The BlackRock logo is seen at the BlackRock Japan headquarters in Tokyo, Japan, October 20, 2016. REUTERS/Toru Hanai
BlackRock Inc , the world’s largest asset manager, on Friday reported a 6.5per cent drop in second-quarter profit, as investment advisory and securities lending revenue fell and costs rose.
REUTERS: BlackRock Inc , the world’s largest asset manager, took in less cash last quarter as investors moved into lower-cost bond funds, and it made less money lending out stocks.
The company, manager of US$6.8 trillion in assets, missed analysts’ estimates for quarterly sales and profits on Friday, despite attracting US$151 billion in new money, as much of that cash moved into lower-fee fixed income funds and accounts used to store cash.
The company’s revenue for the three months through June 30 fell 2.2per cent to US$3.52 billion from a year earlier, affected also by some fee cuts the company has made and lower fees for attaining performance targets.
The decline in fees for lending out stocks resulted from reduced demand by borrowers, typically hedge funds that want to “short” them, selling the stocks and hoping to buy them back later at a lower cost.
Investors did pour more money into BlackRock’s actively managed funds aimed at beating the market over the low-fee passive-investment products. The company also reported 20per cent growth in its business of licensing software and other technology to other financial companies.
Meanwhile, BlackRock said its iShares-branded ETFs took in US$36.10 billion of new money, up from US$30.69 billion in the preceding quarter.
While the revenue decline “reflected certain market headwinds, our second quarter results validate BlackRock’s unique ability to bring together the entire firm to meet clients’ needs in any market environment,” Chief Executive Larry Fink said in a statement.
Net income attributable to New York-based BlackRock fell to US$1 billion, or US$6.41 per share, from US$1.07 billion, or US$6.62 per share, a year earlier. The company cited expenses related to recent acquisitions and a higher effective tax rate. (https://bit.ly/2Ya6YZj)
Analysts had expected a profit of US$6.50 per share, according to IBES data from Refinitiv.
Total expenses rose nearly 4per cent to US$2.25 billion.
Shares of the company were up marginally before the opening bell.
(Reporting by Trevor Hunnicutt in New York, C Nivedita and Bharath Manjesh in Bengaluru; Editing by Maju and Steve Orlofsky)