Lazard
- Investment bank Lazard plans to cut 10% of its workforce.
- A slowdown in mergers and IPOs has put pressure on Wall Street firms to cut costs.
- But much of the costs are related to salaries, which can be "very sticky," CEO Ken Jacobs says.
People are Wall Street's biggest cost by far.
With one of the Street's most lucrative moneymakers – advising on mergers and initial public offerings – still in a deep freeze, it's no surprise that several banks have shrunk year-end bonuses and laid off employees this year to reduce costs.
Lazard is the latest, announcing on Friday that it would shrink its workforce (3,402 people in 26 countries as of the end of 2022) by 10% this year.
"We didn't want to keep our heads in the sand about" the deterioration in business, Ken Jacobs, chief executive of Lazard, said on a conference call on Friday, according to a Sentieo transcript.
And cuts from its competitors could be coming, Jacobs told Bloomberg, given the weak outlook for deals.
Complicating Lazard's, and the rest of Wall Street's, efforts to control costs are the salary increases that took hold during the much busier deal years of 2021 and 2022. Here's what Jacobs told analysts on Friday, according to Sentieo:
"We've seen big increases across the industry in salary. That means benefits are going up. That's very sticky. It's very hard to get that out of the system. You don't reduce salaries."
At the same time, he noted that non-compensation costs, from travel to informational technology costs, have increased significantly because of inflation.
"And so consequently, getting the cost structure in place so that we can get back to our targeted profitability was going to require this kind of action."
Lazard said that the job cuts would result in an expense of $21 million in the first quarter and that there could be an additional charge of $95 million. On Friday, the New York-based investment bank reported an unexpected first-quarter loss of $23 million on an adjusted basis.