Lazard profit drops on M&A slowdown but outlook improves; shares climb

NEW YORK (Reuters) - Investment bank Lazard Ltd reported an 80% decline in fourth-quarter profit on Thursday as dealmaking slumped, but its chief executive predicted improving market sentiment could revive mergers and acquisitions (M&A).

Net income fell 80% to $42 million in the fourth quarter, the company said in a statement. Adjusted earnings per share dropped 64% to 69 cents, falling short of analysts' estimate of 81 cents, according to Refinitiv IBES data.

While a challenging economy and sluggish capital markets may depress deals for the first half of this year, sentiment has improved somewhat, Kenneth Jacobs, the company's chief executive, told Reuters in an interview. Jacobs cited resilient growth, moderating inflation and an improving credit environment as encouraging signs.

"Strategic M&A dialog seems to be increasing and market sentiment seems to be improving," Jacobs said. "We're well positioned to capitalize on any M&A recovery."

Lazard's shares rose about 4% in afternoon trading in New York.

Revenue from its advisory business slid 34% to $404 million versus a year earlier as transactions dried up, even though the business had racked up record revenue for the first nine months of the year, the company said. On an annual basis, advisory revenue fell 7%, smaller than the double-digit declines reported by Wall Street giants.

Top dealmakers at Goldman Sachs Group Inc have also said they were bullish on an M&A recovery in the second half.

The company's revenue from asset management dropped 25% in the fourth quarter to $259 million. Its expenses for compensation and benefits fell 13% for 2022.

After making senior hires last year, the firm may look to recruit more talent.

"The hiring environment may become more attractive," Peter Orszag, the CEO of Lazard's financial advisory business, told analysts on a conference call.

(Reporting by Lananh Nguyen; additional reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru; editing by Will Dunham and Nick Zieminski)