Jefferies to set up Europe financing arm Jefferies is looking to set up a corporate lending business in Europe as the fast-growing US investment bank seeks to grab market share from retrenching rivals. The bank plans to establish a financing arm this year in a move that would further expand its fast-growing operations in Europe, where it has quadrupled its workforce to almost 1,000 over the past five years. "We are working actively to develop corporate lending capacity [in Europe] and have underwritings in process," Brian Friedman, chairman of Jefferies" executive committee, told the Financial Times. The move comes as some large European banks in particular are scaling back corporate lending as an increase in funding costs and tighter regulatory capital requirements for such loans squeeze margins. "Higher funding costs are pinching banks" appetite for cross-border corporate lending," said Huw van Steenis, banking analyst at Morgan Stanley. Jefferies, which this year took over UK broker Hoare Govett from Royal Bank of Scotland, is considering various options for a London-based lender, including a joint venture that would mirror its US partnership with MassMutual, called Jefferies Finance. The US investment bank, which is one of few independent broker-dealers left on Wall Street, has been in the spotlight because of its exposure to peripheral European government debt. In the wake of the bankruptcy of rival US brokerage firm MF Global, Jefferies" shares saw a sharp drop last year. The bank has since sold European government debt and slightly cut its balance sheet. This year, Jefferies shares have recovered almost two-fifths of their value to $19.27. The NYSE-listed investment bank has expanded rapidly in the past few years but it lacks the lending capacity of some rivals such as Bank of America Merrill Lynch or JPMorgan Chase. Jefferies Finance, its joint venture with MassMutual, a US life insurance group, offers loans of $150m to $1bn, and Mr Friedman said the bank was looking to offer similar-sized loans to companies in Europe. In a first step, Jefferies late last year hired Credit Suisse stalwart Tom Muoio to head a new European loan syndication team. It already has capabilities to lend in some European countries including the UK but wants to broaden it out to the whole continent with the new unit. Jefferies recently made its first big foray into loans for non-investment grade companies in Europe when it became an arranger for the financing of Vista Equity Partners" £1.27bn bid for Misys, the UK banking software company.