By Niket Nishant and Lananh Nguyen
(Reuters) -Jefferies Financial Group reported a smaller-than-expected third-quarter profit on Wednesday as lingering economic uncertainty kept dealmaking in check, but the firm said it was hiring more managing directors for next year.
Shares of the New York-based company fell 2.1% after the bell, even as it forecast a more "normal" investment banking environment in 2024.
The biggest hit to earnings came from the asset management unit, where revenue plummeted 97% from last year, which had included results from units Jefferies has since shed.
But market conditions are beginning to improve, the bank said, bolstering the view that mergers and acquisitions (M&A) are starting to pick up pace after the Federal Reserve signaled it is nearing the end of its tightening cycle.
Investment banking revenue was $644.6 million, about 2% lower than last year but nearly 28% higher than the prior quarter.
“The markets are thawing out and beginning to warm a bit,” Jefferies President Brian Friedman said in an interview.
“The market for the services we provide has pretty good demand across the board - it needs to be translated into transactions,” he said, citing recent initial public offerings and a pickup in merger discussions.
Jefferies said it expects around 360 managing directors in its investment banking franchise at the beginning of 2024, up from the 299 that it started this year with.
“As long as I’ve been involved in running investment banking firms, the opportunity to hire and grow is best in downturns,” Friedman said.
“One needs to have the fortitude and the commitment to make the moves that are available in more challenging moments.”
The bank's results are often viewed as a prelude to earnings at Wall Street titans such as JPMorgan Chase, Goldman Sachs Group and Morgan Stanley.
Jefferies' profit slumped 74% to $51.4 million, or 22 cents per share, for the three months ended Aug. 31, compared to analysts' average estimate of 33 cents per share, according to LSEG data.
Here is a look at the new investment banking MDs in financial year 2023:
Designation Executive Previous
organizati
on
Executive John Miller Barclays
Co-Chair of
Global
Investment
Banking and
capital
markets
Chairman of Ron Eliasek Bank of
TMT Banking America
MD, tech Jon Credit
team Gegenheimer Suisse
Global Head Stas JPMorgan
of Byhovsky
Healthcare
IT Banking
Vice Rich Siegel Barclays
Chairman,
Industrials
MD, Sam Jackson Barclays
Industrials
Vice Mark Hudson Barclays
Chairman,
overseeing
Industrials
M&A
EMEA Head of Gavriel Barclays
Consumer Lambert
Retail and
Global
Co-Head of
Retail
Energy David Guggenheim
Transition Dolezal,
Banking team Kyle Baker
and Jeff
Tang
Financial Evan Barclays
Services Rothenberg,
Group Kurt
banking Kohlmeyer
capabilities and Mike
Guinge
International expansion:
Designation Previous
Region Executive organization
Europe & Head of Igor De UBS
UK France Limur
Investment
Banking
Coverage
Europe & Vice Sam Dean Barclays
UK Chairman of
Investment
Banking
Europe & Co-Heads, Glenn Rothschild
UK EMEA Cronin and Lazard,
Restructuri and David respectively
ng group Burlison
Europe & Country Andrea Credit Suisse
UK Head, Italy Donzelli
APAC Head of SEA Amrit Credit Suisse
M&A Kolluru
APAC Vice Rizal Credit Suisse
Chairman, Gozali
SEA and
Head of
Indonesia
APAC Co-Head of Rehan Credit Suisse
Asia IB Anwer
APAC Head of Felicity Credit Suisse
Asia ECM Chan
Syndicate
and SEA ECM
Origination
APAC Private Dennis HI
capital Kwan Transformatio
advisory nal Fund
Australi Vice Dominic Macquarie
a Chairman Meagher
Industrials
Australi Vice Mark Morgan
a Chairman of Burmeiste Stanley
Australia r
Capital
Markets
Australi Head of Julian Gresham
a Infrastruct Babich
ure Banking
Australi Lead, ECM Mike Macquarie
a Syndicate Johnson
LATAM Lead, Alejandro JPMorgan
Brazil Guevara
Investment
Banking
(Reporting by Niket Nishant in Bengaluru, Lananh Nguyen and Nupur Anand in New York; Additional reporting by Pritam Biswas; Editing by Pooja Desai)