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Jefferies’ (NYSE:JEF) stronger-than-expected fiscal Q2 results indicate an improving outlook for investment banking among big lenders, Wells Fargo (WFC) analyst Mike Mayo wrote in a Friday note.
Shares of New York-based Jefferies (JEF) extended gains from Thursday’s spike, advancing 3% in late morning trading, after delivering fiscal Q2 earnings that surpassed the average analyst estimate as positive momentum continued to build across its investment banking and capital markets businesses.
The company recorded nearly 60% Y/Y growth in investment banking net revenues, easily outpacing what the big banks have guided for.
“Jefferies 50% growth appears outsized, but could point to better-than-guided IB results for large banks,” Mayo wrote.
Trading growth at Jefferies was also above implied guidance for larger banks, he noted. JEF’s capital markets net revenues gained 24% from a year before.
Too-big-to-fail banks include: Citigroup (C), Bank of America (BAC), Goldman Sachs (GS), JPMorgan Chase (JPM) and Morgan Stanley (MS). The megabanks will be posting their Q2 earnings starting mid-July.