(Bloomberg) -- Jefferies Financial Group Inc.’s profit plunged in its fiscal first quarter, as a bump in equities and fixed income trading failed to offset a slump in investment banking. 

Investment banking revenue dropped about 42% to $568 million in the period ended Feb. 28, the New York-based firm said Tuesday in a statement. That fell short of the $616.5 million average estimate of analysts in a Bloomberg survey. Sales and trading revenue grew 33% $639.4 million.

Jefferies’ results offer an early snapshot of how Wall Street’s biggest banks may fare as they report earnings for the first three months of 2023. Investment banking revenue plummeted last year, after corporate dealmaking and sales of new securities waned during 2022’s market swings. 

“Despite the significant decline in M&A activity and a continued lull in the IPO and leveraged finance markets, our investment banking business continues to build on our momentum and growing market position,” Chief Executive Officer Richard Handler and President Brian Friedman said in the statement. 

Net income plunged 59% from a year earlier to $133.6 million, or 54 cents a share. The shares gained less that 1% Tuesday in regular New York trading to $30.20, and have declined about 8% this year.

Fixed-income was a growth engine for Jefferies, posting a 63% gain to $330.7 million amid continued volatility across markets caused by economic uncertainty and rising interest rates. Revenue from equities trading grew 11% from a year earlier to $308.7 million.

Market volatility stemming from Silicon Valley Bank’s collapse happened outside Jefferies’ fiscal first quarter.

Capital markets will reopen, though probably not until the third or fourth quarter, Handler said in an interview after results were announced. “We saw capital formation early in the year, then the music just stopped. It won’t be a turn of the switch,” he said. 

Handler said he sees pent-up demand for mergers and acquisitions, but interest rates will determine whether deals return. The recent banking crisis will cause even more complications for the Federal Reserve, he said.

Non-interest expenses fell to $1.125 billion from $1.3 billion a year ago. Costs have been a focus for investors with persistent inflation putting pressure on spending and wage growth across the globe.

(Updates with CEO comments in eighth and ninth paragraphs.)

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