We have previously explained [7]why Jefferies, arguably the last standalone (despite its purchase by Leucadia a year ago) investment bank on Wall Street is so informative:
Jefferies is best known for among Wall Street shareholders is that, by still reporting a Nov. 30 fiscal year end, 1 month ahead of everyone else, it provides an invaluable glimpse into the fortunes of its Wall Street peers with a 4 week advance notice, especially when it comes to its bread and butter: fixed income trading (recall that CEO Rich Handler was a Drexel bond trader when the firm blew up).
And just like last quarter, earlier today Jefferies reported its earnings for the quarter ended February 28 [8], which capture the trailing two-thirds of every other bank's first quarter period (those who now have a December 31 year end).
The result, just like last quarter [7], was a disaster and indicative of nothing short of a trading bloodbath on Wall Street in the past three months of trading. In fact, if this is what one should expect out of the larger Wall Street names in a few weeks when the big banks close the quarter, then it may be best to skip earnings season altogether... for the second quarter in a row.
The bottom line, and what everyone who is awaiting the latest FICC numbers from the balance of the banks will be focusing on, is the 56% drop in Q1 revenue from fixed-income trading, down to $126 million from $286 million a year ago.
Investment banking did not help either, plunging by 34% to $272 million from $414 million.
The only silver lining: equities did not plunge, and in fact posted a modest increase of 8% to $203 million. Now if only Jefferies could change its image from a middle market junk-bond specialist catering to the world's B2/B credits, to the New Paranormal's equity powerhouse all would be well.
The results in one chart.
[9]
And here is why Jefferies' fixed income trading suffered. It appears soaring volatility wasn't Dick Handler's friend.
The question is whether unlike last quarter, when Jefferies reported results in mid-December promptly followed by disappointing earnings and revenue and EPS misses at every single TBTF and other investment bank (as we warned then would happen [7]), if this time is different and somehow everyone else succeeded where Jefferies failed?
