By Davide Barbuscia and Mehnaz Yasmin
(Reuters) -BlackRock Inc reported an 18% drop in fourth-quarter profit on Friday, hit by a global market rout that squeezed fee income, but registered $146 billion of long-term net inflows in the quarter as stocks and bonds rebounded.
Financial markets were thrown into turmoil last year by a swift rise in interest rates and recession fears, hitting businesses such as BlackRock (NYSE:BLK), which makes most of its money from fees on investment advisory and administration services.
But stocks and bonds rallied in the fourth quarter on expectations of a slowdown in global central banks' monetary tightening actions as inflation started to ease.
"2022 was a year of transition and a complex market environment for every one of our clients," Larry Fink, chairman and chief executive of BlackRock, said during a conference call.
"Inflation continues to be a top concern, despite recent cooling, ... global growth continues to slow," he said.
The world's largest asset manager's adjusted earnings were $1.36 billion, or $8.93 per share, in the three months to Dec. 31, down from $1.65 billion, or $10.68 per share, a year earlier. Analysts on average had expected a profit of $8.11 per share, based on IBES data from Refinitiv.
Assets under management (AUM) stood at $8.59 trillion at the end of the fourth quarter, down from a little more than $10 trillion a year earlier but up from $7.96 trillion in the third quarter.
Full-year revenue declined by 8% "primarily driven by the impact of significantly lower markets and dollar appreciation on average AUM and lower performance fees", BlackRock said in a statement.
BlackRock said it had cut 500 jobs, or about 2.5% of its workforce, which resulted in a $91 million restructuring charge in the fourth quarter.
"We recently restructured the size and shape of our workforce to free up investment capacity for our most important growth initiatives," Chief Financial Officer Gary Shedlin said during Friday's conference call. "At present, we would expect our headcount to be broadly flat in 2023," he added.
The company has faced growing pressure from both conservative and liberal U.S. politicians about its stances on issues like climate change and workforce diversity.
During the call, Fink reiterated the company's defense that it only pursues client interests. "Some of these people have suggested we’re either too progressive, some of them suggested we’re too conservative in how we manage our clients' money. I’m going to just tell everybody, we’re neither. We’re a fiduciary," he said.
BlackRock shares were down nearly 1% to $747.30 in late morning trading on Friday.
BlackRock registered $146 billion in long-term inflows in the fourth quarter, up from $65 billion in the previous quarter. Total net inflows amounted to $114 billion when accounting for outflows from cash management.
The majority of inflows were from fixed income products, with net flows into bond funds and exchange traded funds (ETFs) amounting to $115 billion in the quarter.
"We believe the strength in fixed income is just the beginning of a multi-year trend of money flowing back into bond products," said Kyle Sanders, senior equity research analyst at Edward Jones.
In the whole of 2022 BlackRock generated $393 billion in long-term net inflows.
Revenue from technology services, reflecting demand for the Aladdin investment management platform, increased $14 million year on year and $15 million when compared to the previous quarter, BlackRock said.