Lazard’s Profit Rises 35%, Aided by Asset Management

Lazard said on Wednesday that its profits rose 35 percent in the fourth quarter, as it benefited from improvements in its advisory and asset management businesses.

The firm reported $110 million in adjusted net income for the last three months of 2013, or 81 cents a share. That figure, which excludes some accounting charges, beat the average analyst estimate of 61 cents a share, as compiled by Standard & Poor’s Capital IQ.

For all of 2013, Lazard earned $269 million, up 38 percent from the previous year.

Using generally accepted accounting principles, the firm earned $53 million for the quarter and $160 million for the year.

“These were solid results for the year,” Kenneth M. Jacobs, Lazard’s chief executive, said by phone. “The model performed as we had hoped.”

The investment bank benefited the most from improvements in its asset management arm, which is meant to provide a steady stream of income to counterbalance the more volatile business of advising on transactions. The division reported a 20 percent rise in operating revenue for the quarter, to $293 million, as assets under management rose to a record $187 billion.

Lazard’s core financial advisory arm reported a smaller gain, with operating revenue rising 2 percent, to $315 million. The business continued to be propelled by merger advisory work, while restructuring distressed or bankrupt companies continued to lag as the level of Chapter 11 filings remained low.

Mr. Jacobs said the firm expected to see an improvement in deal activity this year as more corporate management teams felt emboldened by pockets of economic recovery, particularly in the United States.

“The improvement in sentiment is leading to a pickup in activity,” he said.

Though Lazard’s particular niche has become more crowded by an influx of boutique and independent investment banks like Centerview Partners and Moelis & Company, Mr. Jacobs said his firm remained competitive, participating in an estimated 40 percent of transactions worth more than $10 billion.

Among the assignments it worked on that closed during the quarter - important because that is when an investment bank receives the bulk of its fees - were the IntercontinentalExchange’s $11 billion takeover of NYSE Euronext, Amgen’s $10.4 billion purchase of Onyx Pharmaceuticals and NV Energy’s $10 billion sale to MidAmerican Energy.

“The field has narrowed to just a few firms that can handle large cross-border transactions,” Mr. Jacobs said. “While there have been more boutiques and independent banks, you’ve probably seen only one and a half Lazards among them.”

The firm also managed to continue restraining costs, after having enacted an initiative to clamp down on expenses. Its ratio of awarded compensation to revenue was 58.3 percent for the year, down from 59.4 percent. And adjusted noncompensation expenses fell 3 percent for the year, to $409 million.

The firm added that it had raised its dividend by 20 percent, to 30 cents, in an effort to return more money to shareholders.

“We have achieved our objectives,” Mr. Jacobs said. “There’s a lot of cost discipline around here.”