Jefferies & Co., the New York-based investment bank, said on Tuesday its third-quarter net income rose to a record $86.3 million, or 42 cents a share, compared with a loss of $31.3 million, or 18 cents a share, a year ago.

Jefferies' revenues of $700 million in the third quarter were a record. Much of the third-quarter gains in revenues were tied to increased revenues in equities, fixed income and commodities as well as high yield.

Other business lines showing gains in revenues included asset management, where fees rose and income from managed funds showed gains. Also, investment banking revenues increased in the third quarter.

Jefferies has been amidst a rapid expansion into fixed income over the last year -- it hired muni bond professionals as well as mortgage-backed debt specialists -- and it has also built up its investment banking presence, notably with the hire of a team of healthcare banking professionals from UBS. The firm has also begun to build its presence overseas in markets like Europe and Asia.

"We are pleased with the momentum throughout Jefferies as we continue to work hard to serve our clients in areas of our historical core competencies, as well as our many business lines," Richard Handler, chief executive of Jefferies, said in a prepared statement.

Jefferies shares were little-changed at $30.20 in early-morning trade.

Soon after Jefferies published its earnings, S&P analysts raised their recommendation on shares of the banking firm to buy from hold.

"Equity, fixed income, and high yield trading all posted revenues beter than our estimates, as did the asset management business," according to S&P. "Costs were also held at or below our estimates, including compensation, helping the bottom line."

Analysts at the credit rating agency said their outlook on investment banking has "brightened" and the trading environment remains favorable. As a result, they raised their 2009 earnings estimate to $1.34 a share from $1.16 and their estimate for 2010 earnings to $1.71 a share from $1.36.

S&P's price target for Jefferies stock was upped by $5 to $37.

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