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Banking

Jefferies IB strength sets up strong earnings season for Wall Street

The broker-dealer posted stellar investment banking and markets numbers for 2020 – and reckons this is just the start.

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For Jefferies, the last big broker-dealer standing after the global financial crisis a decade ago that saw Morgan Stanley and Goldman Sachs transform themselves into banks, the coronavirus crisis has hit close to home.

In March, the firm lost chief financial officer Peg Broadbent to the virus, a tragedy that shocked its staff and those that used to work there.

Financially, however, the picture is far from gloomy. The biggest Wall Street banks are set to begin reporting 2020 earnings this week, with JPMorgan and Citi due to announce on Friday. And last week’s numbers from Jefferies have set the season up for records in some investment banking and capital market business lines.

Jefferies Group, which houses the Jefferies investment banking, capital markets and alternative asset management businesses, on January 4 announced record revenues and profits for its fiscal year to the end of November, with an enviable return on tangible equity (ROTE) of 20.4%.

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And unlike rivals more burdened by traditional banking costs, its lean model shows up in equally appealing operating leverage. In the past five years, revenues have risen 110% while expenses are up only 70%.


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