BlackRock Q3 Profit Rises 46% - Update

(RTTNews) - Tuesday, Investment management firm BlackRock, Inc. (BLK | Quote | Chart | News | PowerRating), reported a 46% rise in profit for the third quarter, reflecting a one-time tax related benefit, lower expenses and increased risk appetite among clients, even as revenues dropped 13% stemming from a drop in fees associated with a market driven reduction in average assets under management.

For the third quarter, net income attributable to BlackRock rose 46% to $317 million from $217 million in the prior-year quarter. On a per-share basis, earnings climbed 43% to $2.27 per share from $1.59 per share in the year-ago quarter.

Results for the quarter include a $0.33 one-time benefit related to local income tax law changes, and a $3 million benefit from balance sheet related foreign exchange re-measurement.

Excluding items, net income attributable to BlackRock increased 28% to $293 million from $229 million in the year-ago quarter. On a per share basis adjusted earnings rose 26% to $2.10 per share from $1.67 per share last year.

Adjusted net income for the quarter included operating income of $1.86 per share, and non-operating income of $0.24 per share.

On average, ten analysts polled by Thomson Reuters expected the company to earn $1.93 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.

In the preceding second quarter, BlackRock reported a 20% decline in net income, hurt by a 26% drop in revenues. The company had reported second quarter net income attributable to the company of $218 million, down from $274 million in the year-ago quarter. On a per share basis, earnings for the second quarter decreased 21% to $1.59 per share from $42 per share in the year-earlier quarter.

Revenues for the third quarter under review dropped 13% to $1.14 billion from $1.31 billion in the year-earlier quarter, yet topping analysts consensus estimate of $1.13 billion for the quarter.

For the sequentially preceding quarter, revenues slid 26% to $1.03 billion from $1.39 billion in the previous-year first quarter.

Laurence Fink, chairman and chief executive officer, BlackRock said, "Improving investor sentiment was the most important factor in third quarter results. Clients are putting money back to work in the markets, driving inflows in equities and bonds, and outflows in money market funds industry-wide. This shift drove the rally in global stocks and tighter credit spreads, as well as a favorable revenue mix in net new business."

Investment advisory and administration base fees for the third quarter decreased 16% to $913 million from $1.08 billion in the corresponding quarter last year, primarily associated with a market driven reduction in average assets under management, or AUM. Performance fees were $49 million, down 11% from $55 million in the previous-year quarter. BlackRock Solutions and advisory revenue, however, increased 12% to $127 million from $113 million in the year-ago quarter.

Operating income for the quarter slipped 21% to $357 million from $454 million in the year-earlier quarter, while adjusted operating income was $400 million, down 7% from $432 million in the prior-year quarter. Operating margin for the quarter contracted to 31.3% from 34.6%, while operating margin, as adjusted expanded 4% to 40.1% from 38.4% in the year-ago quarter.

At September 30, 2009, BlackRock's assets under management were $1.434 trillion, up 14% from $1.258 trillion as at September 30, 2008. Net new business for the quarter totaled $14.5 billion, net outflows in cash management were $26.4 billion and distributions from advisory accounts totaled $4.6 billion.

For the nine-month period, net income attributable to BlackRock declined 15% to $619 million from $732 million last year. On a per share basis, earnings dropped 16% to $4.50 per share from $5.36 per share in the year-ago period. Excluding items, net income attributable to BlackRock decreased to $642 million or $4.66 per share from $766 million or $5.61 per share in the same period last year.

Revenues for the nine months slid 21% to $3.15 billion from $4 billion in the same period last year.

Amongst others in the sector, Baltimore, Maryland-based asset management firm Legg Mason Inc.(LM | Quote | Chart | News | PowerRating), is slated to release its third quarter results on Thursday, October 22. On average, 14 analysts currently estimate the company to earn $0.20 for the quarter.

BlackRock also indicated that its offer to acquire Barclays Global Investors remains on target for a December 1, 2009 closing, and would diversify and further expand its mix of products, clients and geographic presence The cash and stock transaction will create the world's largest asset management firm with combined assets under management of over $2.7 trillion, once it completes the $13.5 billion deal.

BLK is currently trading at $237.02, up $6.59 or 2.86%, on a volume of 0.14 million shares on the NYSE. In the past 52 weeks, the stock trended in a broad range of $88.91 - $239.56, with a three-month average volume of 0.41 million shares.

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