September 21, 2018 / 11:31 AM / a month ago

Jefferies profit slumps on muted investment banking, higher expenses

(Reuters) - Jefferies Group LLC (JEF.N) posted a 28.1 percent dip in third-quarter profit, hit by a slowdown in its investment banking unit, which advises on deals and listings.

Its quarterly profit of $60.2 million, down from $83.8 million last year, was impacted by a 25.5 percent rise in interest expenses. (reut.rs/2OIX3C8)

Revenue from its investment banking business fell 2.2 percent to $465.3 million, reflecting “lower Leverage Finance transaction levels”, CEO Rich Handler said.

“Advisory activity levels were also more muted during the period,” Handler added. Net revenue from the company’s advisory business fell 7.8 percent.

Jefferies, however, saw revenue from its sales and trading business pick up from a year ago, especially for equities.

Total sales and trading net revenue rose 2.4 percent to $303.2 million in the reported quarter. Revenue from equities trading, which was up 4.7 percent, helped offset a minor dip in the fixed income trading business.

A few Wall Street banks have already warned their trading results are not likely to be very upbeat.

JPMorgan’s (JPM.N) third-quarter markets revenue is down by a “mid-single” digit percent from a year earlier after adjusting for tax law changes, its chief financial officer, Marianne Lake, said at an investor conference earlier this month.

Citigroup’s (C.N) Chief Financial Officer John Gerspach, said the bank’s markets revenue will likely be flat to slightly higher, and investment banking revenue to be slightly lower.

Jefferies’ net revenues fell to $777.6 million, from $800.7 million a year earlier.

The New York-based company usually flags off the earnings season for U.S. investment banks and its results are traditionally seen as an indicator of the big Wall Street banks’ performance.

Jefferies Group LLC is a unit of Jefferies Financial Group, which was earlier known as Leucadia National Corp.

In April this year, Leucadia spun off most its non-financial assets, and renamed itself to become a pure-play investment banking and advisory business.

Reporting By Aparajita Saxena in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta

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