Jefferies Financial Group (JEF) delivered a mixed performance in Q2 2025, balancing resilience in its core businesses with macro-driven challenges that weighed on profitability. Net earnings attributable to common shareholders fell to $88.0 million, down 39.6% year-over-year, while diluted EPS from continuing operations declined to $0.40 from $0.64. Despite these pressures, Jefferies maintained total net revenues of $1.63 billion, only slightly lower than the $1.66 billion recorded in the same period last year, underscoring the stability of its top-line performance.

Within Investment Banking, revenues dipped 2.7% to $766.3 million, yet the firm posted standout growth in Advisory, where revenues surged 61% to $457.9 million, driven by market share gains and heightened client engagement. This strength was offset by a 51% plunge in Equity Underwriting revenues to $122.4 million, reflecting muted deal flow amid early-quarter market volatility, while Debt Underwriting held steady at $205.4 million.

The Capital Markets segment delivered $704.2 million in revenues, a modest year-over-year decline. Notably, Equities revenues rose 24% to $526.2 million, benefiting from robust global trading and strong results in corporate derivatives. However, this was tempered by a sharp 37% drop in Fixed Income revenues to $177.9 million, signaling softer client activity and reduced trading performance in that space.

Asset Management remained stable with $154.6 million in revenues, bolstered by a 43% increase in asset management fees and investment returns to $71 million, reflecting improved performance across multiple strategies.

On the expense side, total non-interest expenses rose to $1.50 billion from $1.43 billion a year ago. The compensation ratio held steady at 52.3%, while the non-compensation ratio climbed to 39.4%, up 5.2 percentage points, driven in part by one-time expenses.

Despite the margin pressures, Jefferies’ capital position remained solid. Book value per common share increased to $49.96, and adjusted tangible book value per share rose to $32.84. Total assets grew to $67.3 billion, and total equity stood at $10.4 billion. However, increased market volatility was evident in the firm’s 13 trading loss days, up from just 1 a year ago, though average VaR declined to $11.89 million from $13.36 million, indicating tighter risk control.

Management characterized the quarter as "resilient" in the face of geopolitical and policy-related uncertainty that muted activity early in the period. Encouragingly, momentum improved in May, and the company sees strength building into the second half of the year. Leadership cited a strong backlog, increased client engagement, and growing discussions around capital formation and strategic opportunities. They expect margins to normalize and operating leverage to improve as market conditions stabilize.

Strategically, Jefferies remains focused on expanding its Advisory and Equities businesses, where it continues to gain share. A consistent $0.40 per share dividend reflects confidence in its capital strength. Still, risks remain, especially in areas like equity underwriting and Fixed Income, where volatility and uncertain macro conditions could persist.

Overall, while Jefferies’ profitability came under pressure this quarter, the firm demonstrated notable resilience in key business lines, and management’s forward-looking optimism suggests potential for stronger performance in the back half of 2025.