Jefferies takes US$30 million hit on First Brands as profit drops

Jefferies Financial Group posted a drop in quarterly profit as the bank took a US$30 million pre-tax loss tied to the collapse of auto-parts supplier First Brands Group.

Net earnings for the fiscal fourth quarter declined 7.2 per cent from a year earlier to US$191 million, Jefferies said on Wednesday (Jan 7).

While results were buoyed by a comeback in dealmaking and trading activity, the company’s asset-management operation incurred losses tied to First Brands, which filed for bankruptcy last year. Jefferies owns a 6 per cent interest in a fund called Point Bonita, which had more than US$700 million invested in receivables due by First Brands customers.

Jefferies has previously disclosed its exposure to First Brands through Point Bonita, which is managed by the bank’s Leucadia Asset Management arm.

Most indicators for Jefferies are “upward and to the right”, chief executive officer Rich Handler and president Brian Friedman wrote in a shareholder letter accompanying the results. But the pair acknowledged the “serious disappointment with the fraud and bankruptcy of First Brands substantially impacting Point Bonita”.

“We continue to adjust and improve our control regime,” Friedman said.

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It was a stronger quarter overall for some of the bank’s other business. Revenue for the three months to November rose 5.7 per cent from a year earlier to a fourth-quarter record of US$2.07 billion, Jefferies said.

The firm’s investment-banking business built momentum in the period, with revenue surging 20 per cent from a year earlier to US$1.19 billion, Jefferies said.

Somewhere between May and June, “momentum began to build”, Friedman said.

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Jefferies offers the first glimpse into how Wall Street navigated the last months of 2025 amid US President Donald Trump’s trade wars and ongoing geopolitical tensions. The bank’s results signal that the nation’s biggest banks, scheduled to report earnings next week, may also see upticks in their investment-banking revenues.

The company saw a “stronger overall market” for the bank’s services, Friedman and Handler said in the shareholder letter. Advisory revenue was the second-highest on record, up 6.2 per cent to US$634 million.

Debt and equity underwriting revenue also increased to about US$556 million, due to market-share gains and increased activity in equity underwriting specifically, Jefferies said.

Trading results

The biggest US banks have also benefited from market swings under Trump. That has been good news for trading desks.

Jefferies’ capital-markets unit generated about US$692 million in revenue, up 6.2 per cent from a year earlier. The bank touted growth in equities, where revenue jumped 18 per cent. That helped offset a 14 per cent decline in fixed-income trading revenue, Jefferies said.

While the firm does not give earnings guidance, Jefferies said that the bank sees an “increasingly favourable environment”.

“All signs are that momentum will carry over into 2026, and absent a meaningful intervening event, 2026 should be a strong year of M&A and capital markets activity,” Friedman said

Shares of Jefferies dropped 1 per cent to US$64 in extended trading at 4.18 pm in New York on Wednesday. The stock had dropped 19 per cent in the past 12 months. BLOOMBERG

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