Hire Wire Dec 20 2011

No Bonuses for Top Jefferies Execs

By kelly eggers

New York-based investment bank Jefferies cut 10% of the jobs at its equities arm last quarter, but has "no plans for any meaningful other changes" when it comes to headcount reductions, the firm said in its earnings call for the fourth quarter and fiscal year ending Nov. 30, 2011.

Top executives including Jefferies' Chairman and Chief Executive Richard Handler won't take bonuses this year, in response to the "tough year" endured by the bank's shareholders. "We recognize shareholders had a tough year," Handler said, "and we are shareholders, and we are getting zero bonus."

On Nov. 30, the firm had 3,898 employees, a net increase of 56 people over the end of the third quarter. However, the firm noted "a modest recent reduction in headcount in equities," which brought total headcount to 3,851 at the time of the earnings call.

Recent media reports had indicated the firm had been reducing total headcount by approximately 11%, but executives clarified on the call that the reductions amounted to approximately 10% of the equities division, and less than 2% of its overall staff.

"We don't like to have to make changes like that, but given the relatively quiet activity in equities, and all of the changes, and frankly the investments we've made across the board, we felt that we need to tighten our costs," said Brian Friedman, president of Jefferies Capital Partners.

Jefferies, which in previous quarters has hired hundreds to compete with bulge-bracket investment banks, said further headcount increases around the firm will be gradual. "We have filled out the architecture of our firm almost across the board," Friedman said. "We've caught up in all of the needs we had."

The firm's compensation ratio for the quarter dropped to 55.6% from 59% in the third quarter, and fell at 58.2% for the fiscal year, down slightly from 58.9% in 2010. Its total compensation expenses were $308.1 million for the quarter, and $1.48 billion for the year.

Bonuses are expected to be down across Wall Street this year, and it's not uncommon to for senior management to elect to take no bonuses amid economic uncertainty. Citigroup CEO Vikram Pandit took a salary of $1 per year with no bonus during the years his firm was unprofitable, and Morgan Stanley's former CEO John Mack declined to take a bonus in 2009 due to the "unprecedented environment" and government bailout of his firm.

Jefferies' overall earnings beat analyst estimates, who had raised concerns over the firm's exposure to European debt following the collapse of MF Global in late October. The bank's fourth quarter profit tumbled 23% to $48.4 million from $62.7 million a year ago. It also decreased its investment in European bonds by 75% last month following "a barrage of misinformation" that circulated about the bank's stability.

Write to Kelly Eggers at Kelly.Eggers@dowjones.com

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