Jefferies has just released its results for the second quarter of 2018. If you work for a bank, their message is mixed.
Firstly, it turns out that the great first quarter for fixed income traders may have been no more than that: the second quarter took a distinct turn for the worse.
In Q1, Jefferies' fixed income revenues more than doubled on the final three months of 2017, going from $101m to $213m. In Q2, however, Jefferies' fixed income revenues shriveled nearly back to where they started at $119m. To add insult to injury, they were also 23% lower than the second quarter of 2017.
Fixed income traders who thought their time had come may have to rethink.
Jefferies' 3,348 employees have had a pay cut. Last year, they each averaged $274k in salaries and bonuses for the first half. This year, they're down to $262k.
The fall in pay follows the addition of 114 people in the past year. It also comes as Jefferies booked a provisional tax charge of $160m as a result of the Tax Cuts and Jobs Act which all but wiped out its first-quarter post-tax profits.
If fixed income trading revenues are shrinking back to their previous lows, at Jefferies at least, equities revenues are holding up. They were $175m in Q218 compared to $174m a year earlier.
As Bloomberg notes, Jefferies' Q2 results help confirm Jefferies' transformation from a trading house to an advisory and capital markets house. While trading revenues were weak to flat in the second quarter, investment banking division revenues rose significantly (up 43% in M&A and equity capital markets and up 40% in debt capital markets).
This follows years of M&A banker hiring by Jefferies which has helped propel the firm up the league tables. Who said senior bankers don't perform when they're transplanted to other firms?
Lastly, Jefferies results suggest a whiff of desperation on the trading floor. While the bank's combined fixed income and equities trading revenues were down 12% year-on-year in the second quarter, the number of trading days on which Jefferies made a loss tripled from three to nine.
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