Lazard earnings surge on merger advisory fees

NEW YORK (Reuters) - Merger advisory firm Lazard Ltd (LAZ.N) on Wednesday said its fourth-quarter earnings rose 43 percent, beating estimates, on increased merger advisory fees.

The company also renewed Chief Executive Bruce Wasserstein's contract for five years, and boosted its quarterly dividend.

Lazard focuses on generating merger advisory, restructuring, and asset management fees and does little trading of its own funds. That business mix has insulated the company from the massive writedowns that many other Wall Street firms faced in recent quarters.

But the credit crisis is slowing merger activity globally, which over time could show up in Lazard's results. Lazard earns fees when deals are closed, and, in general, fewer new mergers are being announced, and fewer announced transactions are closing.

Just over $180 billion of merger transactions have closed in 2008 so far worldwide, down from over $265 billion in the same period last year, according to Dealogic.

The timing for deal closings could be less predictable in the near term, said Vice Chairman Steven Golub in an interview.

"The short-term timing could be erratic, but we still see a lot of opportunities," Golub said, adding that restructuring activity is showing signs of picking up.

Net income was $122.6 million, or $1.04 a share, from $85.8 million, or 78 cents, a year earlier. Lazard's operating revenue in the fourth quarter rose 26 percent to $618 million.

Analysts on average expected Lazard to earn 95 cents a share on $595 million in revenue, according to Reuters Estimates.

Lazard, a former partnership that went public in 2005, reports results assuming the full exchange of equity interests.

FIVE MORE YEARS

Lazard's merger advisory operating revenue soared 27 percent to $313.6 million in the fourth quarter, while restructuring revenue rose 58 percent to $32.3 million.

Asset management generated operating revenue of $231.2 million, up 32 percent. That business has staged a big turnaround in recent quarters, helped by client inflows.

Lazard has renewed the contract of Bruce Wasserstein, chairman and chief executive, through the end of 2012. Wasserstein will receive a lower base salary under the contract--$900,000 a year, compared with the prior base of $4.8 million.

But Wasserstein, who helped break down territorial walls at the century-and-a-half old Lazard prior to its initial public offering, will also receive 2.7 million restricted shares. Those shares vest at the end of the contract period, and are worth about $95 million at current prices.

The company boosted its quarterly dividend to 10 cents per share from 9 cents a share.

Shares of Lazard have fallen 31 percent over the past year, part of a broader sell-off among investment bank shares in a year of turmoil in credit and mortgage markets.