By Arasu Kannagi Basil and Pragyan Kalita
June 24 (Reuters) – Jefferies Financial missed second-quarter profit estimates on Wednesday as weakness in asset management overshadowed gains from robust dealmaking and equity underwriting, sending its shares down 1.4% after the bell.
The New York-based investment bank’s asset management fees and investment return revenue fell 35% from a year earlier on weaker performance across several fund strategies, including Point Bonita, which had exposure to bankrupt auto-parts supplier First Brands.
Jefferies has sought to reposition the unit by reducing capital allocated to certain funds after it disclosed plans last year to buy 50% of credit-focused asset manager Hildene.
“In the short term, this has resulted in modestly lower investment return until we close our investment in Hildene, which we are targeting to complete in our third quarter, and should be immediately accretive to results,” Jefferies CEO Richard Handler and President Brian Friedman said in a statement.
Profit attributable to common shareholders was $226.2 million, or $1.02 per share, in the three months ended May 31. Analysts had expected a profit of $1.16 per share, according to estimates compiled by LSEG.
RECORD INVESTMENT BANKING REVENUE
Jefferies’ investment banking net revenue jumped 57.5% year-over-year to a record $1.21 billion, driven by a 47% surge in advisory revenue and higher fees from underwriting share sales.
The results give investors an early glimpse into second-quarter investment banking trends on Wall Street, with large U.S. banks poised to provide a broader picture in the coming weeks.
Dealmaking on Wall Street has remained strong in 2026 despite geopolitical headwinds, as confidence holds steady and boardrooms take a long-term view, striking acquisitions in the chase for scale.
“We continue to make progress in building our corporate M&A business, while staying focused on our historical areas of strength in sponsor-led activity,” Handler and Friedman said.
“The new issue market remains resilient. We continue to be optimistic about the second half of 2026, given the strength of our current backlog and new business bookings.”
Among notable deals announced during the quarter, Jefferies advised India’s Sun Pharmaceutical on its $11.75 billion acquisition of U.S. drugmaker Organon.
EQUITIES BUSINESSES SHINE
Equity capital markets activity also accelerated in the quarter as new issuance held up well, while private equity firms cashed out of portfolio companies through secondary offerings.
Revenue from equity underwriting more than tripled to $370.7 million in the quarter, buoyed by strong activity across sectors.
Jefferies served as joint global coordinator on the $6.3 billion share sale in Swiss skincare company Galderma by a group of shareholders in March, the largest sponsor-backed block trade ever.
It also served as bookrunner on large U.S. IPOs during the quarter, including nuclear reactor developer X-Energy and aerospace parts maker Arxis.
Persistent volatility has also lifted trading revenue at Wall Street banks as investors rejig portfolios to hedge against risks.
Jefferies’ capital markets business, which houses its trading desks, posted $799.3 million in revenue, up 13.5% from a year earlier.
Equities trading led the way with a 14% jump to a record $600.8 million for the quarter, while fixed income revenue grew 12%.
The results come as Jefferies looks to move past a rough period, after its exposure to the high-profile collapses of British lender Market Financial Solutions and U.S. auto-parts supplier First Brands raised scrutiny about its lending standards.
The stock, down 6.5% this year through last close, has rallied in recent months and recouped most of its losses as focus shifted to capital markets momentum.
(Reporting by Pragyan Kalita and Arasu Kannagi Basil in Bengaluru; Editing by Vijay Kishore)
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