(Bloomberg) - Wall Street’s deal making businesses are showing signs of a turnaround and renewed momentum after a prolonged slump, according to Jefferies Financial Group Inc. President Brian Friedman
Jefferies saw a pickup in initial public offerings and mergers and acquisitions activity last month, leading to more meaningful conversations with clients about future opportunities, Friedman said in an interview.
“You’re seeing the kinds of things you see at the turning point, where you’re bouncing off the bottom and you have the chance toward a path to a more normal, positive environment,” he said.
Investment-banking revenue at the New York-based firm plunged 26% in the second quarter, as firms across Wall Street took a hit on corporate dealmaking and sales of new securities. Jefferies said those pressures cut into its performance. But Friedman and his counterparts at firms including Goldman Sachs Group Inc. and Citigroup Inc. have recently been predicting a recovery in the second half.
“Green shoots” have started to appear, Friedman said, with several companies tapping the public markets. Jefferies served as an underwriter in recent weeks for Cava Group Inc., Fidelis Insurance Holdings Ltd. and Savers Value Village Inc. But a mixed reception from investors casts doubt on whether US IPOs are ready to emerge from their deepest and longest slump since the financial crisis more than a decade ago.
Friedman acknowledged that an uptick isn’t always a sign of renewed strength in the markets. “It’s not necessarily the all-clear,” he said. “No one rings the bell and tells you let’s go do deals — but one day you realize that the bell did ring.”
Capital markets also have a tendency to anticipate future performance and have proven resilient, according to Friedman. “The markets can get better even as the economy is slowing,” he said, as investors look past the decline.
The biggest Wall Street banks are scheduled to start reporting second-quarter results next week. That will include the month of March, when several regional lenders fell into receivership. Jefferies reports results before other large banks, and is closely watched for signs of what might be coming from the industry.
By Katherine Doherty
