"After four consecutive strong quarters, we experienced a very challenging fourth quarter.” – Jefferies CEO Richard Handler, in one of the biggest understatements of the year.
Let’s begin with the non-salacious material. The investment bank lost $93 million during its fourth fiscal quarter on the back of a 43% drop in revenue. There was the 73% plunge in fixed income trading revenue along with the fallout from what appears to be a lousy acquisition of Bache, a commodity and futures brokerage firm, for which Jefferies had to write down $60 million during Q4.
Meanwhile, equity trading revenue fell 45% and its traditional investment banking unit, the cash cow at Jefferies, saw a 24% dip in revenue due to “dampened capital-markets activity.”
All that happened during a quarter in which Jefferies’ made some tabloid-style headlines that forced the head of its dominant healthcare unit to take a leave of absence. Sage Kelly walked away in October after his estranged wife accused him and his colleagues of being drug addicts and philanderers, among other things. She later rescinded many of those claims following a settlement, but the damage was done.
Fox Business reported that Jefferies lost at least five clients in the aftermath of the scandal, which graced the front pages of both financial publications and gossip rags. In an interesting bit of timing, Kelly resigned on Wednesday, one day after Jefferies announced its depressed quarterly results.
The rough end of the year at Jefferies is sure to have an impact on employees come bonus season. After likely expecting a bountiful year-end prize following the first three quarters of the fiscal year, Jefferies bankers will receive bonuses that will be flat or slightly up from a year ago, according to TheStreet.com. Hopefully they didn’t make any large purchases at the end of Q3.
Jefferies just made a number of changes to its healthcare hierarchy following Kelly’s official resignation. They certainly need a fresh start.
The Highs and Lows of Working at the Big Four (eFinancialCareers)
When it comes to workplace rankings in accounting, there is the Big Four and then everybody else. But of course not all fall madly in love with huge accounting firms. Like any firm, there are drawbacks in the minds of some employees.
Being a Workaholic on Wall Street (eFinancialCareers)
You're a banking workaholic? Watch out for the negative family feedback loop. Especially if you're a woman.
Hello Cuba (WSJ)
In case you’ve been resting gently under a rock for the last 24 hours, you know that President Obama announced that the U.S. will be “normalizing” its relationship with Cuba after 50 years of, you know, hating each other. This actually means a lot of things for Wall Street and investing in particular. Shares of Cuba Beverage, an energy drink company with $9,961 in sales last quarter, was up 140% at one point on Wednesday, which makes zero sense. Shares of mutual funds with exposure to Cuba are also up, which makes some sense.
Citi Traders Can Thank Bankers Come Bonus Season (Bloomberg)
While they’ll vary from desk to desk, on the whole bonuses for traders at Citi won’t drop from last year, which is rather shocking. Investment bankers will see just a 2% to 3% jump, short of the unit’s increase in revenue year-over-year.
Staley to be Considered For JPM Board Seat (Bloomberg)
Jes. Staley, the former head of J.P. Morgan’s investment bank, has been nominated for election to the board of directors at UBS. Elsewhere, J.P. Morgan has named Robert Stark as the new head of strategic relationships at its asset management unit.
King Kong of M&A (Bloomberg)
Just how good of a year did Goldman Sachs have in M&A? It finished first in the league tables by a margin not seen in 16 years. And it started with a relatively quiet first two months of the year. Monster year.
Eli Manning Has Helped Somebody This Year (Dealbreaker)
If you are a 31-year-old investment analyst and life has you down, try quitting and playing fantasy football for a career. This guy just won $1 million doing just that.
Buzz Around the Office
‘Oh God, It’s Mom’ (WashPo)
Two brothers, one a conservative activist, the other a left-leaning liberal, were arguing with each other on C-SPAN about something political. The brothers then proceeded to take calls. One was from their mother, who scolded them on live TV for all the hostility during the holidays.
Quote of the Day: “You’re right, I’m from down south. And I’m your MOTHER. I don’t know many families that are fighting at Thanksgiving. I’m hoping you’ll have some of this out of your system when you come here for Christmas. I would really like a peaceful Christmas.” – Joy Woodhouse, yelling at her two sons live on C-SPAN