Jefferies Group (JEF) Q1 2012 Earnings Call March 20, 2012 9:00 am ET Executives Richard B. Handler - Executive Chairman, Chief Executive Officer, President, Member of Risk Management Committee and Director of Jefferies
I would now like to introduce your host for today's conference, Mr. Richard Handler, Chairman and CEO of Jefferies. Mr. Handler, you may begin your conference.Richard B. Handler Good morning, and thank you for joining our discussion of Jefferies first quarter results. I am Rich Handler, CEO of Jefferies, and with me on the call today are Brian Friedman, Chairman of our Executive Committee; and Peg Broadbent, our Chief Financial Officer. For the first quarter ended February 29, 2012, we posted net revenues of $780 million, net income to common shareholders of $77 million and earnings per share of $0.33. Our solid results reflect our continued growth in investment banking and strong results in fixed income. At quarter end, our assets were about $34.6 billion or about 9.5x shareholders' equity, slightly below our 9.9x leverage at the end of November. During the quarter, we acquired the U.K. corporate broker, Hoare Govett, from RBS. This was another unique opportunity to advance our business with modest operating cost and no real use of capital in a period of challenge and industry consolidation. With a history of serving clients for over 100 years, Hoare Govett is one of the U.K.'s most prominent corporate brokers and is ranked #4 in terms of FTSE clients. This combination affirms our commitment to our U.K. and European investment banking and trading clients. The entire senior Hoare Govett corporate broking team, along with the relevant equity research, sales and capital market professionals who have joined Jefferies, totals 51 employee partners. With these additions, our headcount at March 1 was 3,875, down 23 people from year end. For the time being, recent backstops of liquidity by the ECB into the European banking system and the Greek debt restructuring appear to have reduced the extreme anxiety surrounding the European sovereign debt and bank risks and consequently appear to have stabilized global credit markets. This more optimistic sentiment translated into increasingly higher fixed income and investment banking activity levels as our first quarter progressed. Equity volumes remained muted for much of the quarter, although we did note a pickup in equity activity toward the end of February. The same broad market trends have continued through the initial few weeks of our second quarter.
Now I'll turn it over to Peg to discuss our results and financial condition in more detail.Peregrine C. de M. Broadbent Thank you, Rich. As Rich said, our net revenues for our first fiscal quarter were $780 million. Our net income to common shareholders were $77 million and earnings per share of $0.33 versus $0.42 for the first quarter last year. The difference in EPS for the 2 quarters is largely attributable to an approximately 10% increase in our average shares outstanding due to our $500 million common equity raise in April 2011 and stronger results in Jefferies high-yield trading that shifted income to noncontrolling interests as we will explain below. Investment banking revenues were $286 million, an increase of 20% over the first quarter of 2011 and 9% over the fourth quarter of 2011. Of the $286 million, capital markets revenues were $136 million and M&A and advisory revenues were $150 million. Fixed income revenues of $339 million were up 141% from last quarter's total of $141 million and 7% above last year's strong first quarter. Equities net revenues for our first quarter were $136 million, lower than the $177 million reported in the comparable quarter last year, but 10% stronger than last year's $124 million. Asset management revenues for the quarter were $6 million, a decrease from the $7 million reported from -- for the fourth quarter last year and the $24 million reported for the year-ago quarter, which included an exceptionally high performance fee accrual. Read the rest of this transcript for free on seekingalpha.com