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Evercore Profit Declines 62% on Investment Banking Costs

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Evercore Profit Falls 62% as Investment Banking Costs Rise
Ralph Schlosstein, president and chief executive officer of Evercore Partners Inc., in New York. Photographer: Ramin Talaie/Bloomberg

April 26 (Bloomberg) -- Evercore Partners Inc., the advisory firm founded by Roger Altman, said first-quarter profit fell 62 percent as expenses in the firm’s investment-banking unit climbed.

Earnings excluding certain items fell to $4.32 million, or 10 cents a share, from $11.4 million, or 28 cents, a year earlier, the New York-based firm said in a statement today. The average estimate of five analysts surveyed by Bloomberg was for adjusted earnings of 33 cents a share. Expenses at the advisory firm’s investment-banking business climbed 26 percent to $77.5 million.

Evercore, led by Chief Executive Officer Ralph Schlosstein, 61, is among investment banks facing declines in mergers-and-acquisitions volume amid concern that the European sovereign-debt crisis and weaker economic growth will delay transactions. The amount of globally announced and completed deals fell for the third consecutive quarter in the three months ended March 31, according to data compiled by Bloomberg.

“Beginning last August and extending through the middle of December, all of us saw very volatile financial markets, very poor credit-market conditions and deal activity came to a screeching halt,” Altman, a former deputy U.S. Treasury secretary, said today on a conference call after results were announced. “It takes a while to restart it. But the fundamentals, at least in my experience, are positive for global M&A volume.”

Advisory Fees

Evercore fell 1.3 percent to $24.73 at 11:16 a.m. in New York. The firm’s shares declined 5.9 percent this year through yesterday. Bank of America Corp. this month cut its rating on Evercore’s stock after slower-than-expected M&A business in the first quarter and a drop in the firm’s publicly announced pipeline of deals.

Adjusted net revenue, at $105.5 million in the first quarter, was unchanged from the same period a year earlier. Net revenue from the investment-banking unit rose 5.5 percent to $85 million, and net revenue from the investment-management division fell 18 percent to $20.5 million.

Schlosstein said Evercore’s backlog in its advisory unit has “never been higher,” and revenue from the business could be as high as $50 million in April.

Evercore earned advisory fees from 104 clients in the first quarter, up from 79 last year, and received fees of more than $1 million from 17 clients, compared with 18 a year ago.

Assets under management fell 25 percent from a year ago to $12.9 billion at March 31 as money flowed out of the firm’s institutional business, Evercore said. Investment advisory and management fees declined to $18.7 million from $23 million.

Adjusted compensation expense was $66.4 million, or 63 percent of net revenue, compared with $62.4 million, or 59 percent, last year. Altman said the firm will to hire senior bankers “steadily” in 2012.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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