Lazard shows up rivals big and small
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Lazard’s Ken Jacobs has an advantage over most of his fellow new Wall Street CEOs: he can look back on his first full year in charge in 2010 with a degree of satisfaction. Sure, James Gorman might argue Morgan Stanley’s turnaround is on track, while Bank of America’s Brian Moynihan might simply be relieved the year is over — though his $9 million bonus must be a comfort. But Lazard showed up rivals big and small.
For starters, the firm’s M&A and strategic advisory business grew by 36 percent last year, faster than any of its peers. Goldman Sachs’s investment bankers, for example, brought in just 9 percent more revenue than they did in 2009. Morgan Stanley’s M&A top line, meanwhile, was flat, while Citi’s fell 5 percent and JPMorgan’s 21 percent. Lazard reckons its share of advisory fees has shot up to 10 percent from 6 percent in 2007 and that it now enjoys the fourth-largest share of advisory fees on the Street.
Lazard has also kept costs under control, unlike smaller rival Greenhill, for example, whose compensation line shot up 16 percent and accounted for more than half the firm’s revenue for the first time since going public in 2004 — even after the top brass eschewed cash bonuses and had the vesting period for stock awards extended to five years.
Lazard’s compensation, by comparison, grew by just 1 percent last year. But the firm has taken the unusual step of breaking out how much it would have increased if all deferred pay was accounted for in 2010. That shows compensation rising by 10 percent — well below the 24 percent gain in firm-wide revenue.
The big question for Lazard is whether it can keep hold of its market-share gains even as commercial banks aggressively use their balance sheets to win business. So far, though, that doesn’t seem as big a threat as it did during the crisis. Nor does Lazard appear to have lost out to the burgeoning number of smaller advisory boutiques trying to muscle in.
Fold in a slight outperformance in the stock market over rivals like Goldman Sachs and Greenhill, and Jacobs deserves a round of applause — particularly from any of his colleagues who doubted his ability to succeed the late Bruce Wasserstein.