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March 28 (Reuters) – Investment bank Jefferies Financial Group Inc (JEF.N) on Tuesday reported a smaller-than-expected drop in profit for the first quarter as strength in its capital markets business helped cushion a lull in dealmaking.
After a stellar run in 2021, U.S. investment banking giants struggled for most of last year as the Federal Reserve’s aggressive monetary tightening raised borrowing costs in a blow to corporate appetite for deals.
The capital markets unit benefited from the rise in volatility, however, as investors rejigged portfolios to hedge against risk. The segment’s revenue surged 33% on increased trading in equities and fixed income.
Total net revenue still dropped 24% to $1.28 billion, hit by declines in the asset management and investment banking units.
Jefferies posted a profit of 54 cents a share, exceeding analysts’ estimates of 43 cents a share, according to data from Refinitiv IBES.
The New York-based financial institution’s results are often viewed as a prelude to earnings at Wall Street titans such as JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N).
The results come at a time of turmoil for the U.S. banking industry, after the collapse of Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O) earlier this month sent tremors through the global financial system.
In a further blow, Swiss giant Credit Suisse was taken over by UBS (UBSG.S) for $3 billion in a state-orchestrated rescue.
“We do not know when the capital markets will return to some version of normalcy, but our plan is to be well-positioned to gain even further market share and take advantage of the dislocations affecting our industry,” Jefferies CEO Richard Handler and President Brian Friedman said in a statement.
They had previously forecast that capital markets would improve in the second half of 2023, according to a letter seen by Reuters earlier this month.
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