New York’s investment banks are signaling upswings in two business lines that don’t usually take off at the same time: advising ambitious companies on expansions, while helping others drowning in debt.
The rare simultaneous waves of dealmaking and restructurings were the talk of one conference call after another as boutiques including Evercore Inc., Lazard Inc. and Moelis & Co. reported first-quarter results in recent days. It underscores, once again, how enmeshed those firms’ fortunes are with the Federal Reserve’s interest-rate decisions — and how the steepest US inflation in a generation is bending norms.
“With each passing day, it is clearer that rates will remain higher for longer,” PJT Partners Inc. Chief Executive Officer Paul Taubman told analysts after posting the firm’s second-highest revenue on record, helped by restructuring fees. “We see the environment getting more constructive by the day.”
Companies that slammed the brakes on takeovers when the Fed initially raised rates have resumed the hunt for acquisitions as financing costs become more predictable and the economy stays robust.
At the same time, those higher-for-longer rates are pressuring overly indebted companies to seek restructuring rather than wait.
Even then, the Fed retains the ability to shake things up.
On the day Lazard posted a record profit and the highest advisory revenue of its peers, the firm’s shares slipped as hotter-than-expected US inflation numbers came through. Days later, the stock advanced again after Fed Chair Jerome Powell said the central bank’s next move probably won’t be to raise rates even higher.
Shareholders also got reminders that it takes a while for an uptick in dealmaking to translate into profits. Transactions have to be hashed out and completed before bankers reap their full rewards.
Results from bulge-bracket firms’ investment-banking franchises and the boutiques that compete with them mostly missed analysts’ estimates — except for Goldman Sachs Group Inc., PJT and Lazard.
Investors waiting for a surge in deals to materialize will need more patience, according to Neil Sipes, an analyst at Bloomberg Intelligence.
“Sentiment around the boutiques had been building in the hope that dealmaking would rebound more quickly,” he said. “Those expectations may now dampen a bit, with lingering market uncertainty and deals still taking a while to come through the pipeline.”
In a coup for Lazard’s new CEO, Peter Orszag, the firm beat every peer on advisory revenue for the first time since the third quarter of 2020.
Read More: Megadeals Make a Comeback to Power $660 Billion M&A Revival
Still, one quarter isn’t enough to cement dominance. The firm that ceded that spot, Evercore, has led the entire investment-banking sector on megadeals above $10 billion that have been announced so far this year, according to data compiled by Bloomberg.
The rivalry for talent is active as firms jostle to take advantage of the coming pipeline. In recent weeks, Evercore, led by John Weinberg, poached a group of top bankers in Paris from Lazard, including the co-chair of investment banking in the country, Charles-Henri Filippi.
Read More: Top Lazard Banker Filippi Set to Join French Exodus to Evercore
The outlook for more deals remains positive for just about every boutique.
“Our pipeline continues to build,” Moelis & Co. CEO Ken Moelis said on his call with analysts. “Our backlogs are robust and strong” were the words of Evercore’s Weinberg. And at Lazard, Orszag cited “ongoing momentum.”
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
