Lazard swings to profit on investment banking rebound, beats estimates

By Manya Saini and Lananh Nguyen

(Reuters) -Lazard swung to a profit in the second quarter, exceeding analysts' expectations as dealmaking surged.

Wall Street investment banks have benefited from a rebound in activity as corporations carry out mergers or raise money with stock and debt offerings. The recovery comes after rising interest rates weighed on activity for two years.

Revenue in Lazard's financial advisory business climbed 17% to $411 million in the second quarter, while its adjusted net revenue jumped 38% to a record $855 million in the first half of the year, the bank said on Thursday.

"Looking ahead, geopolitical uncertainty remains, but we continue to see a constructive environment for our business activity, especially as we shift to a world where central banks reduce rates," CEO Peter Orszag told reporters on a conference call.

Across the broader industry, mergers and acquisitions revenue rose 8% in North America in the first half, according to data from Dealogic. Lazard was ranked among top advisory league tables and earned the tenth highest fees across banks globally over the same period.

The boutique investment bank advised on several major deals including WestRock's $33.5 billion combination with Smurfit Kappa and Rivian's $5 billion strategic investment from Volkswagen Group, among others.

Lazard has hired nine managing directors in its financial advisory business this year, Orszag said.

"We are seeing a lot of discussion and activity," for large and small deals across many sectors, particularly technology, energy transition and biotech, he added.

Meanwhile, the company's restructuring and liability management practice has been working with a number of high-profile clients including Rite Aid and SVB Financial Group.

At larger rivals Goldman Sachs and Morgan Stanley quarterly investment banking revenues rose 21% and 51%, respectively.

Lazard posted net income of $50 million, or 49 cents a share, in the second quarter. That compares with a loss of $124 million, or $1.41 a share, a year earlier.

On an adjusted basis, the company's profit of 52 cents a share surpassed analysts' average estimate of 35 cents a share, according to LSEG.

Orszag, who previously served as the director of the office of management and budget in the Obama administration, said clients were still pursuing deals despite a busy calendar of elections this year that could shift policies in many nations, including the United States.

"Boards and C-suites are willing to proceed, period, perhaps in expectation that there will be a change in the regulatory environment" under either U.S. presidential candidate, or at least a continuation of the status quo. "If you're willing to proceed today, you go ahead and do it."

Lazard is also considering its own deals to grow its asset management business.

"We are very actively looking at a variety of inorganic options to expand the asset business outside of public markets, that includes both acquisitions and... partnerships, so we are very much in the mix," Orszag said, although valuations remain high.

(Reporting by Manya Saini in Bengaluru and Lananh Nguyen in New York; Editing by Maju Samuel and Christina Fincher)