Wall Street just got a taste of what to expect when investment banks release their second-quarter results next month and it’s not happy.
(ticker: JEF) reported results for its fiscal quarter ending May 31 and saw revenue fall 30% year-over-year to $1.37 billion amid a difficult climate in the stock markets. capital. Earnings came in at 45 cents per share, missing the 51 cents per share analysts polled by FactSet had expected. Not only did the bank miss expectations, but it also posted a 65% drop in earnings per share from the year-ago quarter.
“Our second quarter results are reasonable in the face of an extremely challenging capital markets environment, with some markets virtually closed to new issuance,” Jefferies Chief Executive Richard Handler and Chairman Brian Friedman said in a statement Monday. joint.
Because Jefferies has a different fiscal calendar than many of its financial peers, it releases its results about three weeks ahead of its peers for the calendar quarter. Its results are seen as an indicator of what rival banks such as
(MS) will report next month.
For now, the outlook is bleak.
For much of the past two years, investment banks have been able to rely on strong trading activity and capital markets to boost their earnings, but recent recession concerns have made markets more volatile, making companies less likely to go public. In addition to volatility, a rising interest rate environment has made it difficult to close deals as companies are reluctant to take on debt. Total underwriting revenue at Jefferies was down 62%.
Still, Jefferies maintains that its advisory business remains “strong” and that the bank is well positioned for the normalization of market conditions.
“Our order backlog is in line with last quarter’s high levels, but execution remains dependent on market conditions. Based on our ongoing dialogues with our clients, we believe mergers and acquisitions and capital markets activity will resume when stability and visibility improve,” the company said Monday.
Wall Street was less sure as shares of Jefferies slid 4.5% in after-hours trading Monday.
Write to Carleton English at [email protected]