Jefferies poaches bankers by the dozen as it grows

NEW YORK (Reuters) - Jefferies Group Inc (JEF.N) has hired scores of senior bankers from the ranks of its beleaguered competitors as it seeks to build a major force out of the investment banking industry's wreckage.

Jefferies zest for opportunistic hiring was underscored last week when the mid-size investment bank lured away nearly three dozen UBS AG (UBSN.VX) health-care bankers. UBS cried foul, filing an arbitration claim against Jefferies, alleging a "massive, premeditated raid" of its personnel.

Jefferies declined to comment on UBS, but senior executives in interviews with Reuters made no apologies for the firm's aggressive pursuit of talent.

"We are not just lining people up and loading them in," said Chris Kanoff, Jefferies' co-head of investment banking and an executive vice president. "There are a lot of opportunities in hiring right now."

Jefferies is expanding by hiring people for its fixed income, high yield, investment banking and equity trading businesses, while looking to add more personnel overseas.

The hiring strategy goes against the trend in an industry where investment banks have shed staff and cut bonuses in light of the economy and declines in the advising business, while contending with fears of more government regulation.

"People were nervous at the beginning of this year," said Timothy Cronin, head of Jefferies' fixed income division and a managing director. "The opportunity to attract people to a firm like Jefferies - where we had a clean balance sheet, a capital base, and a growing payout - all worked in our favor at a moment in time."

He added, "How long that moment would last is anybody's guess."

Jefferies, with a market capitalization of more than $3.6 billion, has used to its advantage the fact that - unlike many of its competitors - it is free from the baggage of government bailouts, and not expected to be bound by limits on compensation.

Unlike Goldman Sachs and Morgan Stanley Jefferies has not become a bank holding company, which means it will likely face less rigorous regulation.

Jefferies has raided the ranks of Deutsche Bank (DBKGn.DE), Bank of America Merrill Lynch (BAC.N), Credit Suisse (CSGN.VX), and Goldman Sachs Group Inc (GS.N). It has purchased smaller firms, like Depfa First Albany, a municipal securities firm, and it has tapped former bankers from collapsed brokerages like Lehman Brothers (LEHMQ.PK) and Bear Stearns.

"Jefferies has built its success by taking advantage of the turbulence in the marketplace and often it has been the result of hiring the best of the firms that have gone under," said Richard Lipstein, a recruiter at Boyden Global Executive Search in New York.

"As the large investment banks have been increasingly troubled, firms like Jefferies are an increasingly attractive place to work."

Chris Kotowski, an analyst with Oppenheimer & Co, said he was "impressed" with Jefferies accumulation of talent, although he expected Jefferies will reach a limit.

"There's a limit to what you can integrate in any one year," Kotowski said. "So far it seems to be working for them."

Jefferies has added almost 200 employees since the beginning of 2009, bringing its headcount to about 2,296. That's still below its roster of 2,514 at the beginning of 2008, a year that included two rounds of layoffs.

Jefferies has grown, but Kotowski doubts they will match the size of their larger rivals and he is not as bullish on the firm's shares, which he says are too expensive in comparison with Morgan Stanley (MS.N) and Goldman Sachs.

Jefferies is trading for about 26 times forward-looking earnings per share, while Goldman Sachs is trading at 11 times and Morgan Stanley is trading at 36 times, according to Reuters data.

Jefferies shares closed at $21.33 on Tuesday, up 166 percent from their 52-week low of $7.98 in November, and 16 percent off a 52-week high of $25.53 in September.

On June 17, Jefferies said it would become a U.S. Primary dealer, allowing it to do business directly with the Federal Reserve, bringing in new business.

Jefferies shares rose almost 6 percent last week when the company said its quarterly profit might be twice what analysts were predicting because of record results in sales and trading of corporate bonds, mortgage-and-asset-backed debt, interest rate swaps, municipal bonds and emerging markets debt.

Steve Stelmach, an FBR Capital Markets analyst wrote that Jefferies quarter was "as good it gets."

(Reporting by Steve Eder, editing by Leslie Gevirtz)