By Jaiveer Shekhawat and Saeed Azhar
(Reuters) – Investment bank Lazard’s profit beat expectations in the first quarter, as its asset management business performed better than anticipated, but its CEO warned the ongoing economic uncertainty could keep dealmaking in check.
Shares of the firm were down 1.8% at $39.15 in afternoon trading. The stock has fallen 24% since the start of the year.
The recent pullback in markets, heightened volatility and economic uncertainty has prompted CEOs and boards to hold back on acquisitions.
Lazard, with its more specialized focus, faces different pressures compared to its bigger competitors such as Morgan Stanley and Goldman Sachs, which have large trading operations that can benefit from volatility.
“The drivers for M&A (mergers and acquisitions) activity remain strong. But there is an overhang of uncertainty right now,” Lazard CEO Peter Orszag said on a call, noting there were several “strong incentives” for deals.
The company’s adjusted net income fell 9% from a year earlier to $60 million, or 56 cents per share, for the quarter ended March 31. Analysts were expecting 38 cents per share, according to estimates compiled by LSEG.
Financial advisory revenue fell 17% to $370 million, lower than analysts’ estimates of $394 million. Asset management revenue fell 4% to $264 million, but beat expectations of $254.2 million.
Investors’ skepticism of high risk assets such as equities has led to a decline in fees for asset managers such as Lazard. Its average assets under management fell to $231 billion in the quarter from $247 billion a year earlier.
Orszag said the firm’s backlog in advisory has continued to grow since April, which reflects an uptick in restructuring, and especially in Europe, which underscores the diversified business mix.
“On the asset side of the business, we have had a better experience in terms of gross inflows and also our net outflow numbers are smaller than they were a year ago,” he said.
Stephen Biggar, banking analyst at Argus Research, said the key line from the conference call was a comment that the backlog of deals continues to expand.
This indicates “likely considerable pent-up activity that will flow through once we get some clarity of tariffs and trade policy,” he said.
HEADCOUNT
Lazard kept its headcount mostly flat at 3,253 as of the end of the quarter, it said.
“We are constantly evaluating where to expand and where we can adjust in another direction, and that’s just an ongoing process,” Orszag said.
