FUNDWATCH: BlackRock Unveils Fourth-Quarter Hit
January 21 2009 - 8:05AM
Dow Jones News
By Sam Mamudi
NEW YORK (Dow Jones) -- The market turmoil claimed another
victim on Wednesday, as asset manager BlackRock Inc. reported an
84% decline in its fourth-quarter profit, compared to the year-ago
period.
BlackRock (BLK) had until now avoided the worst of the financial
crisis, reporting a 15% year-on-year decline in its third quarter
profits. BlackRock's shares over the past year have, along with
shares of Franklin Resources Inc. (BEN), Eaton Vance Corp. (EV) and
T. Rowe Price Group (TROW), fallen the least among the major asset
managers.
But the firm's fortunes couldn't hold out during the bleak
fourth quarter.
BlackRock's fourth-quarter net income fell to $53 million, or 40
cents a share, as revenue dropped 26% to $1.06 billion. On an
adjusted basis, it earned 68 cents a share. Estimates from analysts
surveyed by FactSet Research were for $1.26 a share.
Shares of BlackRock were down about 4.5% in pre-market trading.
The firm's stock fell 11.7% on Tuesday.
"[Economic] problems accelerated in the second half of the year
and 2009 is beginning on difficult footing with greater headline
risk of growing unemployment, weak earnings and increased
bankruptcies," said Laurence Fink, chairman and chief executive
officer at BlackRock.
Last week analysts covering the asset management industry
predicted that fourth-quarter results would be the worst on record
for the industry.
Net inflows
But despite the fall in its profit, BlackRock fared better than
many of its rivals in the last quarter. It saw $129.1 billion of
net new business, a 10% organic growth rate, in the period. Even
with a fall in asset values of $80.5 billion, assets under
management grew $48.6 billion.
By contrast, Franklin last week reported an 18% quarterly drop
in its assets under management, to $416 billion from $507
billion.
"The strength and potential of our platform is evident in our
2008 new business momentum, but our financial results were
significantly harmed by the sharp decline in markets," said Fink.
"Management fees, performance fees and non-operating income have
all suffered."
BlackRock reported that it saw net new business in 2008 of
$167.6 billion, a 12% organic growth rate. But that was offset by a
$217.1 billion decline in asset values due to market falls and the
decline of the dollar, it said.
BlackRock's profit for 2008 was $786 million, or $5.91 a share,
a fall of 21% from 2007 results. Adjusted net income for the year
was $858 million, or $6.45 a share, also a 21% fall from 2007.
The 2008 numbers included a $38 million charge associated with
costs incurred by a 9% cut in BlackRock staff.
"I am realistic about the fact that our industry and our
business are smaller solely by virtue of sharply lower asset
values," said Fink. But, he added, "I believe that industry
consolidation will accelerate and that BlackRock will have
meaningful strategic opportunities."
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.