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Jefferies Q1 Profit Drops

Jefferies Group reported lower first-quarter earnings on Tuesday due to higher costs and a loss in its managed funds business.

March 20 -- Jefferies Group Inc reported lower first-quarter earnings on Tuesday due to higher costs and a loss in its managed funds business.

The midsize investment bank said overall non-interest expenses rose 5 percent from a year earlier to $609.3 million as costs for compensation, technology, occupancy and other services increased.

A sharp rise in investment-banking fees helped push up overall revenue, but a $6.3 million loss in its managed-funds business also ate into the bottom line. That loss dragged asset-management revenue down 76 percent, even as asset-management fees climbed sharply.

Jefferies posted net earnings of $77.1 million, or 33 cents per share, for the first quarter, ended Feb. 29, down 12 percent from $87.3 million, or 42 cents per share, a year earlier.

Excluding one-time items, adjusted earnings were 32 cents per share, 3 cents above the muted expectations of Wall Street analysts, according to Thomson Reuters I/B/E/S.

Jefferies came under intense pressure last fall amid worries about its exposure to European sovereign debt after the failure of brokerage firm MF Global Holdings Ltd.

Threatened by a ratings downgrade from Egan-Jones and the flight of some clients, Jefferies sold billions of dollars worth of Greek, Irish, Italian, Portuguese and Spanish debt in a matter of days and issued strongly worded statements defending itself against what management called "malicious lies and false rumors" about its viability.

The strategy worked in regaining investor confidence. Jefferies shares are up 38.6 percent this year, compared with a 30.4 percent rise in the NYSE Arca Securities Broker/Dealer Index.

(Reporting By Lauren Tara LaCapra; Editing by Gerald E. McCormick and John Wallace)

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