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BlackRock profit misses as market turmoil hits bottom line

Published 01/16/2019, 07:55 AM
Updated 01/16/2019, 07:55 AM
© Reuters. FILE PHOTO - A sign for BlackRock Inc hangs above their building in New York

By Trevor Hunnicutt

NEW YORK (Reuters) - BlackRock Inc (N:BLK), the world's largest asset manager, reported lower-than-expected quarterly profits on Wednesday, as price cuts and market turmoil overshadowed strong sales of relatively low-cost funds.

Sinking markets in late 2018 led investors to pull cash from the company's typically higher fee actively managed funds even as they delivered record cash to the company's relatively low-cost exchange traded funds (ETFs).

Overall, the company sold $43.6 billion in stock, bond and other long-term investment funds, more than the $10.6 billion sold the quarter prior.

But market declines and the company's own price cuts took a bite out of the fees the company earns as a percentage of assets under management. Fees the company collects for hitting certain performance targets and lending out shares to people betting against stocks were also lower than the year prior. Assets under management were just under $6 trillion, down from $6.44 trillion in the preceding quarter.

Net income attributable to BlackRock fell to $927 million, or $5.78 per share, in the quarter ended Dec. 31, from $2.30 billion, or $14.01 per share, a year earlier, when it took a one-time gain due to U.S. corporate tax cuts.

Analysts on average expected BlackRock to report $6.27 per share, according to IBES data from Refinitiv.

Excluding the restructuring charges and other items, the company earned $6.08 per share, compared with $6.19 per share, a year ago.

BlackRock cut expenses, but not as fast as its revenues fell. The company last week announced cutting about 500 jobs, or 3 percent of its workforce and booked a $60 million restructuring charge.

Investors now face the prospect that what they saw as one of the few big growth stocks in the asset management business could report lower earnings per share this year.

BlackRock's stock is down nearly a third from an all-time high near $600 per share last year, declining more than 21 percent in 2018. Shares traded around $400 this week and were down 2 percent in light pre-market trading on Wednesday.

© Reuters. FILE PHOTO - A sign for BlackRock Inc hangs above their building in New York

"We continue to build and evolve our business in order to stay ahead of clients' needs and industry disruption," BlackRock CEO Larry Fink said in the earnings release.

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