Jefferies profit drops less than feared on capital markets strength
Adds estimates, CEO statement
March 28 (Reuters) -Investment bank Jefferies Financial Group Inc JEF.N on Tuesday reported a smaller-than-expected drop inprofit for the first quarteras strength inits capital markets business helpedcushion a lull in dealmaking.
After a stellar run in 2021, U.S. investment banking giants struggled for most of last year as theFederal Reserve's aggressive monetarytightening raised borrowing costs in a blow tocorporate 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 aprofit of 54 cents a share, exceedinganalysts' 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 SiliconValley Bank SIVB.O and Signature Bank SBNY.O earlierthis month sent tremors through the global financial system.
In a further blow, Swissgiant 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-positionedto gain even further market share and take advantage of the dislocations affecting our industry," JefferiesCEO Richard Handler and President Brian Friedman said in a statement.
They had previouslyforecast that capitalmarkets would improvein the second half of 2023, according to a letter seen by Reuters earlier this month.
Reporting by Jaiveer Shekhawat in Bengaluru; Editing by Devika Syamnath
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