Bloomberg News

Jefferies Advances as Analysts Note Recovery Since November

January 16, 2012

(Updates shares in second paragraph.)

Jan. 13 (Bloomberg) -- Jefferies Group Inc., the investment bank bouncing back from a 48 percent stock slide last year, extended gains as analysts said the firm is benefiting from steps taken to evade losses tied to European debt.

Jefferies rose 3.1 percent to $15.89 at 4:15 p.m. in New York trading after advancing as much as 8.2 percent earlier today. The New York-based firm has posted gains for seven consecutive trading days and has risen 16 percent this month.

The investment bank will perform “reasonably well” in its fiscal first quarter, which started Dec. 1, and will benefit as European and larger U.S. banks cut or exit some businesses in the face of stricter capital requirements, David Trone, an analyst at JMP Securities LLC, said in a Jan. 12 note.

A meeting with Chief Executive Officer Richard Handler and Chief Financial Officer Peregrine Broadbent “gave us confidence that the company has fully recovered from its November crisis of confidence and is largely back to business as usual,” Trone wrote.

Jefferies reduced its European sovereign holdings by three- quarters in November after Egan-Jones Ratings Co. said the firm may face losses tied to the region’s debt crisis. The company slashed assets to $35 billion during its fiscal fourth quarter from $45.1 billion at Aug. 31.

Handler, 50, invited ratings firms and regulators to examine his company’s liquidity in November, Chris Kotowski, an Oppenheimer & Co. analyst, wrote in a Jan. 10 note. Jefferies is “willing to do whatever it takes to maintain its investment- grade rating,” he wrote.

Share Decline

Jefferies shares are recovering from a two-year low of $9.50 on Nov. 17. Handler sought to reassure investors in November that his firm doesn’t face the same risks as MF Global Holdings Ltd., which filed for bankruptcy Oct. 31 after revealing a $6.3 billion bet on the bonds of Europe’s most- troubled nations.

Handler’s firm reported earnings per share excluding some items of 17 cents in the period ended Nov. 30, compared with the 14-cent average estimate of eight analysts surveyed by Bloomberg. Net income fell 23 percent to $48.4 million from a year earlier, the firm said Dec. 20.

Jefferies “successfully navigated an extremely challenging fourth quarter that included continuing global volatility compounded by a November filled with a barrage of misinformation about Jefferies,” Handler said at the time.

--Editors: Dan Reichl, Dan Kraut

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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