TEXT-Fitch: Jefferies ratings unaffected by weak earnings

June 20 - Jefferies Group Inc. (Jefferies) reported weaker
second quarter 2012 results due to a more challenging market environment,
further reduction in M&A activity and certain one-time items. Generally, fixed
income has maintained some of the momentum gained during 1Q12 and exceeded
Fitch's expectations. However, the equities business remains challenged amid
poor market conditions, which are likely to persist.

Fitch's ratings already take into account some of the volatility inherent in
Jefferies' business model and are unaffected by the reduction in second quarter
earnings. Furthermore, the weaker revenues in 2Q12 were not unexpected given
challenging market conditions, which have continued to persist into 3Q12, a
seasonally slower quarter.

Second quarter net revenues were down 8.8% from the prior quarter, driven
primarily by lower fixed income trading and advisory fees, which were down 14%
and 27% respectively. This was partially offset by debt capital markets
revenues, which were stronger despite some spread widening during the quarter.
Jefferies has also reduced its compensation expense by 5%, which further
softened the impact to earnings. Nonrecurring charges reduced earnings by
approximately $9 million during the quarter.

The sharp reduction in advisory fees points to a further delay in M&A activity
as many clients remain on the sidelines amid increasing uncertainty in global
markets. Recent escalation in the Eurozone crisis is likely to have a very
limited direct impact on Jefferies, which has reduced its overall exposure to
Europe. However, uncertainty in Europe continues to weigh on revenues through
reduced trading volumes and investment banking activities for Jefferies and its
peers.

Jefferies' balance sheet remained relatively flat from the prior quarter and
leverage increased very modestly, but is down year-over-year.

Jefferies, a Delaware-incorporated holding company, is a well-established full
service investment bank and institutional securities firm primarily serving
middle-market clients and investors. Its primary broker/dealer operating
subsidiary, Jefferies & Company, Inc. holds the vast majority of the firm's
consolidated assets and is regulated by the SEC. At May 31, 2012, Jefferies had
U.S. GAAP total assets of $35.7 billion and shareholders' equity of $3.3 billion
(including non-controlling interests).

Contact:

Primary Analyst

Joo-Yung Lee

Managing Director

+1-212-908-0560

Fitch, Inc.

One State Street Plaza

New York, NY 10004

Secondary Analyst

Ilya Ivashkov, CFA

Director

+1-212-908-0769

Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email:
brian.bertsch@fitchratings.com.