Jefferies profit slides as Wall Street dealmaking falters

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(Reuters) -Investment bank Jefferies Financial Group reported a 52.5% decline in fourth-quarter profit on Monday, hit by lower underwriting fees and volatile markets that dented income from its trading desks.

Still, the firm posted its second-best year for investment banking revenue, which was substantially above 2019 levels, chief executive officer Richard Handler and president Brian Friedman said.

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 (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS), since the bank reports ahead of its rivals.

Investment banks are buckling under pressure from a dearth of deals as companies refrain from mergers and acquisitions due to higher borrowing costs and geopolitical uncertainties such as the fallout from the Ukraine war.

Friedman said the profit decline looked more stark compared with an "extraordinary" bonanza for dealmaking in 2021. "And yet, Jefferies had a reasonable year" relative to pre-pandemic levels, expanding its market share and climbing up league tables, he said in an interview.

Jefferies' total net revenue was down 18% at $1.44 billion, dragged lower by a 35% decline in investment banking and capital markets revenue.

The bank reported a profit of 57 cents a share in the three months ended Nov. 30, compared with $1.20 a year earlier.

Jefferies began reducing the size of its merchant banking portfolio last year in an effort to sharpen its focus on its key businesses. Revenue was more than double this quarter from a year earlier.

The unit, which includes Jefferies' investments in real estate, oil and gas and others, is one of the last remaining holdings of former conglomerate Leucadia National (NYSE:JEF) that bought the bank a decade ago.