logo-loader

BlackRock's Q3 profit rises 8%, but assets under management decline

Published: 15:33 19 Oct 2011 BST

no_picture_pai

BlackRock (NYSE:BLK) reported Wednesday that net income in the third quarter increased eight percent, but assets under management fell during the period marked by "economic uncertainty and declining markets".

For the three months ending September 30, the company reported a profit of $595 million, or $3.23 per share, compared to $551 million, or $2.83 per share, a year earlier. The asset manager said it benefited from a $129 million tax gain, and wider operating margins year-over-year, despite falling from the second quarter.

On an adjusted basis, BlackRock recorded $521 million in earnings, or $2.83 per share, versus $537 million, or $2.75 per share, a year ago.

Operating income of $849 million, adjusted to exclude costs of exiting two UK leases, improved $112 million, or 15 percent, compared with third quarter of 2010, primarily driven by growth in base fees, the company said, but declined $34 million, or 4 percent from the second quarter, reflecting lower base fees tied to global market disruption.

Revenue rose six percent in the latest quarter to $2.23 billion. According to Thomson Reuters, analysts forecast earnings of $2.63 a share on revenue of $2.26 billion.

Assets under management declined three percent year-over-year to $3.35 trillion in the third quarter, and fell nine percent from the second quarter, driven largely by $303.9 billion of market-related declines across products, BlackRock said.

"In a quarter marked by heightened economic uncertainty and declining markets, BlackRock’s broadly diversified, global platform delivered strong financial results - with revenue growth of 6% year-over-year and 15% growth in as adjusted operating income,” said chairman and CEO, Laurence D. Fink.

"Despite market headwinds, we continued to generate organic growth across global iShares®, our US retail channel, multi-asset class offerings and defined contribution. These are core growth opportunities for the Firm that leverage longer-term trends in investment and risk management.

"At the same time, market volatility obviously weighed on investor psychology and led some clients to de-risk or delay fundings, though we also saw some clients buy equities to rebalance their portfolios amidst recent market declines."

Investment advisory, administration fees and securities lending revenue of $1.9 billion in third quarter increased nine percent from the same period last year, due to growth in average long-term assets under management on new business. This was partially offset by a decline in fees from cash management products on account of lower average assets under mangement, the company said.

Meanwhile, performance fees declined 20% percent from last year, reflecting lower fees from opportunistic funds and other hedge funds, but BlackRock Solutions and advisory revenue rose to $117 million from $101 million a year earlier. BlackRock Solutions added 13 net new assignments during the quarter.

Equity assets under management of $1.441 trillion declined 18 percent largely reflecting $309.5 billion in market and foreign exchange valuation declines.

Fixed income assets under management rose two percent to $1.205 trillion on account of $33.3 billion in net market and foreign exchange valuation gains, despite net outflows of $14.0 billion.
Flows into fundamental U.S. short-duration, credit and municipal mandates were insufficient to offset outflows from U.S.long-duration and core strategies, the company said.

BlackRock also said that net inflows of $13.3 billion in the Europe, Middle East, and Africa region were outpaced by $23.5 billion of outflows from Americas and Asia-Pacific clients. Inflows were strong from iShares and Americas retail and high net worth clients, it added.

At October 17, the company's new business pipeline totaled $29.2 billion, or $65.2 billion before giving effect to a $36 billion institutional fixed income index outflow from a single client that intends to insource their business over time.  Of the total, 94 percent was in long-term products and 6 percent in cash management products and advisory assignments.

“With the persistence of volatile markets, low interest rates and the low-growth environment, an increasing number of investors are reevaluating their investment and asset allocation decisions. Clients are increasingly looking for a broader and more diversified range of solutions, value-added advice and risk management tools, with a number of clients opting for strategies that rely on index, ETF and multi-asset class products," Fink continued.

"In this environment, BlackRock is uniquely positioned to meet the needs of investors - with our global platform, broad mix of capabilities, and the benefit of BlackRock Solutions."

BlackRock is focused in investment management, risk management and advisory services for institutional and retail clients worldwide. Products include separate accounts, mutual funds, iShares (exchange-traded funds), and other pooled investment vehicles. The firm also offers risk management, advisory and enterprise investment system services to institutional investors through BlackRock Solutions.

The company, whose shares declined more than 2.4% Wednesday morning to $152.41 as of 10:29am EST, has approximately 10,200 employees in 27 countries.

Ariana Resources updates resource and reserve; realises long-term strategy

Joining Jonathan Jackson in the Proactive studio is Ariana Resources PLC (AIM:AAU) managing director Kerim Sener, who sits down to discuss the latest resource and reserve update for the Zenit Mining Operations in Western Türkiye. The update encompasses the Kiziltepe and Tavsan sectors, operated...

5 hours, 14 minutes ago