NEW YORK (Reuters) - Investment bank Lazard Ltd. on Wednesday posted a five-percent increase in quarterly profit because of higher advisory and asset-management fees, despite a slowdown in deal activity.

But shares of the independent adviser declined after comments from executives cautioning that volatile markets could impact near-term results.

Lazard was involved in some of the biggest deals announced this year, including InBev NV's $52 billion takeover of Anheuser-Busch Cos Inc. and Gaz de France's 44.6 billion euro merger with Suez Environment.

Vice-chairman Steve Golub told Reuters that Lazard was an adviser on deals announced in July worth more than $100 billion, indicating merger and acquisition revenue would remain strong.

Lazard's second-quarter net income rose to $64.6 million, or 54 cents a share, from $61.5 million, or 53 cents, a year earlier. The Bermuda-based company reports earnings assuming the exchange of equity shares held by executives who helped convert the partnership into a public company in 2005.

Excluding certain costs and partnership stakes, operating revenue rose 12 percent to $494 million. The results were powered by the bank's financial advisory business, which saw an 18-percent increase in fees to a $289 million.

Analysts' average earnings forecast was 51 cents a share, according to Reuters Estimates.

"We would be buyers," Merrill Lynch analyst Guy Moszkowski told clients in a note. "Lazard posted a clean beat," he added, citing surprisingly strong asset management results.

Lazard shares were down 14 cents at $38.95 in late afternoon trading on the New York Stock Exchange. For the year, Lazard shares have fallen 3.9 percent, compared with a 29-percent drop in the Amex Securities Broker Dealer index .

Lazard's second quarter was one of its best, with advisory revenue surging 37 percent.

Mr. Golub said Lazard had also closed on a number of transactions in July, "so we have seen a continuation of what we had (seen) in the second quarter".

Bank of America analyst Michael Hecht said Lazard's year- over-year increase in mergers and aquisitions revenue looked good compared with an 18-percent decline reported by competitors.

"We expect the stock to respond favourably to these results, as very few capital markets-related firms have been able to post solid quarterly or year-over-year growth in the current environment," Mr. Hecht said in a client note.

Yet he cautioned that deal closings have lagged in the current quarter, about $6 billion in July compared with $53 billion in the first quarter.

A year earlier, first-half results sagged as the bulk of Lazard's deals closed after June 30.

"The second half of the year remains uncertain because the markets remain unpredictable," Lazard chief financial officer Michael Castellano said in a conference call with analysts.

Weighing on second-quarter results was a 40-percent decline in other businesses, including a unit that raises funds for private investment managers and another that advises on stock offerings.

Looking to smooth out dips in M&A, Lazard has been expanding its money management unit, in which quarterly revenue rose 11 percent to a record $178.8 million.

Assets under management fell five percent in the first half, though Lazard had net inflows of $2.6 billion from customers.

Mr. Golub told Reuters that Lazard would continue seeking acquisitions in advisory and asset management, while adding more people and opening offices in new regions. He cited the recent addition of some aerospace industry bankers and an office in Charlotte, North Carolina.

The firm recently opened a Hong Kong office and is entering the Middle East with a new office in Bahrain.

The total number of employees fell by 12 to 2,478 during the quarter, and the number of advisory managing directors declined by three to 152 people.

Lazard announced a back-office outsourcing deal with State Street on Wednesday that will lead to the transfer of 70 employees, or nine percent of the firm's asset management staff.

Current and former Lazard executives own more than half of the company through units that will be converted into stock over time. Excluding these units, net income rose 17 percent to $34.3 million, or 54 cents.