Lazard‘s third-quarter profit fell 33 percent from the year-ago period, the investment bank reported on Thursday, as the business of advising companies on mergers and bankruptcies declined.
And under pressure from investors like the activist Nelson Peltz, the firm said that it is taking steps to cut about $125 million in annual costs, including through layoffs and lowered compensation.
Lazard said that it earned $35 million in adjusted profit for the quarter, amounting to 26 cents a share. That still bested the average analyst estimate of 22 cents a share, according to Standard & Poor's Capital IQ.
(Using generally accepted accounting principles, Lazard's profit fell 47 percent, to $33 million.)
With the emergence of Mr. Peltz's Trian as a major investor with a 5.1 percent stake, Lazard has embarked on a series of initiatives aimed at both cutting costs and returning more money to shareholders.
Much of the plan is expected to be completed by the end of the fourth quarter, with results showing over the next two years. They include cutting $85 million in compensation-related expenses and $40 million in noncompensation costs.
Kenneth M. Jacobs, Lazard's chairman and chief executive, said on a conference call with analysts that he expects the cuts to have a “minimal†impact on revenue.
Meanwhile, the relative lack of confidence among would-be corporate buyers was evident in the firm's results. Financial advisory revenues were down 13 percent, at $220 million, with both deal and restructuring results down by double digits.
Still, Lazard executives argue that their firm is still performing above expectations, landing big cross-border mandates. The firm is involved in several of the biggest deals of the year, including T-Mobile USA's proposed merger with MetroPCS, Anheuser-Busch InBev‘s $20.1 billion purchase of the rest of Grupo Modelo and Walgreens‘ deal for an eventual takeover of Alliance Boots.
“We're up when the market's down,†Mr. Jacobs told DealBook in a phone interview on Thursday. “That's pretty good outperformance.â€
He added that many factors for increased deal-making, including rising valuations and the general availability of financing, were present. But clients still showed uncertainty about the economic environment and potential hurdles like the United States' fiscal cliff, somewhat dampening an appetite for riskier transactions.
Lazard's asset-management arm, which is meant to provide a stable counterweight to the more volatile advisory business, was up slightly for the quarter. Revenue rose 2 percent, to $220.3 million, as incentive fees grew by double-digits. Its assets under management also grew 8 percent from the second quarter, to $160 billion.
Separately, the firm announced that it had added an outsider, the former Goldman Sachs banker Andrew Alper, to its board.
