financials Index.

--Editors: Steve Dickson, Steven Crabill