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Lazard Profit Off 71% on Problems in Corporate Holdings
Wednesday May 7, 2008 11:35 pm ET
By MICHAEL J. de la MERCED

Lazard, the investment bank run by Bruce Wasserstein, said Tuesday that its first-quarter profit plunged 71 percent, hurt largely by a $28.5 million write-down in its holdings of corporate debt and losses in its corporate equity portfolio.

The firm earned about $16 million for the three months ended March 31, a steep drop from the $55 million it earned last year. The profit amounted to 14 cents a share, down from 47 cents a share last year.

Despite the slowdown in deal making — which hit Lazard especially hard because of the bank’s large mergers advisory practice — the decline in profit stemmed largely from the bank’s portfolio of corporate fixed-income securities, which reported a decline in value for the second consecutive quarter. The firm has taken steps to shore up the portfolio and has sold some of the debt.

“We don’t think our first-quarter results are representative of what we’ll see for the rest of the year,” Steven J. Golub, Lazard’s vice chairman, said in an interview. He added that the debt portfolio and the bank’s corporate equity portfolio, which is used mainly to seed new asset management products, posted positive returns in April.

Earnings from Lazard’s core mergers advisory business showed a less-steep drop of 15 percent, to $166 million. Among the completed deals that Lazard worked on in the first quarter were I.B.M.’s $5 billion purchase of Cognos and the Rank Group’s $2.7 billion acquisition of Alcoa’s consumer and packaging businesses. The firm earns its fees when deals are completed.

Much of Lazard’s recent mergers business included advising financial institutions that sought to raise capital to shore up their ravaged balance sheets. “We’ll probably continue to see a number of assignments in the financial institutions area for the rest of the year,” Mr. Golub said.



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