Jefferies Profit Decreases 34% as Trading Revenue Declines

Jefferies Group LLC, the investment bank owned by Leucadia National Corp., said fiscal second-quarter profit fell 34 percent as trading revenue declined.

Net income for the three months ended May 31 slid to $42 million from $63.5 million a year earlier, the New York-based firm said today in a statement. Jefferies was acquired this year by New York-based Leucadia, whose quarter ends June 30.

Jefferies saw a “significant slowdown” in fixed-income trading during March and April resulting from uncertainty about the direction of the Federal Reserve’s bond-buying program, Leucadia Chief Executive Officer Richard Handler, who oversees Jefferies, said in the statement. Fed officials have indicated that the central bank would slow its bond purchases if they saw improvement in the economy.

Sluggish trading in the first two months of the quarter “offset better fixed-income results in May,” Handler, 52, said.

Volatility, a measure of swings in the prices of securities, surged in May after dropping in March and April, according to the Bank of America Merrill Lynch MOVE index. The gauge, which is based on prices of over-the-counter Treasury options, jumped to 84.8 on June 6 from a low of 48.9 on May 9 after averaging 62.2 over the last 12 months.

Investment Banking

Revenue from sales and trading fell 13 percent to $358.8 million in the quarter from a year earlier, the firm said. That was led by a 27 percent decline in revenue from trading fixed-income securities, which slid to $213.3 million. Revenue from equities trading increased 22 percent to $145.5 million.

Investment-banking revenue declined 6.7 percent to $277.1 million from a year earlier, the firm said.

Jefferies said it restated its after-tax first-quarter profit to exclude $8.5 million in professional expenses that should have been counted in the second quarter. This had the effect of boosting first-quarter net income by $5.3 million.

Leucadia fell 1.4 percent to close at $27.36 in New York. The shares have climbed 18 percent this year, compared with the 16 percent advance of the Standard & Poor’s 500 Index.

Jefferies was purchased by its biggest shareholder for $3.2 billion in a deal that the companies said would help the firm weather market turmoil.

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