UPDATE 2-Lazard adjusted profit rises 35 pct as M&A activity picks up

Wed Feb 5, 2014 2:23pm EST

Feb 5 (Reuters) - Investment bank and asset manager Lazard Ltd reported a better-than-expected 35 percent rise in fourth-quarter profit as merger advisory revenue rose in a recovering M&A market.

Lazard's financial advisory revenue increased 2 percent from the same quarter last year to $315 million, driven by an 8 percent increase in M&A and other advisory fees.

"In financial advisory, we are poised to benefit from an upturn in the M&A market," Lazard Chief Executive Kenneth Jacob said on Wednesday.

Last year was the slowest for deal making since 2005, according to Thomson Reuters data.

Lazard's profit rose to $110 million, or 81 cents per share, on an adjusted basis in the three months ended Dec. 31, from $81.6 million, or 61 cents per share a year earlier.

Analysts on average had expected earnings of 61 cents per share, according to Thomson Reuters I/B/E/S.

Lazard said fourth-quarter compensation costs fell to 56.1 percent of operating revenue from 59.6 percent in 2012, within its goal of a "mid-to-high" 50 percent range.

While that ratio is still well above that of competitors such as Goldman Sachs Group Inc, which paid out less than 40 percent of its net revenue to employees last year, it is down from over 60 percent in recent years.

The merger advisory market has been tough since the financial crisis, and has only recently begun to pick up.

Lazard has been diversifying its business to rely less on merger advisory revenue by expanding its asset-management unit.

That business did well last quarter as a rise in stock prices boosted fees. Asset-management revenue rose 20 percent from the year-earlier quarter to $293.1 million.

Average assets under management rose to $174 billion in 2013 from $156 billion in 2012.

Lazard shares closed at $42.99 on the New York Stock Exchange on Tuesday. The stock, which hit a 52-week high of $48.70 on Jan. 15, has risen 9 percent since it reported third-quarter results in October.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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