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Invesco Misses Estimates as Net Income Rises 87% on Takeover

Invesco Ltd. (IVZ), owner of the Invesco, Van Kampen and PowerShares funds, fell short of analysts’ estimates after first-quarter profit increased 87 percent, helped by the purchase of Morgan Stanley’s mutual-funds business in June.

Net income rose to $177.5 million, or 38 cents a share, from $95 million, or 21 cents, a year earlier, Atlanta-based Invesco said in a statement today. Excluding some items, earnings of 41 cents a share missed the 42-cent average estimate of 16 analysts surveyed by Bloomberg.

“They continue to have underwhelming equity flows,” Doug Sipkin, an analyst in New York for Ticonderoga Securities LLC, said in a telephone interview. Sipkin expected earnings of 42 cents a share.

Investors withdrew $2.8 billion from equity products in the quarter even as the company reported $6.6 billion in net deposits. Invesco’s Chief Executive Officer Martin L. Flanagan, 50, has made growth in Europe a priority for 2011 after raising assets by $115 billion with the Morgan Stanley (MS) funds takeover.

The company fell as much as 3.5 percent in New York Stock Exchange composite trading. It was down 3 cents, to $24.82, at 4:02 p.m.

Invesco raised its quarterly dividend to 12.25 cents a share from 11 cents, and said it repurchased 2.1 million shares for $53.1 million in the first quarter.

‘Retail Coming Back’

Assets under management rose 4.1 percent to $642 billion in the three months ended March 31. The MSCI AC World Index of stocks has increased 6.7 percent this year. The $1.37 billion deal with Morgan Stanley, which included its Van Kampen unit, helped push assets up 53 percent from a year earlier.

Almost half of new investments came from U.S. retail customers, Chief Financial Officer Loren Starr said in a telephone interview.

“The U.S. retail piece is definitely coming back and now we feel we have an equal opportunity in Europe,” Starr said.

Flanagan wants to expand the European business by increasing cross-border retail and institutional sales, he said in an e-mail yesterday. Invesco owns Perpetual, the largest U.K. money manager, and has operations in 12 European countries.

Distribution Fees

Revenue increased 43 percent from a year earlier to $1.03 billion, and expenses rose 38 percent to $802 million. While investment management fees were in line with expectations, distribution-related expenses and fees were off by $16 million, reducing earnings by more than 2 cents a share, according to a research note today by Daniel Fannon, a San Francisco-based analyst at Jefferies & Co. Fannon expected earnings of 43 cents a share.

BlackRock Inc. (BLK), based in New York and the world’s largest money manager, said April 21 that first-quarter net income rose 34 percent to $568 million, or $2.89 a share. Baltimore’s T. Rowe Price Group Inc. said the same day that net income increased 27 percent to $194.6 million, or 72 cents a share.

Invesco’s shares have risen 20 percent in the past year, compared with the 7.4 percent gain for the Standard & Poor’s 17- company index for asset managers and custody banks.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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