Jefferies posts profit plunge on weak equity underwriting; eyes rebound later in 2025

June 25 (Reuters) - Jefferies' JEF.N profit fell nearly 40% in the second quarter as equity underwriting weakness offset gains from merger advisory fees, but the investment bank said dealmaking could rebound later in 2025 as the economic outlook becomes clearer.

Uncertainty due to U.S. policy and geopolitical events slowed investment banking activity in the first two months of the March-May quarter, Jefferies said on Wednesday.

However, investor confidence was recovering since May and clients are actively discussing transaction opportunities, the bank added.

"The global economy continues to show remarkable resilience in the face of incredibly significant crosscurrents," CEO Rich Handler and President Brian Friedman said in a statement.

"Given the strength of our current backlog, overall activity levels and an abundance of discussions with clients around capital formation and their need to transact, we are increasingly optimistic about the second half of 2025."

The results highlight how investment banks, once expected to be among the biggest beneficiaries under President Donald Trump's administration, are faring months into his second term.

Hopes of a dealmaking revival were dented by his tariffs, while market volatility prompted many companies to delay capital-raising plans. However, with Trump dialing back some of his harsher threats, dealmakers are hopeful that the long-awaited boom might finally be within reach.

Jefferies' net earnings attributable to common shareholders fell to $88 million, or 40 cents per share, in the three months ended May 31. That compares with $145.7 million, or 64 cents per share, a year earlier.

Revenue from equity underwriting halved to $122.4 million due to market volatility, particularly in the first two months of the quarter. Debt underwriting revenue was flat.

In a bright spot, however, advisory revenue climbed 61% to $457.9 million as the bank continued to gain market share.

Revenue from the capital markets business, which houses its trading desks, dipped 0.4% to $704.2 million as lower fixed-income revenue outweighed a stronger performance in equities.

The bank's results are closely scrutinized as they offer an early look into trends at Wall Street. Larger rivals — JPMorgan Chase JPM.N, Goldman Sachs GS.N and Morgan Stanley MS.N — are scheduled to report earnings next month.