The Wall Street Journal-20080131-Lazard-s Earnings Surge By Sticking With M-A

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Lazard's Earnings Surge By Sticking With M&A

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Lazard Ltd. reported record profit in both the fourth quarter and the year, yet the investment bank said the mergers-and-acquisitions market would likely be "erratic" in the short term.

The New York firm also extended Chief Executive Bruce Wasserstein's contract through the end of 2012. A veteran dealmaker and widely known figure both on Wall Street and beyond, he will receive a base annual salary of $900,000 a year and restricted stock valued at about $102 million at current prices. Under his old contract, Mr. Wasserstein earned $4.8 million a year atop incentive compensation that totaled $36.2 million in 2007.

Lazard said fourth-quarter net income rose 62% to $59.1 million, or $1.04 a share, from $36.6 million, or 78 cents, in the year-earlier period. Revenue rose 26% to $626.3 million. Full-year profit rose 67% to $155 million compared with a year earlier on revenue of $2.05 billion, a 29% rise over 2006.

The company's shares rose $2.15, or 6%, to $37.81 as of 4 p.m. in New York Stock Exchange composite trading.

Unlike many of big corporate banks such as Citigroup and Morgan Stanley, Lazard didn't get ensnared in the subprime-mortgage crisis. It has focused instead on its traditional advisory role on deals and in company restructurings. It also runs an asset-management business accounting for about 35% of revenue.

"When we went public, a lot of people questioned our model, but we've shown that it can work pretty well compared to the universal banks," Lazard Vice Chairman Steven J. Golub said in an interview. "We happen to be in an environment where it really does stand out."

Mr. Golub said that while M&A activity would likely be "erratic" in the short term, the bank was still seeing "a lot of activity" in areas such as restructuring and investments by sovereign-wealth funds and other international investors. It recently advised the Kuwait Investment Authority, which invested about $3 billion in Citigroup, for example.

"One of the biggest things that's changed to where we are today from where we were in the last cycle five years ago is the emergence of global investors," Mr. Golub said. "It's changed the landscape of the world."