UPDATE 3-MF Global to convert to investment bank in 3-5 years
* Q3 adj EPS $0.03 vs est $0.05 * Q3 rev $246.8 mln vs est. $251.4 mln
* Interest and transaction-based expenses up 14 pct * Board defines plan to convert to investment bank * CEO Corzine extends contract for another 3 years (Rewrites throughout; adds details, background, share movement)
BANGALORE Feb 3 (Reuters) - Brokerage MF Global Holdings MF.N, led by former Goldman Sachs (GS.N) Chief Executive Jon Corzine, plans to convert itself into an investment bank in the next 3-5 years, to reduce its dependence on markets and interest rates.
The company, which is currently in the process of transitioning from a broker to a broker-dealer, said its business model will focus on institutional capital markets, retails services, transaction services and asset management.
On a post-earnings conference call, CEO Corzine, who agreed to extend his contract with the company for another 3 years, said MF Global would look at acquisitions to build out parts of its existing business.
The move into asset management will give MF Global, with a market value of $1.4 billion, a steady stream of fee income and a dependable source of revenue, mitigating the impact from the volatility in trading volumes.
Corzine, who was hired last March to help turn around the company, had slashed jobs and streamlined operations to begin MF Global's transition. [ID:nSGE62M0L8]
MF Global, which started its proprietary trading arm Principal Strategies Group late last year, saw a 23 percent increase in revenue from principal transactions in the October-December quarter.
"As we take part in federal auctions and expanded principal trading, products and transaction types, we expect our revenue will no longer be principally derived from the wholesale financing business," Chief Financial Officer Randy MacDonald said on the call.
The company hired Mike Blomfield as managing director of its Asia-Pacific operations to develop and lead its expansion plans in a region with significant growth potential.
The brokerage said it sees limited competition to its expansion strategies.
On Wednesday, the Federal Reserve Bank of New York named the company to a select group of investment banks and securities dealers that work directly with the U.S. government to help manage monetary policy and sell U.S. debt. [ID:nN02268920]
The company posted an adjusted quarterly profit that missed Wall Street estimates, hurt mainly by higher interest expenses.
Net revenue fell about 2 percent to $246.8 million, below analysts' estimates of $251.4 million.
Bermuda-based MF Global's shares, which have risen 4 percent since the company posted a lower-than-expected second-quarter profit in November, fell 3 percent to $8.25 in morning trade on Thursday on the New York Stock Exchange.
(Reporting by Jochelle Mendonca in Bangalore; Editing by Unnikrishnan Nair)