March 25 (Reuters) - Jefferies' profit jumped

22% in the first quarter, as resilient dealmaking and robust

underwriting boosted investment banking, it said on Wednesday.

The investment bank also said it had $17 million in losses

related to collapsed British lender Market Financial Solutions

and bankrupt U.S. auto-parts supplier First Brands after

adjusting for compensation and taxes, with exposure to First

Brands now amounting to zero.

Wall Street executives are betting on a strong 2026 for

mergers and acquisitions despite disruption from the ongoing

conflict in the Middle East, as investments in artificial

intelligence and a friendlier regulatory environment in the U.S.

are expected to spur dealmaking.

More than $1 trillion worth of deals has been announced so

far this year, 27% more than this time last year, according to

data compiled by Dealogic.

Jefferies' investment banking net revenues in the quarter

rose 45% to $1.02 billion from a year earlier, while total

revenues climbed to $2.02 billion.

The firm, which served as a lead underwriter on several

sizable initial public offerings in the first quarter, including

those of York Space ( YSS ) and Forgent, increased its

share buyback authorization to $250 million.

The results kick off a closely watched earnings season for

Wall Street's biggest banks, with the likes of JPMorgan Chase ( JPM )

, Goldman Sachs ( GS ) and Morgan Stanley ( MS ) set to

report over the next few weeks.

BUYOUT TALKS

Jefferies was in the spotlight on Tuesday after the

Financial Times reported that Japan's Sumitomo Mitsui Financial

Group ( SMFG ) was planning a potential takeover of the

investment bank.

Other media reports rebuffed the news, saying Japan's

second-largest lender was not engaged in acquisition talks and

that the Wall Street investment bank was not interested in

selling at this point.

SMFG, which already has a board seat at Jefferies, first

picked up a stake in the company in 2021. In September, SMFG

said it would invest a further 135 billion yen ($912.84

million), which will increase its stake to up to 20% from 14.5%.

The firms said at the time they would set up a joint venture

in Japan to consolidate their wholesale Japanese equities

businesses.

INVESTOR SCRUTINY

Jefferies has been under intense investor scrutiny over its

exposure to Market Financial Solutions and losses related to

First Brands. Its shares are down about 35% this year.

"Management is disappointed and takes full responsibility

for the losses already recognized and that may be absorbed over

time in respect of First Brands, all of which are manageable,"

the company said in a statement on Wednesday.

Jefferies reported a net income of about $156 million, or 70

cents per share, compared with $128 million, or 57 cents per

share, a year ago.