Lazard\'s 4th-Quarter Profit Surged as Deal Assignments Picked Up

What a difference a year has made for Lazard.

The independent investment bank said on Thursday that its adjusted profit jumped to $81.6 million in the fourth quarter, up from just $1.4 million the same time a year ago, as deal-making improved.

The year-ago period also was weighed down heavily by accounting charges tied to efforts to rein in deferred compensation.

The fourth-quarter profit amounts to 61 cents a share, nearly double the average analyst estimate of 34 cents a share, according to Capital IQ.

Using generally accepted accounting principles, the firm reported a narrower loss in the fourth quarter of $4.1 million.

Firms that specialize in advising on mergers and acquisitions benefited from a growth in deal-making in the fourth quarter. While overall takeover activity remains low, investment bankers predict that more companies will seek growth by buying other businesses.

“We’re about as well-positioned as we’ve ever been,” Kenneth Jacobs, Lazard’s chaiman and chief executive, said in a telephone interview.

He added that the current banking environment, which has imposed additional costs on bigger firms with more complex businesses like trading, favors the independent model of Lazard and rivals like Evercore Partners. One bigger competitor, Barclays, recently disclosed that it plans to lay off about 275 people from its investment banking unit in New York City.

“We think we’ve got the ideal model for today and the next decade or so,” Mr. Jacobs said.

Lazard’s core financial advisory division reported ! a 19 percent jump in operating revenue, to $309 million, with those gains coming primarily from deal-making. Assignments that closed in the quarter â€" which meant the full payment of fees â€" included Hertz’s $2.3 billion takeover of the Dollar Thrifty Automotive Group.

And the firm is advising on a number of prominent transactions, including Anheuser-Busch InBev’s proposed takeover of Grupo Modelo of Mexico (although regulators are seeking to block the bid on antitrust grounds); T-Mobile USA’s merger with MetroPCS; and the IntercontinentalExchange’s purchase of NYSE Euronext.

The only weak spot was in the restructuring unit, which advises clients on bankruptcies and corporate turnarounds. Mr. Jacobs said that he expected that business, whose operating revenue fell 36 percent to $48 million, to remain muted for some time.

azard’s other big business, asset management, also performed well in the fourth quarter, with operating revenue rising 20 percent from the year-ago period to $245 million. Virtually all of the asset classes that the firm invests in performed strongly, Mr. Jacobs said.

One of the firm’s main focuses over the past few years has been reining in compensation expenses, something that investors like Nelson Peltz have made a key focus. The firm said that its adjusted compensation for last year was $1.2 billion, almost flat from 2011. And the ratio of its awarded compensation to revenue came in at 59.4 percent for the year, compared to 62 percent a year ago.

The firm took a $103 million charge in the quarter tied to its cost-savings plan.

“We’ve been very disciplined in the last few years,” Mr. Jacobs said. â€! œWe still! have more progress to go, but we’ve made steps in the right direction.”

The cost-savings intiatives that Lazard has rolled out are expected to be fully completed next year.