Lazard profit up 5 percent despite market slump

By Joseph A. Giannone

NEW YORK (Reuters) - Investment bank Lazard Ltd (LAZ.N) on Wednesday posted a 5 percent increase in quarterly profit because of higher advisory and asset-management fees, despite a slowdown in deal activity.

But shares of the independent adviser declined after comments from executives cautioning that volatile markets could impact near-term results.

Lazard was involved in some of the biggest deals announced this year, including InBev NV's $52 billion takeover of Anheuser-Busch Cos Inc BUD.N INTB.BR and Gaz de France's 44.6 billion euro merger with Suez Environment (SEVI.PA).

Vice Chairman Steve Golub told Reuters that Lazard was an adviser on deals announced in July worth more than $100 billion, indicating merger and acquisition revenue would remain strong.

Lazard's second-quarter net income rose to $64.6 million, or 54 cents a share, from $61.5 million, or 53 cents, a year earlier. The Bermuda-based company reports earnings assuming the exchange of equity shares held by executives who helped convert the partnership into a public company in 2005.

Excluding certain costs and partnership stakes, operating revenue rose 12 percent to $494 million. The results were powered by the bank's financial advisory business, which saw an 18 percent increase in fees to a $289 million.

Analysts' average earnings forecast was 51 cents a share, according to Reuters Estimates.

"We would be buyers," Merrill Lynch analyst Guy Moszkowski told clients in a note. "Lazard posted a clean beat," he added, citing surprisingly strong asset management results.

Lazard shares were down 14 cents at $38.95 in late afternoon trading on the New York Stock Exchange. For the year, Lazard shares have fallen 3.9 percent, compared with a 29 percent drop in the Amex Securities Broker Dealer index .XBD.

$100 BILLION MONTH

Lazard's second quarter was one of its best, with advisory revenue surging 37 percent.

Golub said Lazard had also closed on a number of transactions in July, "so we have seen a continuation of what we had (seen) in the second quarter."

Bank of America analyst Michael Hecht said Lazard's year- over-year increase in M&A revenue looked good compared with an 18 percent decline reported by competitors.

"We expect the stock to respond favorably to these results, as very few capital markets-related firms have been able to post solid quarterly or year-over-year growth in the current environment," Hecht said in a client note.

Yet he cautioned that deal closings have lagged in the current quarter, about $6 billion in July compared with $53 billion in the first quarter.