Jefferies Financial Group reports Q4 EPS 29c, consensus 34c

Reports Q4 revenue $1.20B, two estimates $1.24B. CEO Richard Handler stated: “2023 was a transition year in the economy, in capital markets, in our industry and at Jefferies. It was accompanied by the challenges and sadness of geopolitical turmoil. In the face of this, Jefferies performed reasonably well and eked out a modest return on equity during what we believe to be the bottom of the current cycle. For Jefferies, the pain of this transition was felt primarily in Investment Banking, where curtailed new capital markets issuance was compounded by a dampening of merger and acquisition activity among our corporate and sponsor clients. Fortunately, our Equities, Fixed Income and Asset Management businesses performed well despite uncertainty, turmoil and volatility. We are hopeful that 2023’s results will represent a trough year and, as such, it wasn’t too bad. Our total net revenues of $4.7 billion and net income attributable to common shareholders of $263 million, or a 3.7% return on tangible equity, are an acceptable showing at the bottom of the cycle, even though they are far from our goals or long-term expectations. Our Investment Banking net revenues were $2.3 billion, and our Equities and Fixed Income revenues were $2.2 billion, while our Asset Management and Other net revenues totaled about $200 million. These results pale in comparison to the heady period of 2020-21 that represented the height of free money and strong stimulus. We did remind everyone at the time that those results were unique and reflected that passing moment, rather than our new run rate. However, if you go back to 2019, which is more indicative of the last “normal” year in our industry, our current results compare strongly with Investment Banking net revenues of $1.6 billion in 2019 and Equities and Fixed Income net revenues of $1.5 billion. With the ongoing wind down of our legacy merchant banking portfolio, as well as our expectation of better results over the next several years, we expect Jefferies to continue to return capital to shareholders through cash dividends and share repurchases. While we made some profit and were vigilant on our risk during this complicated year, we are most proud of our team, who focused on our clients and enabled us to aggressively and strategically expand our capabilities. We are able to play strong offense in downturns because we have had a multi-decade consistent strategy and a culture that encourages this contrarian approach. It is one thing to make it through a transition year(s) intact. It is entirely another to come through such a period with a significantly enhanced market position, broader geographic reach, a credit rating upgrade, enhanced human capital, and an even stronger brand-all of which Jefferies achieved in 2023. We have pursued our investment in talent on a global basis, as we have expanded throughout Europe, Asia-Pacific, South America, Canada, and the Middle East, as well as in the United States. While our recruiting efforts have largely been in Investment Banking, we have also hired incremental talent in Equities, Fixed Income, Research, Alternative Asset Management and Support.”