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Wall Street bankers are getting jam tomorrow, and jam yesterday, but not much jam today. Jefferies Financial Group confirmed on Wednesday what most executives and investors already sensed: the profit picnic they expected this year was taking longer than anticipated.
Jefferies is an oddity among financial firms. Its fiscal year starts on December 1, so its quarterly earnings appear a month before rivals, which generally begin their year in January instead. Since Jefferies chief Rich Handler is among Wall Street’s longest-tenured CEOs, such contrarianism is his prerogative.
Timing aside, Jefferies is the only big US trading and dealmaking house that isn’t also a bank. JPMorgan, Bank of America, Citigroup, Morgan Stanley and Goldman Sachs run other huge businesses such as wealth management and deposit-taking. About $9 of every $10 in Jefferies revenue comes from investment banking and trading; at JPMorgan the share is more like $2.
Considering those quirks, it’s no surprise that the firm is seen as a harbinger of Wall Street’s fortunes. That means its disappointing showing for the latest quarter bodes ill for peers. Jefferies made $1.6bn of revenue, it said on Wednesday, an 8 per cent fall from a year earlier and 15 per cent below what analysts expected, according to Visible Alpha.
It’s an early sign that 2025 isn’t going as planned. A change in the White House was supposed to unleash listings and acquisitions, to Wall Street’s benefit. Instead, uncertainty and tariffs have tested clients’ vim. Jefferies’ advisory fees grew 17 per cent, half the rate analysts had forecast. Equity underwriting shrank 39 per cent, twice the drop the market had baked in.
The other pillar of high finance, trading, has lost momentum too. Jefferies’ revenue from flipping stocks and bonds fell 4 per cent. JPMorgan, for its part, expects the growth rate of its markets business to halve from the previous quarter. Trading is a big earner; it drove Wall Street’s record $47.5bn in bonuses last year. Disappointment would be widely spread.
Though Jefferies is often seen as a bellwether, it arguably should be an outperformer when things do pick up. The company has hired briskly — growing its cadre of managing directors by 70 per cent since 2019. Jefferies has a particular skew towards private equity firms, who still have about $1.2tn of unspent funds to deploy, consultancy Bain & Co reckons.
And what had stayed down must eventually go up. Global investment banking fees remain below their historical average. The 161 mergers worth more than $1bn announced this year, according to LSEG, tally less than last year’s total. It’s hard to imagine executives won’t still have expansion on their minds when market conditions permit.
That may not cheer Wall Street rainmakers who are, after all, remunerated more on today’s results than tomorrow’s. They largely expected 2025 to serve up outsize helpings. While that no longer looks as likely, hopefully there will still be enough jam to keep them well fed.
john.foley@ft.com
