Jefferies Now Predicts Quarterly Loss, Trading Slumps

Jefferies Group, an investment bank focused on mid-sized companies, Monday projected a surprise fourth-quarter loss, hurt by weak results in its high-yield and asset management businesses, trading losses and higher compensation costs.

The company projected a quarterly loss of $24 million, or 17 cents per share, on revenue of $345 million to $365 million.

Analysts on average expected a profit of 33 cents per share on revenue of $401 million, according to Reuters Estimates.

Shares of Jefferies fell $1.59, or 8 percent, to $18.20 in light pre-market electronic trading. On Friday they hit their lowest level since October 2005.

Jefferies, based in New York, said it shut down two trading accounts that lost money, firing some employees. It also said investment banking results were hurt by the postponement of some transactions, in what Chief Executive Richard Handler called an "extremely challenging environment."

Handler said that he and Brian Friedman, chairman of the company's executive committee, will receive no bonuses for 2007. They also will reduce future pay by the value of restricted shares they were granted for that year. He said these shares were originally valued at $6.5 million and $13 million, respectively.

The company also said it has "substantial" liquidity, and is not seeking a capital infusion from a third party. It also said it has no extraordinary write-offs or asset write-downs.

Jefferies projected full-year net earnings in excess of $140 million, or roughly 99 cents per share based on quarterly results, on revenue of $1.55 billion. Analysts on average expected profit of $1.45 per share on revenue of $1.62 billion.