The Zhitong Finance App learned that Jefferies (JEF.US)'s performance in the latest fiscal quarter was significantly divided: stock trading and investment banking business handed over record results, but poor bets from the asset management department continued to drag down performance and made the market wary of the prospects for restructuring its platform.
In the third fiscal quarter ending August 31, the net revenue of Jefferies's asset management business fell to US$85.6 million, down more than 50% from nearly US$177 million in the same period last year; of these, income from expenses and return on investment plummeted from US$84 million to US$34 million. The main problem is the exposure of Leucadia Asset Management's Point Bonita Fund to First Brands Group and Radiant World. First Brands is a bankrupt auto parts supplier, and Radiant World is facing fraud charges. According to previous reports, Jefferies's risk exposure to Radiant World is less than $300 million.
In a statement, management tried to reassure investors, saying that they still have confidence in the long-term prospects of the asset management business and continue to reposition the platform according to the strategy announced last fall to reduce capital allocations for some existing funds. One of the core elements of this strategy is the acquisition and funding of 50% of Hildene Holding Co., a credit asset management company. Jefferies agreed to the deal in 2025. CEO Richard Handler and President Brian Friedman said that the relevant adjustments will help restore the platform's vitality.
Weaknesses in the asset management business overshadowed a record quarter for Jefferies stock trading and investment banking. Jefferies stock trading revenue increased 29% year over year to a record $626 million, driven by the principal brokerage business of cash and electronic trading and service hedge funds. Investment banking revenue increased 17% to US$1.33 billion, with consulting business growing 25% and stock underwriting business surging 69%. Revenue from the capital markets business, which includes trading desks, increased 11% to US$802 million. The volume of global mergers and acquisitions transactions has exceeded 4 trillion US dollars this year, and companies are more willing to push forward expansion transactions in the context of a looser regulatory environment. This has provided an important smooth wind for investment banks such as Jefferies.
In terms of profit, the profit attributable to Jefferies shareholders was US$260.6 million, or US$1.08 per share, exceeding the average market estimate of US$1. However, net revenue from fixed income transactions fell 26%, which was dragged down by the market downturn. Adam Crisafulli of Vital Knowledge commented that this season was “not amazing or bad”; at the same time, he pointed out that stock trading performance was strong, but its sustainability was already beginning to raise questions.
As the first major US bank to announce third-quarter results, Jefferies has set a reference benchmark for the October Wall Street earnings season. Bank of America (BAC.US) CEO Brian Moynihan said earlier that stock trading had risen as of mid-September; Goldman Sachs (GS.US) CEO David Solomon also called stock trading “very strong.” However, fixed income transactions are clearly weak in some institutions, and Bank of America has warned that revenue from this business will decline and fluctuate greatly.
The market reacted cautiously to Jefferies's latest earnings report. The bank's stock price once fell by more than 4% after the market, and the stock has fallen by a cumulative total of about 24% since this year. Management emphasized that it was “very optimistic” about the remainder of 2026 and the momentum going into 2027, citing extensive and strong pending orders and new business activities. However, until the wounds of the asset management department actually heal, the outstanding performance of the trading desk will still be difficult to completely dispel the structural concerns of the outside world about this investment bank.
