Jefferies sees record revenues and profits driven by FXCM
Investment bank and financial services firm Jefferies Financial Group Inc. has reported record revenues and profits for its latest financial quarter ended May 31, 2020 (Jefferies has a November 30 fiscal year end).
Jefferies said that its principal operating subsidiary Jefferies Group LLC recorded quarterly net revenues of $1.03 billion, pre-tax income of $173 million, and net earnings of $129 million. The company saw record quarterly combined Capital Markets net revenues of $730 million; Equities net revenues of $237 million and Fixed Income net revenues of $493 million. Investment Banking net revenues came in at $316 million, including Advisory net revenues of $182 million. Asset Management revenues were $19 million.
In its Merchant Banking arm, Jefferies stated that its positive results reflected in part “a record quarter for FXCM”. We’re not sure if that means it was FXCM’s best-ever quarter since the company was (effectively) acquired by Jefferies in January 2015 (more on that below), or if was truly FXCM’s best-ever quarter ever, hearkening back to the days when FXCM did upwards of a trillion dollars in monthly volumes in the mid to late 2000s. We’re guessing the former.
Jefferies has done very well with its investment in FXCM. The company, then known as Leucadia, made a $300 million rescue loan (actually $279 million, as $21 million was immediately returned to Jefferies as an advisory fee) to FXCM which allowed FXCM to avoid bankruptcy in the wake of the January 15, 2015 surprise spike in the value of the Swiss Franc. By the end of 2017 Jefferies had already received $331.6 million of combined principal and interest payments from that initial $279 million loan to FXCM. And, Jefferies is continued to be owed $71.6 million by FXCM as at November 30, 2019, with the loan paying interest of 20.5%.
In addition to the positive cash flow that FXCM has generated for Jefferies, Jefferies also got out of the deal a 50% voting interest in FXCM and continues to receive a majority of all distributions in respect of the equity of FXCM.
The news that FXCM is doing well this year shouldn’t come as much of a surprise to FNG readers, as brokers throughout the Retail Forex spectrum are reporting record volumes, revenues and profits as volatile markets have brought traders back to their screens following a nearly two-year lull. A number of Retail Forex brokers are also taking advantage of their increased momentum, and are going to the capital markets to raise money.
Jefferies’ full press release on its Q2-2020 results can be seen here.