The energy sector shake out is hammering Jefferies trading business

Jefferies' trading business is hurting.

The investment bank reported earnings of $2 million for its third quarter.

That is down from $83.6 million the same period a year earlier.

The decline was largely the result of a loss in fixed income sales and trading, with the firm booking a loss of $18.2 million, versus revenues of $195.3 million in the third quarter of 2014.

In a joint statement, chairman and CEO Richard Handler and and Brian P. Friedman, Chairman of the Jefferies' executive committee, called the quarter "disappointing" and pointed toward volatility coming from China as the result.

Here is what they said:

"After a solid second quarter, the third quarter's sales and trading environment was initially slow due to concerns about a possible Greek exit from the Euro, and then became more volatile and challenging in the second half of the quarter as news of China's economic growth deceleration led to a further deterioration of trading volumes and continuing declines in global asset prices. A substantial increase in volatility affected almost every asset class globally. This significantly impacted, among other areas, the distressed side of the credit market, most notably in the energy sector."

The letter went on to say that Jefferies had recorded losses totaling $90 million over the last nine months across more than 25 distressed energy positions. The bank cut its exposure to the distressed energy trading business by half during the period, according the letter.

Handler and Friedman said: "We believe that, with our exposures in distressed securities reduced to current levels, there should be no similar impact on our future results."

Jefferies isn't alone in feeling some pain this summer - Goldman Sachs also took a hit between $50 million and $60 million on one of its trading desk.

Fitch pointed out however in a note that the firm booked "significant mark-to-market write-downs" last year when the high yield market sold off in October.

The ratings agency said: "The reoccurrence underscores Fitch's belief that Jefferies' distressed debt market making business creates inventory concentration issues and exposes the firm to the risk of inventory write downs in times of market disruptions."

Jefferies did not respond to a request seeking comment.