(New throughout, adds comments from CEO)
NEW YORK Feb 1 (Reuters) - Lazard Ltd on Thursday posted adjusted fourth-quarter profit that beat Wall Street estimates, as strength in its asset management business helped offset a decline in advisory fees.
While adjusted profits beat expectations, the Bermuda-based firm also reported a one-time charge of $420 million related to the new U.S. tax law, which contributed to its first quarterly loss in five years.
Analysts and investors expressed concern about the company's tax structure going forward, particularly since Lazard's plans to convert to a C-Corporation could prove to be more costly than anticipated under the new tax law.
Lazard's stock fell more than 2 percent in morning trade, but retraced losses and was up about 1 percent around midday. Last week, its stock traded to an intraday record of $59.80.
Lazard, seen as a bellwether for the M&A advisory industry, worked on a number of high-profile deals during the quarter including Aetna Inc's $77 billion sale to CVS Health . Still, this activity paled in comparison to last year which included the $130 billion merger of Dow Chemicals and DuPont.
Lazard Chief Executive Ken Jacobs said the environment for M&A activity looked bright, particularly for large cap M&A, which tailed off in 2016 and 2017 but now should see a pick up, encouraged by the U.S. tax change.
"The factors underlying M&A activity are about the strongest they've been in a long time," he told Reuters. "Really, the question is how long they persist."
Revenue from Lazard's strategic advisory activity, which includes fees from consulting on deals, fell 18 percent in the fourth quarter ended Dec. 31 from the same period a year ago. Financial advisory revenue was down 17 percent.
Revenue from the asset management business rose 23.1 percent to a record $339 million and accounted for nearly half of total revenue.
In an earnings call, analysts pressed for details about plans to convert to a C Corporation. The company warned that converting to this structure could push its effective tax rate up by around 10 percentage points due to changes in net operating loss (NOLs) deductions and foreign income tax, which would be "punitive."
"I think we've carefully left open the possibility still of a conversion, but it's going to require a lot more study," Jacobs told analysts.
Adjusted for the tax charge as well as a one-time gain of $203 million, Lazard earned $1.12 per share, beating the average estimate of 90 cents.
Net loss attributable to the company was $83.6 million, or 70 cents per share, in the fourth quarter, compared with a profit of $128 million, or 96 cents per share, a year earlier.
Total revenue fell slightly to $692.3 million from $705.8 million.
(Reporting By Aparajita Saxena in Bengaluru and Catherine Ngai in New York; Editing by David Gregorio)