Lazard profit beats estimates as dealmaking rebound fuels record revenue

By Mehnaz Yasmin and Lananh Nguyen

(Reuters) - Lazard's first-quarter profit exceeded estimates on Thursday, buoyed by a resurgence in dealmaking at the boutique investment bank.

A robust economy and steadying interest rate outlook have sparked a flurry of large mergers and acquisitions (M&A) this year. Bank CEOs have also expressed guarded optimism about uncertainties that could weigh on merger activity.

Lazard's profit gained from a string of high-profile deals it advised on in the first quarter, such as AbbVie's $10.1 billion acquisition of ImmunoGen and Gilead's $4.3 billion deal for CymaBay Therapeutic.

Meanwhile, its restructuring group advised companies including Rite Aid and SVB Financial Group.

The bank's firmwide and advisory revenues surged to record levels.

"We see lots of opportunity and we're getting traction across an array of products, geographies," CEO Peter Orszag told reporters on a conference call. "The market is moving toward a more constructive position. Our dialogs are quite active, so we’re feeling like there’s momentum."

He cited strong activity in North America, with a broad pickup in activity across healthcare, industrials, tech and financial institutions.

Revenue at Lazard's financial advisory segment, which advises on M&A, surged 63% to $454 million.

The results echo those at Wall Street giants including Goldman Sachs, Bank of America and Morgan Stanley, which reported investment banking gains in the first quarter fueled by capital markets.

Lazard's adjusted net revenue jumped 42% to $747 million, compared with analysts' average estimate of $668 million, according to LSEG data.

Excluding one-time items, it earned 66 cents per share, surpassing analysts' average estimate of 51 cents, according to LSEG data.

Asset management revenue rose 4% to $295 million in the first quarter. Assets under management climbed 8% to $250 billion in the quarter from $232 billion a year earlier.

LOOKING FOR RAINMAKERS

The bank is focused on recruiting top producers after reducing its headcount by about 10%, said Orszag, who expects more movement across the industry.

"The market for talent is very competitive right now... we’re in the midst of a significant number of serious conversations with really talented bankers," said Orszag, who credited President Ray McGuire with leading efforts to attract senior dealmakers.

Orszag, who previously served as the director of the office of management and budget in the Obama administration, also gave his view on the U.S. Federal Trade Commission's near-total ban on noncompete agreements that are widely used in the financial industry.

The U.S. Chamber of Commerce, the country's largest business lobby, filed a lawsuit on Wednesday seeking to strike down the rule.

Orszag said noncompetes provide an extra layer of protection in highly skilled industries like financial services that proprietary or confidential information won't be shared with future employers.

"I deeply appreciate the concerns that many policy makers have about noncompetes in general, but in highly skilled settings, there's a clear purpose that needs to be taken into account," he said. "We’ll see how it goes."

(Reporting by Mehnaz Yasmin in Bengaluru and Lananh Nguyen in New York; Editing by Shounak Dasgupta, Shinjini Ganguli and Michael Erman)