Lazard quarterly profit beats estimates on M&A recovery

Investment bank Lazard Ltd comfortably beat quarterly profit expectations on Thursday thanks to a recovery in deal-making activity, although weakness in its asset management arm weighed.

Dealmaking activity spiked to a record $1 trillion in the third quarter. But mergers and acquisitions (M&A) deals overall were down 21% at $2.2 trillion in the first nine months of 2020.

Operating revenue from Lazard's M&A financial advisory business, its biggest breadwinner, rose 1% in the quarter, while revenue from its asset management arm fell 8%.

For the financial advisory unit, it was the first quarterly year-on-year increase since the last three months of 2018.

Cheap financing for deals, companies' ability to use stock as acquisition currency and a growing boardroom conviction about the economic landscape could ensure a sustained M&A recovery, according to Lazard Chairman and Chief Executive Kenneth Jacobs.

"You don't need necessarily an optimistic outlook on the economy. What you need is the ability to have some confidence to predict the future," Jacobs said in an interview.

The bank, whose business is split between asset management and financial advisory, said adjusted net income for the three months to Sept. 30 fell to $76 million, or 67 cents per share, from $88 million, or 76 cents per share, a year earlier.

The figure was higher than Refinitiv IBES estimates of 47 cents per share.

Lazard's total assets under management fell to $228 billion at the end of the quarter from $231 billion a year earlier but was up from the prior quarter.

The quarterly inflows were supported by Lazard bringing in three new teams focused on credit, emerging markets and digital health investments, as well as three new fund launches.