Investment bank Jefferies will continue to slow its hiring rate over the next quarter, the firm said today as it reported its third-quarter earnings for the three months ending August 31. The bank has hired hundreds since the financial crisis in an effort to compete with the bulge bracket.
"We're very happy with our platform and our human capital base," said CEO Richard Handler on a conference call. "That said, if we do see a situation with the right person, we're going to continue to add, but keeping in mind the relatively tough operating environment."
In March, Handler said the firm would scale back its efforts and focus on making selective hires; hiring was projected to slow during the second half of 2011.
At the end of the third quarter, headcount totaled 3,842, up from 3,222 last quarter; two-thirds of that new headcount was from the July acquisition of Prudential Bache, the commodities trading and derivatives business. The 200 additional workers Jefferies added organically is slightly more than the 140 the firm brought on last quarter.
The number of hires was slightly inflated by the number of MBAs and analysts who comprised the junior banking class that joined over the summer, Handler said.
Net headcount will be up next quarter, Handler said on the call, "We're going to very mindful of the environment. Given that a lot of good people want to join us, we can't hire everybody."
Jefferies has added talent quickly since the financial crisis. About a quarter of senior investment bankers have been with the firm for less than a year, and roughly a third have been with the firm for 18 to 24 months, Handler said.
Pay Stays Steady
The firm set aside $299.6 million in compensation and benefits during the third quarter, down 30% from the $431.9 million it set aside last quarter and 2.9% from the $308.7 million it set aside in the year earlier period.
The compensation ratio, or compensation as a percentage of revenue, remained flat at 59% at the end of the third quarter. The firm said it doesn't try to stick to any specific number for the compensation ratio, bur wants to pay competitively while being mindful of its shareholders.
Jefferies reported net revenues of $509.3 million, down 1.5% from $517.3 million in the year earlier period. Analysts had expected $618.8 million in revenues. Investment banking revenues were up 16.3% this quarter to $294 million, compared with $246 million in the year earlier period. Sales and trading revenue, however, decreased 21% to $212.4 million in the third quarter from $270.3 million in the year earlier period.
On the call, Handler noted August was the third worst month for credit markets since the financial crisis in the last few months of 2008, but said September trading volumes are bouncing back from August's slump.