Lazard Q2 Profit Plummets 91% on Tax Hit and Weaker Advisory Fees

Lazard (NYSE: LAZ) reported a 91% plunge in second-quarter profit, as a significant tax provision and a downturn in its financial advisory business overshadowed a record-setting performance in its asset management division. The investment bank's shares fell in premarket trading following the announcement Thursday.

Tax Rate and Advisory Slump Hit Bottom Line

The firm's net income for the three months ended June 30 fell to $5 million, or 3 cents per share, according to its earnings report. This marks a steep decline from the $55 million, or 52 cents per share, reported in the same period a year earlier.

A primary driver was a $24 million provision for income taxes. In a statement, CFO Tracy Farr characterized the charge as an anomaly, stating, "This quarter’s earnings were impacted by an elevated tax rate, which is not indicative of the full-year rate."

Revenue from the company's core financial advisory business, which counsels on mergers and acquisitions, slid 9% to $450 million. The results reflect an uneven recovery in global deal-making, where bouts of market volatility have continued to delay major transactions.

Asset Management a Bright Spot

In a stark contrast to its advisory unit, Lazard's asset management business delivered strong results, with revenue climbing 20% to $351 million.

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The division achieved a number of milestones, including:

• Its best first-half for net inflows in nearly 20 years.
• Record reported assets under management (AUM), ending the quarter with $285 billion, up from $248 billion a year prior.

The performance suggests that market volatility, driven by geopolitical tensions and shifting interest rate expectations, has encouraged clients to reposition portfolios, boosting fee-based revenue for the unit.

Market Reaction

Investors reacted negatively to the steep profit decline, with Lazard's shares dropping nearly 7% in thin premarket trading on Thursday.

The divergent results between Lazard's two main businesses highlight a key trend for the financial industry. The same market uncertainty that can stifle M&A activity can simultaneously drive demand for active asset management services as investors seek guidance.