Jefferies Group LLC, the investment bank owned by Leucadia National Corp., said net trading revenue dropped in the fiscal second quarter as institutional investors continued to shy away from stocks and bonds.
Trading revenue fell 5 percent in the three months ended May 31, without counting mark-to-market gains on equity block holdings, the New York-based company said today in a statement. Even with the trading decline, net income advanced 54 percent to $61.8 million as revenue from investment banking climbed.
Wall Street’s biggest firms have been warning that the trading slump that pressured profits early this year would continue into the second quarter. Citigroup Inc. Chief Financial Officer John Gerspach said last month that second-quarter trading revenue could be down 20 percent to 25 percent in a market he described as “becalmed.”
“During the second quarter, clients have been cautious and generally less active in trading due to the unsettled markets, but we believe Jefferies’ results reflect gains in market share,” Richard Handler, the chief executive officer of Jefferies and its parent company, said in the statement.
Leucadia shares climbed 1 percent to $26.41 at 12:33 p.m. in New York. The stock had dropped 7.7 percent this year through yesterday, compared with a 2.7 percent advance for the 83-company Standard & Poor’s 500 Financials Index.
Jefferies may be gaining market share by taking risks that banks are avoiding amid regulatory changes, according to Alexander Blostein, an analyst at Goldman Sachs Group Inc. The trading firm’s results compare favorably to what executives at bigger banks said to expect, Blostein wrote today in a report.
Leucadia agreed to buy Jefferies in 2012 and made Handler, who was running the investment bank, CEO of the combined company. Leucadia’s other businesses include a beef processor, an Italian broadband provider and a lumber company, the New York-based company said last month in a presentation.