Jefferies Announces Fourth Quarter 2023 Financial Results
NEW YORK--(BUSINESS WIRE)--January 08, 2024--
Jefferies Financial Group Inc. (NYSE: JEF):
Q4 Financial Highlights
-- Net earnings attributable to common shareholders of $66 million, or
$0.29 per diluted common share
-- Annualized return on adjusted tangible equity1 of 3.8%
-- Net revenues of $1.20 billion
-- Investment Banking net revenues of $577 million
-- Capital Markets net revenues of $481 million
-- Asset Management net revenues (before allocated net interest4)
of $155 million
-- Please refer to the just-released Jefferies Financial Group
Annual Letter from our CEO and President for broader perspective
on 2023, as well as our strategy and outlook
-- At November 30, 2023, we had 210.6 million common shares outstanding
and 252.4 million shares outstanding on a fully diluted basis2. Our book
value per common share was $46.10 and tangible book value per fully
diluted share3 was $30.82 at November 30, 2023
-- Our Board of Directors has increased our share buyback authorization
back to a total of $250 million
“2023 was a transition year in the economy, in capital markets, in our industry and at Jefferies. It was accompanied by the challenges and sadness of geopolitical turmoil. In the face of this, Jefferies performed reasonably well and eked out a modest return on equity during what we believe to be the bottom of the current cycle.
“For Jefferies, the pain of this transition was felt primarily in Investment Banking, where curtailed new capital markets issuance was compounded by a dampening of merger and acquisition activity among our corporate and sponsor clients. Fortunately, our Equities, Fixed Income and Asset Management businesses performed well despite uncertainty, turmoil and volatility.
“We are hopeful that 2023’s results will represent a trough year and, as such, it wasn’t too bad. Our total net revenues of $4.7 billion and net income attributable to common shareholders of $263 million, or a 3.7% return on tangible equity, are an acceptable showing at the bottom of the cycle, even though they are far from our goals or long-term expectations. Our Investment Banking net revenues were $2.3 billion, and our Equities and Fixed Income revenues were $2.2 billion, while our Asset Management and Other net revenues totaled about $200 million. These results pale in comparison to the heady period of 2020-21 that represented the height of free money and strong stimulus. We did remind everyone at the time that those results were unique and reflected that passing moment, rather than our new run rate. However, if you go back to 2019, which is more indicative of the last “normal” year in our industry, our current results compare strongly with Investment Banking net revenues of $1.6 billion in 2019 and Equities and Fixed Income net revenues of $1.5 billion.
“Our goal (not guidance) is for our investments and progress of the last several years to position us to eventually achieve the level of results we achieved during the unique period of free money and strong stimulus, but on a durable basis, without relying on excessive “froth” in the system. We have our work cut out to achieve this, but that is the direction and objective we are all driving toward.
“Returning capital to shareholders remains one of our overriding priorities. In 2023, we returned an aggregate of $986 million to common shareholders in the form of $816 million in dividends (inclusive of the Vitesse spin-off) and the repurchase of 5 million shares for a total of $169 million, or $34.66 per share repurchased.
“We have returned $6 billion in total capital to shareholders over the last six years, representing over 78% of tangible book value at January 1, 2018. 252 million fully diluted shares remain outstanding today versus 373 million six years ago.
“We are appreciative of our recent upgrade to BBB+ by Fitch and will constantly strive to improve in this important fundamental measure with the three major ratings agencies.
“With the ongoing wind down of our legacy merchant banking portfolio, as well as our expectation of better results over the next several years, we expect Jefferies to continue to return capital to shareholders through cash dividends and share repurchases.
“While we made some profit and were vigilant on our risk during this complicated year, we are most proud of our team, who focused on our clients and enabled us to aggressively and strategically expand our capabilities. We are able to play strong offense in downturns because we have had a multi-decade consistent strategy and a culture that encourages this contrarian approach. It is one thing to make it through a transition year(s) intact. It is entirely another to come through such a period with a significantly enhanced market position, broader geographic reach, a credit rating upgrade, enhanced human capital, and an even stronger brand–all of which Jefferies achieved in 2023.
“We have pursued our investment in talent on a global basis, as we have expanded throughout Europe, Asia-Pacific, South America, Canada, and the Middle East, as well as in the United States. While our recruiting efforts have largely been in Investment Banking, we have also hired incremental talent in Equities, Fixed Income, Research, Alternative Asset Management and Support.
“Specifically, over the last three years, we have added from other firms and through internal promotion 182 Investment Banking Managing Directors, bringing our total senior team to 344 MDs as of December 1, 2023 (and 364 today), which over the three years is up 61% overall, 48% in the Americas, 78% in Europe and the Middle East, and 150% in Asia-Pacific.
“We certainly do not want to jinx ourselves, and we never provide guidance given the complicated world in which we operate, but the two of us could not be more excited to enter 2024 to experience what we can accomplish as a global team. In our combined 55+ years at Jefferies, we have never seen our Firm better positioned, and we have a straightforward path for our unique global franchise to deliver excellent long-term total returns to our shareholders, with lower-risk Investment Banking revenue driving our growth, a diversified sales, trading and research platform serving our clients and the foundation of a strong alternative asset management business. Critically important, our front-office effort is complemented by a solid and experienced Support team. It is impossible to estimate with clarity when our opportunity will fully normalize, but it always does, and we are ready! Given the Fed’s statement in December, it may even be sooner than we had expected.”
Richard Handler, CEO, and Brian Friedman, President
Quarterly Cash Dividend
The Jefferies Board of Directors declared a quarterly cash dividend equal to $0.30 per Jefferies common share, payable on February 27, 2024 to record holders of Jefferies common shares on February 16, 2024.
Financial Summary
(Dollars in thousands,
except per share Three Months Ended Twelve Months Ended
amounts) November 30, November 30,
----------------------- --------------------------------- ---------- --------------------------------- ----------
2023 2022(14, 15) % Change 2023 2022(14, 15) % Change
----------------------- --------- ------------ ---------- --------- ------------ ----------
Net revenues:
Investment Banking and
Capital Markets $1,057,997 $ 1,052,594 1% $4,504,379 $ 4,741,261 (5)
Asset Management 140,646 389,068 (64)% 188,345 1,243,491 (85)%
Other (1,437) (3,580) (60)% 7,693 (5,914) N/M
----------------------- --------- ------------ ----- --------- ------------ ---- ----
Net revenues 1,197,206 1,438,082 (17)% 4,700,417 5,978,838 (21)%
----------------------- --------- ------------ ----- --------- ------------ ----
Net earnings before
income taxes 87,261 194,840 (55)% 354,269 1,055,562 (66)%
Income tax expense 16,828 53,903 (69)% 91,881 273,852 (66)%
----------------------- --------- ------------ ----- --------- ------------ ----
Net earnings 70,433 140,937 (50)% 262,388 781,710 (66)%
----------------------- --------- ------------ ----- --------- ------------ ----
Net losses attributable
to noncontrolling
interests (1,506) (1,280) 18% (14,846) (2,397) 519%
Net losses attributable
to redeemable
noncontrolling
interests -- (101) (100)% (454) (1,342) (66)%
Preferred stock
dividends 6,300 2,070 204% 14,616 8,281 77%
----------------------- --------- ------------ ----- --------- ------------ ---- ---
Net earnings
attributable to
Jefferies Financial
Group Inc. common
shareholders $ 65,639 $ 140,248 (53)% $ 263,072 $ 777,168 (66)%
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Earnings per common
share:
Basic $ 0.30 $ 0.58 (48)% $ 1.12 $ 3.13 (64)%