Market News

BY  Sonali Basak, Bloomberg News

(Bloomberg) -- Lazard Ltd. Chief Executive Officer Ken Jacobs said the strong dollar may persist for several months, something that his top banker believes may cause severe stress among sovereign clients. 

Jacobs, speaking after New York-based Lazard reported second-quarter results, said the dollar’s strength impacted the firm’s asset-management unit by more than $8 billion. But the “lion’s share” of pain from currency swings may have already been felt, he said. 

“The rate of today is the best predictor of the future,” Jacobs said in a telephone interview Thursday. “Maybe there’s more likelihood that the moves are less in the future.” 

Lazard’s asset-management business, which oversaw $217 billion at the end of June, had a 23% drop in revenue during the period, partially due to the currency fluctuations. While financial-advisory fees dropped 14% amid a challenging environment for deals across Wall Street, the investment bank beat analysts’ estimates for revenue and earnings. 

Lazard also generates fees from advising sovereign clients on liabilities. It recently announced a new office in Germany and is working on the country’s efforts to resolve uncertainty around energy giant Uniper SE as the standoff with Russia following its invasion of Ukraine rocks the economy and gas flows, according to Peter Orszag, Lazard’s financial advisory chief. The firm also is working on the planned nationalization of Electricite de France SA, he said. 

“A lot of the sovereign-debt problems are yet to come,” Orszag said, adding that Lazard is advising countries with debt negotiations involving China, especially Latin American and South American nations that have borrowed from China. “There is the possibility of higher rates and a stronger dollar causing severe stress for a lot of countries. Whether that transpires or not is yet to be seen.”