Morning Coffee: Why Lazard is hiring while revenues collapse. Curious quirks of Ted Pick
To listen to Peter Orszag, the new CEO of Lazard, talk about the bank's results yesterday, you might assume that things are going well there. According to its presentation, Lazard wants to hire 10-15 managing directors 'net' every year. In an interview with Financial News, Orszag declared that these bankers will cover everything from technology to industrials, healthcare and energy and that Lazard will also be hiring for Germany, America, restructuring and its private capital business.
Why the fervor? In theLazard investor call, Orszag reiterated his vision: by 2030, revenues will have doubled, split equally between Lazard's advisory and asset management arms; the return on equity will be 10-15%. To achieve this, there will be "double-digit revenue growth annually on average." There will be «aggressive lateral hiring.» The halcyon days are coming.
So, how's this all going? In the third quarter, revenues in Lazard's financial advisory business were down 42% year-on-year. In the first nine months of 2023, they were down 30%. There are double-digit changes in revenue, but they're in the wrong direction.
The combination of big hiring and big drops in revenue doesn't bode well for big pay. In third quarter, Lazard cut compensation spending by 16% year-on-year, and the bank's compensation spending is down 4% for the year as a whole. With revenues falling by more than compensation, paying people is already consuming 71% of the money Lazard brings in.
Orszag, who spent most of his career in government and only became a banker in 2016, seems untroubled by all of this. Speaking yesterday, he said the «headwinds are easing» and there are signs of an M&A revival. It's all about, "the interplay between the catalyst of activity,
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