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Jefferies (JEF) Q2 Results Show Rebound in IB: Others to Follow?

Swayta Shah
·2-min read

After several false starts, investment banking (IB) performance seems to have found solid ground. Looking at Jefferies’ JEF better-than-expected second-quarter fiscal 2024 results (which surged on the back of robust IB and underwriting fees), it can be said that IB business has finally rebounded.

This also brightens prospects for the biggest U.S. banks.

Before we dig deeper into what to expect from other firms, let’s take a look at JEF’s performance. In the second quarter of fiscal 2024, the company witnessed a 59% year-over-year jump in IB revenues. This was driven by higher advisory (up 12%), equity underwriting (up 68%) and debt underwriting (up 129%).

The results, thus, show that demand for IB services is reviving after two years despite lingering geopolitical concerns and high interest rates, which put brakes on deal activity globally since 2022. Hence, JEF’s large peers like JPMorgan JPM, Bank of America BAC and Citigroup C are also likely to post robust IB results.

The top executives from these large Wall Street players indicated a healthy quarter for the IB business too.

At the Investors Day conference in June, Citigroup provided an upbeat outlook for IB fees. The lender forecasted a 50% year-over-year surge in IB fees for the second quarter of 2024. The company CFO Mark Mason noted, “We are still seeing good activity from a [debt capital markets] point of view and [equity capital markets] point of view. M&A announced deals continue to look pretty good, healthy, I would say.”

Additionally, JPM provided an updated outlook for IB revenues. At the Morgan Stanley US Financials, Payments & CRE Conference, Troy Rohrbaugh (co-CEO of JPMorgan's commercial and investment bank), said that IB revenues will likely increase 25-30% in the second quarter, driven by robust capital markets performance.

This view moved up from the prior guidance provided by the company. In May, JPM forecasted an increase in IB revenues in the mid-teen percentage.

Notably, in late May, Bank of America also provided an outlook for second-quarter IB revenues. Per the bank’s CEO, Brian Moynihan, the metric is anticipated to grow 10-15% from the year-ago quarter.

These projections imply a solid rebound in IB fees. We will have to wait till next week as JPM, C and BAC start reporting second-quarter results.

JPMorgan and Citigroup are scheduled to announce results on Jul 12, while BAC will report on Jul 16.

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