Wall Street just got a new sign that dealmaking is making a comeback.

Jefferies Financial Group (JEF) released third-quarter results Wednesday afternoon, showing investment banking fees rose 47% year-over-year and 18% quarter-over-quarter.

Those numbers were slightly below analysts' expectations and the stock fell 1% in after-hours trading.

But the stock is up 53% year-to-date.

Jefferies' results offer investors the first official glimpse into the recovery of investment banking on Wall Street after a two-year drought. Larger rivals JPMorgan Chase (JPM) and Citigroup (C) report third-quarter results on October 11.

Major banks posted higher profits in the first half of 2024 due to a rebound in M&A, IPOs and debt issuances.

But it's not yet clear how this will play out in the second half of the year, as corporate customers digest new interest rate cuts from the Federal Reserve and uncertainty over everything from the fate of the U.S. economy to the outcome of the U.S. presidential election.

But some other major banks have also indicated that investment banking increased in the third quarter.

Earlier this month, Citigroup CFO Mark Mason told investors that his company's investment banking fees were likely “up 20% year-over-year,” while JPMorgan COO Daniel Pinto said the same fees compared to the same period last year would increase “by around 15% plus/minus” in the same period last year.

Bank of America (BAC) CEO Brian Moynihan told investors that these fees are “fundamentally flat.” Bank of America reports earnings a week after JPMorgan and Citigroup.

At Jefferies, the mergers and acquisitions advisory division reported revenue of $592 million, up 108%. Total investment banking fees rose to $949 million.

However, IPO underwriting revenue fell 2.6%.

“We are pleased with the strength and direction of our margin and return metrics and are optimistic about this year's balance sheet and our prospects for 2025,” Jefferies CEO Richard Handler and Jefferies President Brian Friedman said in a statement.

Jefferies beat analysts' expectations in trading, where revenue of $670 million rose 28% from the same period last year. This recovery was driven by stock trading.

The trading picture may not be so rosy for all of Jefferies' larger competitors.

Citi's Mason warned earlier this month of a trading decline of “approximately 4%” compared to the same period last year, due in part to volatility in the bond market in August.

JPMorgan and Bank of America expect slightly better trading performance over the period, both with modest increases in the low single digits.

The story continues

Goldman Sachs CEO David Solomon said two weeks ago that third-quarter trading revenues were expected to fall 10% year-on-year, citing an “extremely strong quarter in 2023” and “a more challenging macroeconomic environment, particularly in the Month of August”. .”

Solomon didn't share expectations for Goldman's performance in investment banking, but suggested that deal flow from the private equity community was somewhat disappointing.

“I was surprised that financial sponsor activity did not take off as quickly as I would have expected,” Solomon said at the Barclays event.

“But I expect that we will see a little more activity from financial sponsors as the fall progresses and into 2025.”

David Hollerith is a senior reporter at Yahoo Finance, covering banking, crypto and other financial areas.

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