Lazard Ltd., the largest independent merger adviser, fell the most since December after reporting a 99 percent plunge in fourth-quarter profit on a decrease in revenue from working on deals.
Lazard declined $1.22, or 4.2 percent, to $27.67 in New York. Net income tumbled to $1.4 million, or 1 cent a share, from $104.5 million, or 76 cents, in the same period a year earlier, the Hamilton, Bermuda-based firm said today in a statement. The average estimate of 10 analysts surveyed by Bloomberg was for profit of 38 cents.
“We saw turmoil in the markets beginning in the summer, and by the mid fourth-quarter, you were really feeling the impact of that,” Chief Executive Officer Kenneth Jacobs, 53, said today in a phone interview after results were announced. “Things that were started didn’t get completed. Things that were almost done got pushed off. That’s the nature of what happens when you get periods of turmoil.”
Global announced deal volume fell in the third and fourth quarters as a downgrade of U.S. debt and the European sovereign-debt crisis stoked investor concern of a worldwide recession. Lazard ranked ninth on the financial advisory league tables last year, overseeing $232.6 billion in announced transactions, according to data compiled by Bloomberg.
Lazard’s revenue from mergers and acquisitions declined 36 percent to $167.1 million from the year earlier, according to the statement. Financial advisory revenue, which includes fees from overseeing M&A, capital markets and restructuring, fell 26 percent to $260.5 million in the fourth quarter from the same period a year earlier. Full-year revenue for the segment decreased 11 percent to $992.2 million.
Discretionary Bonuses Cut
Lazard advised on some of the world’s largest announced deals last year, including Medco Health Solutions Inc. on its $34.3 billion proposed sale to Express Scripts Inc. and Progress Energy Inc. on its $25.5 billion announced sale to Duke Energy Corp.
Asset management revenue was $204.4 million in the three months-ended Dec. 31, down from $255.7 million. Full-year revenue from the unit rose 6 percent to $882.8 million.
Lazard cut discretionary bonuses by about 20 percent in 2011, the firm said in the statement. The company set aside $337 million in compensation expenses for the fourth quarter, compared with $347.7 million in the same period a year earlier.
The “burden of deferred grants” made in 2008 will make it “challenging” for Lazard to reach a compensation-to-revenue ratio in the mid-50 percent range in 2012, Jacobs said today on a conference call after results were announced. Lazard kept its deferral rate constant in 2011 from 2010, Jacobs said.
Getting Off ‘Treadmill’
“The decision on the deferrals was, we just want to get off this treadmill,” he said. “They keep deferring, which just have made this harder and harder each year, and eventually I just don’t think this is the right way to manage the business.”
Lazard’s full-year net income fell 36 percent to $178.6 million, or $1.31 per share, from $281.1 million, or $2.06, in 2010, according to the statement.
Lazard repurchased $206 million of shares in 2011, according to the statement. The firm increased its quarterly dividend payable in April by 25 percent to 20 cents per share.
Lazard’s competitors reported increases in fourth-quarter profit. Evercore Partners Inc., the advisory firm founded by former U.S. Deputy Treasury secretary Roger Altman, said Feb. 2 that net income increased 29 percent, and Greenhill & Co. reported on Jan. 26 that profit increased eightfold.