Jefferies Posts $77 Million Quarterly Profit

3:49 p.m. | Updated

Profits at the Jefferies Group may have slipped in the first quarter, but the investment bank’s results are giving Wall Street a reason to cheer.

Though profit at the firm was down 11 percent from the same time last year, the results of its bond-trading operations have bolstered confidence across Wall Street that the business, the profit engine of many financial firms, is coming back.

The results, reported Tuesday, helped push up the stock price not only of Jefferies, which rose more than 2 percent, but those of its competitors as well. Shares in Goldman Sachs and Morgan Stanley, which are set to report earnings next month, rose nearly 2 percent each.

Banks’ fixed-income trading operations were quick to rebound after the financial crisis of 2008, and helped stabilize financial firms’ revenue. But the European sovereign debt crisis sent convulsions through the bond markets, slicing banks’ earnings last fall.

The recent calm that has settled upon the financial world this year has helped restore confidence and stabilized bond trading somewhat. Jefferies more than doubled its revenue from debt trading to $339.1 million from the previous quarter.

Over all, Jefferies said that it earned $77 million, as debt trading and investment banking showed renewed life after faltering in the second half of last year. Jefferies reported $780 million in net revenue for the quarter, up from the period a year earlier.

“Market prices have improved throughout fixed income for the quarter,” Richard B. Handler, Jefferies’s chairman and chief executive, said in a call with analysts on Tuesday. “A large percentage of the gains were due to healthy customer flows and reasonable bid-ask spreads.”

Beyond the revival in trading, the firm’s profit also shows the continued survival of a firm whose viability was questioned in the wake of MF Global’s collapse after a big bet on sovereign debt. Among the principal critics was the credit ratings firm Egan-Jones, which warned that it would downgrade Jefferies’s bond rating unless it raised an enormous amount of capital.

Jefferies swiftly and sternly rebutted analyst concerns that it had a similar problem, selling off its holdings of foreign government bonds within days as a show of strength.

Since then, Jefferies has rebounded. Its stock price has climbed nearly 42 percent so far this year, and it has taken both market share and staff members from weaker rivals. Those include foreign banks that initially sought to expand in the United States, but were forced into retreat, Mr. Handler said on the call.

Other parts of Jefferies’s businesses showed improvement as well. Fees from advising companies on mergers and from underwriting bond offerings both rose significantly, contributing to a 20 percent gain in investment banking revenue for the quarter, to $285.8 million.

Mr. Handler highlighted the firm’s big mandates, including serving as the sole adviser to the Samson Investment Company on its sale to a group led by Kohlberg Kravis Roberts for $7.2 billion, in one of the largest leveraged buyouts of the past four years.

Not all of the Jefferies first-quarter results were rosy, however. Both the trading of stocks and the underwriting of equity offerings remained depressed from the same time last year. The firm’s chief financial officer, Peregrine C. Broadbent, said in Tuesday’s call that it had laid off some equities employees.

Its asset-management fees plummeted 77 percent, to $5.6 million, from the period a year earlier, though the division accounts for a relatively small portion of the firm’s total revenue.