By Sree Vidya Bhaktavatsalam - Jul 21, 2010
BlackRock Inc. said second-quarter profit rose 98 percent as the acquisition of Barclays Global Investors boosted assets and fees.
Net income rose to $432 million, or $2.21 a share, from $218 million, or $1.59 a share, a year earlier, the New York- based firm said today in a statement. Excluding certain items, earnings of $2.37 a share beat the $2.30 estimate of 11 analysts surveyed by Bloomberg.
The $15.2 billion acquisition of BGI on Dec. 1 added the biggest lineup of exchange-traded funds and more than doubled assets under management to $3.15 trillion. Chief Executive Officer Laurence D. Fink, who built BlackRock from a fixed- income firm into the world’s largest asset manager, is trying to convince shareholders that the firm can use its size to attract more clients, after the stock fell the most among the largest U.S. firms this year.
“Where we are seeing recovery in flows is in passive funds and fixed-income,” Jeffrey Hopson, an analyst with Stifel Nicolaus & Co. Inc. in St. Louis, Missouri, said in an interview before the results were announced. Hopson expected BlackRock to earn $2.40 a share, excluding certain one-time items.
BlackRock’s 36 percent decline in New York Stock Exchange composite trading this year makes it the worst performer in the 202-member Russell 1000 Financial Service Index, which is down 1.4 percent. The stock surged 73 percent in 2009, four times the rate of index, helped by news of the BGI purchase.
Consolidating Accounts
After the acquisition, some investors who had invested with BlackRock and BGI withdrew money as they consolidated their accounts and reassessed their portfolios. BlackRock’s long-term funds attracted a net $8.9 billion new client money in the three months ended March 31, down from $41.8 billion during the prior quarter.
Investors in the U.S. have deposited about $50 billion into stock and bond mutual funds in the quarter ending June 30, with most of that going into fixed-income funds, preliminary data from the Investment Company Institute in Washington show. Exchange-traded funds pulled in $30.5 billion during the quarter, according to Morningstar Inc. in Chicago.
BlackRock, co-founded in 1988 by Fink, began as a fixed- income firm and has expanded through a series of acquisitions. In 2005, BlackRock bought State Street Research & Management to add more stock, real estate and hedge funds. In 2006, it expanded its equity business with the purchase of Merrill Lynch & Co.’s money-management unit. In 2008, BlackRock acquired a division of Quellos Group LLC to add hedge-fund assets. The $15.2 billion purchase of BGI, the biggest seller of index- tracking ETFs, was its largest takeover.
The firm now has about 12 percent of its assets in mutual funds aimed at individuals, 15 percent in ETFs and the majority in institutional products.
To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.
From Bloomberg published on Jul 21, 2010
