Jefferies Q2 profit beats estimates on dealmaking rebound

By Lananh Nguyen and Pritam Biswas

(Reuters) -Jefferies Financial on Wednesday beat analysts' estimates for second-quarter profit as the bank earned higher fees from advising on deals as well as underwriting stock and bond sales.

Its earnings, viewed as an early indicator of results at major investment banks such as Goldman Sachs and Morgan Stanley, underscore the strong recovery in the corporate dealmaking space.

Expectations of a soft landing for the U.S. economy have sparked a surge in large mergers and acquisitions (M&A) this year. Buyers are also selling bonds to fund their purchases, while a strong rally in equities has boosted investors' appetite for new offerings.

Jefferies' investment banking revenue in the second quarter ended May 31 soared 59% from a year earlier to $803.2 million, helped by a strong performance in its advisory as well as equity and debt underwriting businesses.

"The market is strengthening," Jefferies President Brian Friedman told Reuters and added that the company's ECM (equity capital markets) and M&A numbers reflect a gain in market share.

The bank's capital markets revenue jumped 24%, thanks to strength in equities, and helped Jefferies' total revenue climb 60% to $1.66 billion.

Analysts had expected total revenue of $1.59 billion according to data polled by LSEG.

In the reported quarter, the company expanded its partnership with Japan's Sumitomo Mitsui Banking Corp (SMBC) as it looks to tap into the dealmaking market in Canada, which offers a competitive advantage for U.S. investment banks.

Jefferies net profit attributable to common shareholders rose nearly twelve-fold to $145.7 million, or 64 cents per share. Analysts had expected a profit of 63 cents per share, per LSEG data.

Shares of the company were down 1.8% in extended trading.

So far this year, Jefferies shares have gained nearly 14%, while those of Goldman Sachs and Morgan Stanley jumped 19% and 5%, respectively.

(Reporting by Lananh Nguyen in New York and Pritam Biswas in Bengaluru; Editing by Shinjini Ganguli)