0000096223-25-000014
SEC filingRevenue increased 21.6% driven by record Advisory and strong Equities, but Non-comp expenses rose faster than revenue.
For the three months ended August 31, 2025, net revenues increased 21.6% to $2.05 billion compared to $1.68 billion in the prior year quarter. Earnings from continuing operations before income taxes rose 31.3% to $331.8 million from $252.7 million. Net earnings from continuing operations improved 38.8% to $242.5 million. The effective tax rate decreased to 26.9% from 30.9%, driven by resolution of state and local tax matters.
Revenue growth was led by the Investment Banking segment, which posted a 20.3% increase to $1.14 billion. Advisory had its best quarter ever with net revenues of $655.6 million, up 10.7%, driven by higher average fees per M&A deal. Total underwriting net revenues increased 29.3% to $430.7 million as market conditions improved for both equity and debt underwriting. Equities net revenues rose 25.7% to $486.7 million on increased global trading volumes, prime brokerage, and corporate derivatives activity. Fixed income net revenues fell 18.2% to $236.7 million, as tight credit conditions continued to suppress activity in the bank's core asset classes.
Non-interest expenses increased 19.9% to $1.72 billion. Compensation and benefits expense rose 21.9% to $1.08 billion, but as a percentage of net revenues remained essentially flat at 52.9% versus 52.8% in the prior year quarter. Non-compensation expenses increased 16.7% to $632.1 million, driven by higher brokerage and clearing fees, technology and communication, and business development costs. Notably, non-compensation expense as a percentage of net revenues improved to 30.9% from 32.2%.
Total Investment Banking and Capital Markets net revenues were $1.86 billion, up 14.7% from $1.62 billion a year ago, representing 90.9% of total net revenues. Within this, Investment Banking contributed $1.14 billion, Capital Markets $723.4 million. The segment's revenue mix shifted: Advisory rose to 32.0% of net revenues (from 35.2%), while Equities increased to 23.8% (from 23.0%), and Fixed Income declined to 11.6% (from 17.2%).
Asset Management net revenues surged 199.7% to $176.9 million, driven by a swing in Investment return from a loss of $40.1 million to a gain of $68.0 million. Asset management fees and revenues increased 20.0% to $15.9 million, and Other investments (including real estate, FX, telecom) contributed $111.5 million, up 9.4%. Total segment revenues represented 8.6% of total net revenues, up from 3.5%.
Management noted that the investment banking backlog remains strong, though realization timing is subject to change. The company highlighted an expected normalization of fixed income market activity, which should improve operating margins going forward. A significant strategic development occurred on September 19, 2025, when Jefferies and SMBC Group announced an expansion of their alliance, including a planned Japan equities joint venture, expansion of joint sponsor coverage in EMEA, SMBC's intention to increase its economic ownership to up to 20%, and a commitment of approximately $2.5 billion in new credit facilities. The company also noted the signing of the One Big Beautiful Bill Act on July 4, 2025, which is not expected to materially impact fiscal 2025 results.
The Notes disclose the fair value hierarchy for financial instruments owned and sold, not yet purchased. As of August 31, 2025, total financial instruments owned (excluding NAV-based investments) were $24.62B, with $10.14B in Level 1, $16.47B in Level 2, and $802.9M in Level 3. Corresponding liabilities (sold, not yet purchased) were $12.36B total, with $7.06B Level 1, $8.40B Level 2, and $49.1M Level 3. Derivative assets and liabilities after netting were $1.73B and $1.25B, respectively. Cash collateral netting significantly reduces gross exposures. Consolidated variable interest entities (VIEs) had total assets of $3.38B, primarily secured funding vehicles of $3.20B. These data points provide liquidity and risk transparency, though the filing lacks full balance sheet totals (cash, debt, equity) within the Notes section.
The Notes section provided does not include Note 19 (Commitments, Contingencies and Guarantees) due to incomplete filing. Thus, no purchase commitments or contractual obligations beyond derivative and collateral data are available.
No capital allocation details (buybacks, dividends, debt changes, capex) are presented in the included Notes. The statements of changes in equity and cash flows, which contain such information, are not part of the Notes section and are excluded per instructions.
Note 1 identifies two reportable segments: Investment Banking and Capital Markets, and Asset Management. However, segment financial data (revenue, operating income) are not provided in the Notes excerpt. Note 21 (Segment Reporting) is missing from the filing. Therefore, no segment economics can be extracted.
Net earnings for the nine months ended August 31, 2025 were $470,748 thousand, while net cash used in operating activities from continuing operations was -$3,459,309 thousand, a significant divergence. This was driven by large working capital outflows, particularly in financial instruments owned (-$1,712,385 thousand), securities purchased under agreements to resell (-$1,664,568 thousand), and securities borrowed (-$945,232 thousand). These are typical for a financial services firm and reflect changes in trading and financing activities rather than operational deterioration.
Capital expenditures (net payments on premises and equipment) were -$151,425 thousand, modest relative to the scale of operations. Free cash flow is not explicitly stated and cannot be reliably computed due to the nature of the business (financial services).
Financing activities show significant debt issuance: proceeds from long-term debt were $3,852,721 thousand, partially offset by repayments of $1,758,422 thousand. Short-term borrowings also increased net by $806,895 thousand. No share repurchases or dividends are explicitly disclosed in the provided excerpt.
Anomalies: The large swings in financial instruments owned and resale agreements are typical for a broker-dealer and reflect market-making and repo activity. The absence of discontinued operations cash flows in 2025 (vs. -$68,789 thousand in 2024) indicates a simplification of the business structure.