October 26, 2017 / 11:41 AM / a year ago

Lazard's asset management powers profit as advisory fees drop

(Reuters) - Lazard Ltd (LAZ.N) reported a better-than-expected quarterly profit on Thursday, as strength in its asset management business offset a sharp drop in financial advisory fees.

The company, often seen as a bellwether for the M&A advisory industry, said revenue from strategic advisory, which includes fees from consulting on deals, fell 13 percent in the quarter.

“There has been a drop off from 2015 and 2016 in bigger deals. A lot of that has to do with the policy environment in Washington which affects big multinationals,” Chief Executive Kenneth Jacobs told Reuters.

The drop came even as Lazard grew its market share among major advisers globally in a quarter when it closed high-profile deals such as Dow Chemical’s $130 billion-merger with DuPont and Reynolds American’s $49 billion acquisition by BAT.

Major U.S. banks, including Morgan Stanley (MS.N) and Goldman Sachs (GS.N), reported a jump in investment banking fees for the most recent quarter, helped by higher levels of completed M&A.

The value of worldwide M&A announced during the third quarter totaled $819.7 billion, an increase of 3 percent from a year earlier, according to Thomson Reuters I/B/E/S.

Cushioning the blow from weak advisory fees was a 19 percent rise in revenue from Lazard’s asset management business, which it has been building out to diversify its revenue stream.

Revenue from the business rose to a record of $315.47 million in the quarter, accounting for nearly half of total revenue, up from 40 percent at the end of last year.

Assets under management rose 6 percent between July and September to a record $238 billion as of the end of last month.

Net income attributable to Lazard fell 3 percent to $109.21 million as expenses rose. Its adjusted earnings of 85 cents per share, however, handsomely beat analysts’ estimate of 75 cents per share, according to Thomson Reuters I/B/E/S.

Total operating revenue rose 2.6 percent to $627 million, also beating estimates of $593.30 million.

Lazard shares were up nearly 1 percent at $45.63 in early trading. They have risen about 13 percent this year through Wednesday, just shy of the 14 percent rise in the S&P 500 index .SPX.

Reporting by Sweta Singh in Bengaluru and Olivia Oran in New York; Editing by Anil D'Silva, Supriya Kurane and Savio D'Souza

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