Lazard Ltd. (LAZ:US) rose the most in more than two months in New York trading after third-quarter profit beat analysts’ estimates and the firm said it would implement a cost-cutting plan.
The shares climbed 4.9 percent at 10:16 a.m. to $29.67, the biggest intraday increase since Aug. 7, after the Hamilton, Bermuda-based company said earnings were $35.4 million, or 26 cents a share. The average estimate (LAZ:US) of 11 analysts surveyed by Bloomberg was for per-share profit of 21 cents.
Lazard, run by Chief Executive Officer Ken Jacobs, 54, said it’s implementing a cost-cutting plan, targeting $125 million in annual savings, to boost operating leverage through reductions in staff and non-compensation expenses. Most of the cuts will come in the fourth quarter, and result in as much as $130 million in implementation costs, Lazard said.
“We are focused on revenue growth, cost discipline and effective use of capital to build shareholder value,” Jacobs said in the statement.
About two-thirds of the savings will be booked in 2013, and the full impact will be realized in 2014, according to the statement.
About $85 million of the savings will come from headcount reductions and $40 million from non-compensation expenses including technology and travel, Chief Operating Officer Alex Stern said today in a telephone interview. Lazard is focusing its cost-saving efforts on support functions and the financial- advisory business, Stern said, adding that it’s too soon to provide more details on the size of the job cuts.
“What we’re targeting are areas (LAZ:US) where we’re overstaffed relative to the foreseeable market opportunity,” Stern said. “There are certain businesses and groups, investments in our view, that are hard to justify given the compensation levels required and the return outlook for those investments.”
Third-quarter financial-advisory revenue fell 13 percent to $220 million from $253.6 million a year earlier, driven by a 14 percent decline in revenue from advising on M&A transactions, which decreased to $171.4 million.
Asset-management revenue rose 1.7 percent to $220.3 million, including a 13 percent increase in incentive fees, which were $10.6 million in the quarter.
Lazard earns about half of its revenue from asset management. The firm is in a “sweet spot” of the business because global and international equity make up almost three- quarters of its assets under management, Nelson Peltz, who runs Trian Fund Management LP, said earlier this year. Peltz in June disclosed a 5.1 percent stake in Lazard, making it the second- biggest shareholder (LAZ:US).
Lazard set aside $278.1 million for compensation in the third quarter, or 63 percent of operating revenue, compared with $276.7 million, or 59 percent, a year earlier.
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