July 28, 2011 / 11:24 AM / 7 years ago

UPDATE 4-MF Global's Q1 profit beats on risk-taking, shares rise

* Q1 adj EPS $0.10 vs est $0.05

* Q1 rev $314.5 mln vs est $287.4 mln

* Rev from principal transactions more than doubles

* Shares rise as much as 12 percent (Adds analyst quotes; Updates share)

By Jochelle Mendonca

BANGALORE, July 28 (Reuters) - Brokerage MF Global Holdings Ltd , led by former Goldman Sachs Group Inc chief executive Jon Corzine , posted a quarterly profit that beat estimates, as it earned more from investing its own money, sending its share up 12 percent.

MF Global benefited from taking on more risk, in contrast with investment banking giant Goldman Sachs — whose results were hurt as it played safe — and other Wall Street biggies who are prevented from betting their own money by regulators.

“We continue to see de-risking and de-leveraging of our larger competitors, which increases opportunities for us,” CEO Corzine said on a post-earnings conference call.

He added that the firm was managing its increased risk-taking with diversification and risk management methods.

Corzine was hired last March to help turn the company around, and has slashed jobs and streamlined operations to begin MF Global’s transition.

Evercore analyst Chris Allen believes that MF Global is taking on risk in a smart way and that risk is helping drive returns for shareholders.

The New York-based firm started its proprietary trading arm Principal Strategies Group late last year and also started taking the other side of client trades. The businesses have increasingly earned more for the company.

“The evolution of our business model is taking shape, as client facilitation and principal activities accounted for nearly half of the firm’s overall revenue base,” Chief Financial Officer Henri Steenkamp said in a statement.

Revenue from principal transactions more than doubled to $116.8 million as revenue, net of interest and transaction-based expenses, rose 9 percent to $314.5 million.

“(MF Global) outperformed in a number of areas. It gives us confidence in the path it is taking,” Evercore’s Allen said.

First-quarter earnings rose $7.8 million, or 5 cents a share, from $0.7 million, or 1 cent a share, a year ago.

Separately, MF Global said it intends to sell $300 million aggregate principal amount of convertible senior notes due 2018.

Shares of the company rose to $8.09 on Thursday morning before shedding some gains to trade up 9 percent at $7.91 on the New York Stock Exchange. (Reporting by Jochelle Mendonca in Bangalore; Editing by Joyjeet Das)

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