Adds CEO comment in paragraph 4, updates shares in paragraph 6

By Manya Saini and Tatiana Bautzer

July 23 (Reuters) - Lazard LAZ.N reported a 91% drop in second-quarter profit on Thursday and said it had cut more than 80 managing director positions as it restructures its financial advisory business following a lackluster performance.

The cuts represent 40% of its total pool, the bank said, adding that it would hire bankers in high-growth sectors with lucrative fee opportunities, including healthcare, industrials and defense technology, to bolster the business.

The unit reported a 9% drop in quarterly revenue, despite strong activity in the M&A market.

"That (the cuts) does create this interesting dynamic of kind of a loss of revenue associated with them, even if they were lower productivity, there still is some revenue associated with them," CEO Peter Orszag told reporters on a post-earnings call.

He added that revenue from newly hired and promoted bankers was expected to ramp up through 2027.

Shares of the bank fell about 3.5% in morning trading after the company also missed Wall Street's profit expectations, as a higher tax rate and a move to overhaul its financial advisory business weighed on results.

To strengthen its operations and cash in on the current listing boom, Lazard said it was planning to build out an IPO advisory business in the U.S., focusing on advising companies without acting as an underwriter.

The U.S. IPO market has roared back to life in 2026, with SpaceX's blockbuster debut opening the door for a broad range of companies to tap public markets.

A resilient stock market and strong investor appetite for new listings have also prompted companies to pursue offerings after years of delays, with bankers expecting IPO activity to remain robust in the months ahead.

"We have a very active IPO advisory business in Europe, and we recently made a hire in the United States that gives us the capabilities to do similar work," Orszag said.

PROFIT MISSES EXPECTATIONS

Lazard posted a profit of 12 cents per share in the second quarter on an adjusted basis, well below Wall Street expectations of 35 cents per share, according to estimates compiled by LSEG.

"This quarter's earnings were impacted by an elevated tax rate, which is not indicative of the full-year rate," CFO Tracy Farr said in a statement.

Lazard said the provision for income taxes was $24 million in the second quarter.

Net income fell to $5 million, ⁠or 3 ​cents per share, in the three months ended June 30. That compares with $55 million, or 52 cents per share, a year earlier.

ASSET MANAGEMENT SHINES

Asset management was the bright spot in an otherwise soft quarter.

Geopolitical tensions, uncertainty over interest rates and rapid advances in artificial intelligence have driven market swings, spurring portfolio rebalancing and supporting fee-based revenue across the asset management industry.

Lazard said it posted its best first-half net inflows in nearly 20 years and reached record reported assets under management.

On an adjusted basis, asset management revenue climbed 23% to $331 million in the second quarter, driving total adjusted revenue up 2% to $786 million, ahead of analysts' estimates of about $757.5 million.

Lazard ended the quarter with $285 billion in assets under management, compared with $248 ​billion a year earlier.