BlackRock gets a lift from cost-cutting, market rally

Investment manager BlackRock Inc. said Tuesday its third-quarter profit jumped 46 percent on gains from cost-cutting and a market rally that whetted investors' appetites for higher-risk investments.

Investment manager BlackRock Inc. said Tuesday its third-quarter profit jumped 46 percent on gains from cost-cutting and a market rally that whetted investors’ appetites for higher-risk investments.
New York-based BlackRock reported net income of $317 million, or $2.27 per share, up from a profit of $217 million, or $1.59 per share, in the year-ago period.
The latest quarter’s profit was boosted by a one-time benefit of 33 cents per share from changes in local income tax law. Excluding that gain and other one-time items, BlackRock’s adjusted profit was $293 million, or $2.10 per share.
On that basis, the performance beat the expectations of analysts surveyed by Thomson Reuters, who expected a profit of $1.93 per share, on average.
Shares of BlackRock rose $5.61, or 2.4 percent, to $236.04 in midday trading.
Revenue fell 13 percent to $1.14 billion from $1.31 billion in the year-ago period. Analysts predicted $1.12 billion. BlackRock’s main revenue source, fees from investment advisory and administration, fell 16 percent as last year’s market plunge reduced the value of investments while also eroding the fees BlackRock brings in.
But the revenue decline was offset by a 9 percent reduction in operating expenses, to $783 million, in part due to job cuts and reduced spending on marketing.
The seven-month market rally that began in March improved BlackRock’s bottom line as clients shifted away from safe-harbor investments like money-market funds that earn assets managers relatively small amounts in fees. Increasingly, investors have been moving into bonds and stocks, boosting investment managers’ profit margins.
“Improving investor sentiment was the most important factor in third quarter results,” said Laurence Fink,BlackRock’s chairman and CEO.
The market rally helped drive a 14 percent increase in BlackRock’s assets under management, which stood at $1.43 trillion as of Sept. 30, compared with $1.26 trillion a year earlier.
BlackRock is expected to become the world’s largest asset manager when it completes its planned $13.5 billion acquisition of Barclays Global Investors, the asset management arm of British bank Barclays, including BGI’s iShares exchange-traded fund business.
BlackRock, which announced the deal in June, said Tuesday it expects to complete the transaction on Dec. 1.