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BlackRock Profit Falls 20 Percent as Market Volatility Curbs Fees

BlackRock Profit Falls 20 Percent as Market Volatility Curbs Fees

(Bloomberg) -- BlackRock Inc., the world’s largest money manager, said first-quarter profit fell 20 percent as a global stock-market slump early in the year crimped revenue and the firm cut jobs.

Net income decreased to $657 million, or $3.92 a share, from $822 million, or $4.84, a year earlier, the company said Thursday. Adjusted earnings of $4.25 a share missed the $4.30 average estimate by 18 analysts surveyed by Bloomberg.

BlackRock booked a restructuring charge of $76 million as Chief Executive Officer Laurence D. Fink undertakes the biggest round of layoffs in the firm’s history. About 400 jobs, or 3 percent of the workforce, are being cut, people with knowledge of the matter said in late March. Despite the market swings, BlackRock saw $36.1 billion of long-term net inflows, mostly into its exchange-traded funds.

“While we of course were not immune to the effects of market movements, which impacted both base fees and performance fees this quarter, the magnitude and diversification of our inflows speak to the differentiation of BlackRock’s platform and our ability to serve our clients,” Fink said in the statement.

Shares Outperform

BlackRock’s shares have dropped 5.8 percent to $348.29 in the past year through Wednesday, compared with a 15 percent decline for the S&P’s 19-company index of asset managers and custody banks.

Fink said in January that market swings at the start of the year may pressure companies to eliminate jobs. Global stocks, as measured by the MSCI ACWI Index, fell almost 12 percent this year through Feb. 11, before paring losses to about 0.3 percent at the end of March.

“We had a pretty volatile first quarter, so despite AUM levels exiting the quarter higher than the start, the average AUM during the quarter was impacted pretty significantly,” Macrae Sykes, an analyst at Gabelli & Co., said before results were released. “That impacts fee revenue.”

Revenue Falls

Revenue declined 3.6 percent to $2.62 billion in the quarter compared to the prior year. Expenses rose 0.3 percent to $1.66 billion, reflecting the restructuring charge. Compensation, distribution and administrative costs fell.

Assets under management increased to $4.74 trillion from $4.65 trillion in the fourth quarter. The firm’s iShares ETF business reported more than $24 billion in net inflows during the quarter, driven by more than $27 billion of net inflows into fixed income.

Fink has been expanding offerings including ETFs and seeking to improve performance of actively managed funds, which typically command higher fees than index products.

To contact the reporter on this story: Sabrina Willmer in Boston at [email protected] To contact the editors responsible for this story: Christian Baumgaertel at [email protected] Vincent Bielski

TAGS: Industry
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