Wall Street just got another sign that dealmaking is making a comeback.
Jefferies Financial Group (JEF) reported third-quarter results on Wednesday afternoon, revealing that investment banking fees rose 47% year-over-year and 18% sequentially.
Those numbers were slightly below analysts’ expectations, and the stock fell 1% in after-hours trading.
However, the stock is up 53% since the beginning of the year.
Jefferies’ results gave investors their first official look at how the investment banking recovery is unfolding across Wall Street after a two-year drought. Major rivals JPMorgan Chase (JPM) and Citigroup (C) announced their third quarter results on October 11th.
Major banks made gains in the first half of 2024 due to a recovery in M&A, IPOs and bond underwriting.
But it remains to be seen how it will play out in the second half of the year, as corporate customers digest new interest rate cuts by the Federal Reserve and uncertainty about everything from the fate of the US economy to the outcome of the US presidential election. isn’t it.
But some other large banks also signaled that their investment banking divisions increased in the third quarter.
Earlier this month, Citigroup Chief Financial Officer Mark Mason told investors that the firm’s investment banking fees were “likely to rise 20% year-over-year,” while JPMorgan’s Chief operating officer Daniel Pinto said the fee would increase “approximately plus/minus 15%” compared to the same level. period one year ago.
Bank of America (BAC) CEO Brian Moynihan told investors that these fees are “basically flat.” Bank of America will report its results the week after JPMorgan and Citigroup.
At Jefferies, its mergers and acquisitions advisory practice posted revenue of $592 million, an increase of 108%. Total investment banking fees increased to $949 million.
However, revenue from IPO underwriting activities decreased by 2.6%.
“We are pleased with the strength and direction of our margin and revenue metrics and are optimistic about this year’s results and outlook for 2025,” Jefferies CEO Richard Handler and President Brian Friedman said in a statement. That’s the point,” he said.
Jefferies Financial Group offices in Manhattan. (Reuters/Eduardo Munoz/File photo) (Reuters/Reuters)
Jefferies beat analysts’ expectations in its trading business, with revenue up 28% from a year earlier to $670 million. This boost came from stock trading.
The trading picture may not be so rosy for Jefferies’ major rivals.
Citi’s Mason warned earlier this month that trading volumes would be down “about 4%” from a year earlier, due in part to bond market volatility in August.
JPMorgan and Bank of America expect trading performance to improve slightly this quarter, with both expecting modest increases in the low single digits.
story continues
Two weeks ago, Goldman Sachs CEO David Solomon said he expected a “very strong quarter in 2023” and a “tougher macro environment, especially in August,” leading to a strong outlook for the third quarter. said it expects its trading revenue to decline 10% year-on-year. . ”
Mr. Solomon did not share expectations about Goldman’s investment banking performance, but expressed some disappointment with deal flow from the private equity community.
“We’re surprised that financial sponsorship activity hasn’t picked up as quickly as we expected,” Solomon said at a Barclays event.
“However, as we move through the rest of the fall and into 2025, we expect to see a little more activity from financial sponsors.”
David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrencies, and other financial areas.
Click here for the latest stock market news and in-depth analysis of the events that move stocks.
Read the latest financial and business news from Yahoo Finance
