Lazard Profit Falls 79% as M&A, Asset-Management Fees Slide

  • Net income slips to 61 cents a share, beating estimates
  • Advisory revenue drops 26%; asset-management fees down 14%

Lazard Ltd., the largest independent investment bank, said second-quarter profit fell 79 percent as fees from mergers and acquisitions and asset management declined.

Net income dropped to $80.4 million, or 61 cents a share, from $374.1 million, or $2.82, a year earlier, when a tax benefit helped results, the Bermuda-based company said Thursday in a statement. The average estimate of nine analysts surveyed by Bloomberg was for profit of 59 cents.

“This was actually not a bad quarter when you look at it in perspective of the last several years,” Chief Executive Officer Ken Jacobs said in a phone interview. “On the M&A side, we’re a little back-end loaded this year. And on the asset-management side, assets under management are back up near record levels again, so the second half of the year should be better.”

Lazard’s revenue is about equally split between asset management and financial advisory, which has been pressured as takeover attempts have unraveled. The U.S. government has increased scrutiny on large deals that may limit competition, while analysts and dealmakers say that global uncertainties including the U.K.’s decision to part from the European Union may kill some transactions abroad.

Revenue Declines

Total revenue fell 12 percent to $546.6 million from a year earlier, while operating expenses excluding an accrued tax obligation declined to $421.4 million. Asset-management fees dropped 14 percent to $250.7 million from a year earlier, when the company sold its Australian private-equity business. Revenue from M&A advisory tumbled 26 percent to $203.4 million, while total advisory fees, which includes restructuring and capital raising, fell 9.3 percent to $287 million.

The firm was the No. 8 adviser on M&A deals in the first half of the year, according to data compiled by Bloomberg. It won work on Baxalta Inc.’s $35.5 billion sale to Shire Plc, which was completed in June, and ARM Holdings Plc’s impending sale to SoftBank Group Corp. for more than $20 billion.

Brexit hasn’t really had an impact on M&A activity, Lazard’s Chief Operating Officer Alex Stern said in a phone interview, while Jacobs said it may create more opportunities for the firm’s sovereign advisory practice.

Lazard shares slipped less than 1 percent to $33.40 at 9:56 a.m. in New York. The stock fell 26 percent this year through Wednesday in New York trading, compared with the 0.7 percent advance of the Russell 100 Financial Services Index.

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