By Manya Saini
(Reuters) -Investment bank Lazard’s second-quarter profit fell 76% as its advisory business reeled from a prolonged slump in dealmaking, but executives said on Thursday that they were seeing early signs that things were bottoming out.
Confidence was improving among boards and investors amid expectations that the Federal Reserve was nearing the end of its monetary policy tightening cycle, Chief Executive Ken Jacobs and incoming CEO Peter Orszag said in an interview.
But they warned that it was early days for a recovery and any rebound was going to be tempered, rather than like 2021, when activity suddenly spiked to a new high.
“This is going to be probably more like previous cycles, where M&A rebound comes with fits and starts,” Jacobs said. “You still have a fair amount of uncertainty out there.”
Global mergers and acquisitions activity fell 36% year-on-year in the second quarter as high interest rates and a stand-off over the U.S. debt ceiling kept dealmakers on edge.
The slump in dealmaking has affected some of Wall Street’s largest investment banks, with some announcing job cuts and others cost-cutting measures.
Lazard joins other Wall Street firms, such as Morgan Stanley and Goldman Sachs, in reporting early signs of recovery.
Jacobs and Orszag said a revival was being aided by the availability of financing, especially from private credit markets, even if it was not cheap.
They highlighted areas such as energy transition, technology and health care as sectors that were seeing the most activity.
PROFIT FALLS
Lazard reported an adjusted profit of $23 million, or 24 cents per share, in the three months ended June 30, compared with $96 million, or 92 cents per share, a year earlier.
Revenue at Lazard’s financial advisory segment fell 15% to $344 million in the second quarter, while its asset management arm saw a 1% rise in revenue.
Lazard’s total operating revenue declined 8% to $620 million, compared with $676 million a year earlier.
Lazard said in April it would eliminate around 10% of its workforce in 2023, which could result in additional costs of around $95 million.
Orszag said the company was on track to hit that target.
(Reporting by Manya Saini in Bengaluru, Lananh Nguyen and Paritosh Bansal in New York; Editing by Shounak Dasgupta and Sharon Singleton)
