March 28, 2019 / 11:40 AM / 7 months ago

Jefferies' revenue hurt by U.S. government shutdown, weak markets in December

(Reuters) - Jefferies Group LLC’s quarterly revenue fell 17 percent on Thursday, as the company’s investment banking business took a hit from a partial government shutdown and a dip in market activity in December, but said it expects a better trading environment going forward.

Revenue from the company’s biggest unit fell 35.1 percent to $285.6 million in the first quarter ended Feb. 28.

“(Investment banking) Activity was very light during the December market downturn and this was further exacerbated by the government shutdown for five weeks to the end of January,” Chief Executive Officer Rich Handler said in a statement.

The company, however, said the numbers were “not indicative of anything going forward”, and that its backlog for capital raising and mergers and acquisitions are “robust and the trading environment is good.”

Investment banking revenue is widely expected to rise for most Wall Street banks in the quarter, as several high-profile tech companies such as Uber, Lyft, Pinterest and Slack, are set to go public.

Robust M&A activity in the first three months of 2019, such as Bristol-Myers Squibb Co’s $74 billion deal to buy Celgene Corp, and BB&T Corp’s $28 billion merger with SunTrust Banks Inc, could also help investment banking bring in more revenue.

However, a decline in trading activity from the year-ago quarter when changes in U.S. tax laws infused markets with optimism could pressure banks’ profits.

Jefferies’ trading revenue rose by a meager 1 percent to $371.3 million due to losses in bond trading.

Meanwhile, JPMorgan Chase & Co expects trading revenue in the first quarter to be down in the “high teens” in percentage terms after an unusually strong quarter a year earlier.

Jefferies’ net revenue fell to $685.7 million from $821.2 million, a year ago.

The New York-based company posted a profit of $46 million in the quarter versus a loss of $60.8 million a year ago, mostly due to a 91 percent drop in income tax expenses.

Jefferies Group LLC is the main unit of Jefferies Financial Group, and being the first big financial company to report earnings, its results are widely seen as an indicator of the performance of big Wall Street banks expected to report in mid April.

Reporting by Bharath Manjesh and Aparajita Saxena in Bengaluru; Editing by Shinjini Ganguli

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