Jefferies’ banking record overshadowed by asset management
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Its asset-management unit revenue slumped more than 50% in the fiscal third quarter.
PHOTO: REUTERS
Jefferies Financial Group’s asset-management unit revenue slumped more than 50% in the fiscal third quarter, overshadowing a record quarter for the firm’s investment bankers and equities traders.
Net revenue in that business totalled US$85.6 million (S$109.4 million) in the three months through August, down from almost US$177 million in the same period a year earlier, according to a statement late on Sept 28.
That business has been dealing with soured bets on First Brands Group and Radiant World that the firm was exposed to through Leucadia Asset Management’s Point Bonita fund.
Shares of Jefferies were down less than 1% at 9.34am in New York trading on Sept 29, extending the decline in 2026 to 24%.
At the same time, Jefferies’ investment bank and equity-trading desks pulled off record quarters.
Revenue at the investment-banking business rose 17% to US$1.3 billion.
That was driven by a 25% gain in its advisory unit and a 69% increase in its equity-underwriting business.
Jefferies’ pulled in US$626 million of revenue, up 29% from the third quarter of 2025, boosted by cash and electronic trading as well as the firm’s prime services business that works with hedge funds.
“There’s something here for both bulls and bears,” Morgan Stanley analysts led by Ryan Kenny said in a note to clients.
The asset-management business, which was hit by weaker investment returns, did not record a writedown of its Radiant World investment bet, and bearish investors expect more marks to come, according to the Morgan Stanley analysts.
In recent months, Radiant World has come under scrutiny amid allegations of fraud.
Jefferies’ exposure to Radiant World was less than US$300 million, Bloomberg previously reported.
The third quarter showed that issues are still present at the firm’s asset manager, even if Jefferies is seeking to resolve them. Meanwhile, its core investment banking and some trading units are faring better.
“We remain confident in the long-term outlook for the business as we continue to reposition the platform by reducing capital allocated to certain existing funds consistent with the strategy we outlined last fall when we announced our intent to acquire and fund a 50% interest in Hildene,” chief executive Richard Handler and president Brian Friedman said in the statement.
Jefferies has been seeking to reposition the asset-management business and reduce capital that its allocated to certain funds, after it announced a deal in 2025 to buy a 50% stake in Hildene Holding Co, a credit-focused asset manager that the bank had had a strategic relationship with for years.
The bank’s fixed-income trading business also had a lackluster quarter that impacted overall trading results, hit by a sluggish market that drove a 26% decrease in net revenue.
While fixed-income trading was soft, equity trading was “robust” even if questions arise about how sustainable it can be, according to Vital Knowledge’s Adam Crisafulli.
The quarter was OK, he said in an e-mailed statement. “Not amazing, not horrible.”
Overall, earnings per share totalled US$1.08 in the period, surpassing the US$1 average estimate of analysts in a Bloomberg survey.
“Jefferies’ expanding investment-banking and capital-markets franchise supports earnings growth and consistent double-digit returns, with a supportive backdrop adding momentum,” Bloomberg Intelligence analysts Neil Sipes and Ravi Chelluri said in a note.
Backlog strength
Jefferies is the first of the major US banks to post third-quarter results, setting a benchmark for Wall Street firms that report in October.
The results offer a look into how investment-banking businesses have held up despite market volatility.
“We are very optimistic about the balance of 2026 and our momentum heading into 2027, supported by the breadth and strength of our current backlog and new business activity,” Handler and Friedman said in the statement.
The bank’s capital-markets momentum is also a positive sign for Wall Street’s other equity-trading desks, many of which had already started hinting at how good the quarter was shaping up.
Bank of America Corp chief executive Brian Moynihan said equity trading climbed in the quarter through the middle of September, while Goldman Sachs Group’s David Solomon said equity trading has remained “very strong”.
Fixed-income trading, however, has been softer in some parts of Wall Street. Bank of America has cautioned that revenue in the business was down and bouncing around. BLOOMBERG