Lazard Profit Plummets 91% as It Overhauls Advisory Business

Lazard (NYSE:LAZ) reported a 91% drop in second-quarter profit and widely missed Wall Street expectations, as the investment bank undertakes a significant overhaul of its financial advisory business. The firm announced it is replacing more than 80 managing directors as part of a multi-year restructuring plan aimed at revitalizing performance.

Advisory Overhaul Weighs on Results

The company's net income fell to $5 million, or 3 cents per share, for the three months ended June 30, a sharp decline from $55 million, or 52 cents per share, in the same period a year earlier. On an adjusted basis, Lazard earned 12 cents per share, significantly below the 35 cents per share consensus estimate compiled by LSEG. The firm's shares fell about 3.5% in morning trading following the release.

The restructuring involves a turnover affecting 40% of its managing director positions between 2023 and 2025. Lazard stated it would hire bankers in high-growth sectors with more lucrative fee opportunities, such as healthcare, industrials, and defense technology. The financial advisory unit's revenue fell 9% in the quarter, even amid strong M&A market activity.

CEO Peter Orszag acknowledged the near-term impact on a call with reporters, noting the departures create a "loss of revenue." However, he added that contributions from newly hired and promoted bankers were expected to "ramp up through 2027."

Strategic Shifts and Asset Management Strength

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To capitalize on a rebounding market for new listings, Lazard is building out a U.S. IPO advisory business. This initiative will focus on advising companies going public without acting as an underwriter, mirroring its existing model in Europe.

In a bright spot for the quarter, the asset management division delivered a strong performance. Key figures for the unit include:

• Adjusted revenue climbed 23% to $331 million.
• The firm reported its best first-half net inflows in nearly 20 years.
• Assets under management reached a record $285 billion, up from $248 billion a year earlier.

The strength in asset management helped lift Lazard's total adjusted revenue by 2% to $786 million, ahead of analyst estimates.