BlackRock Profit Falls 20% as Market Volatility Curbs Fees

BlackRock Earnings Dragged Down by Job Cuts Charge
  • Adjusted earnings per share missed Wall Street estimates
  • Earnings were dragged down by $76 million charge for job cuts

BlackRock Inc., the world’s largest money manager, said first-quarter profit fell 20 percent as a global stock-market slump early in the year crimped revenue and the firm cut jobs.

Net income decreased to $657 million, or $3.92 a share, from $822 million, or $4.84, a year earlier, the company said Thursday. Adjusted earnings of $4.25 a share missed the $4.30 average estimate by 18 analysts surveyed by Bloomberg.

BlackRock booked a restructuring charge of $76 million as Chief Executive Officer Laurence D. Fink undertakes the biggest round of layoffs in the firm’s history. About 400 jobs, or 3 percent of the workforce, are being cut, people with knowledge of the matter said in late March. Despite the market swings, BlackRock saw $36.1 billion of long-term net inflows, mostly into its exchange-traded funds.

“While we of course were not immune to the effects of market movements, which impacted both base fees and performance fees this quarter, the magnitude and diversification of our inflows speak to the differentiation of BlackRock’s platform and our ability to serve our clients,” Fink said in the statement.

BlackRock shares rose 1.6 percent to $354 at 11:40 a.m. They have dropped 5.8 percent in the past year through Wednesday, compared with a 15 percent decline for Standard & Poor’s 19-company index of asset managers and custody banks.

Fink said in January that market swings at the start of the year may pressure companies to eliminate jobs. Global stocks, as measured by the MSCI ACWI Index, fell almost 12 percent this year through Feb. 11, before paring losses to about 0.3 percent at the end of March.

Revenue Falls

Fink said during an earnings call that his firm is positioned to benefit from tailwinds in the second quarter.

Revenue declined 3.6 percent to $2.62 billion in the quarter compared to the prior year. Expenses rose 0.3 percent to $1.66 billion, reflecting the restructuring charge. Compensation, distribution and administrative costs fell.

Assets under management increased to $4.74 trillion from $4.65 trillion in the fourth quarter. The firm’s iShares ETF business reported more than $24 billion in net inflows during the quarter, driven by more than $27 billion into fixed income.

Smart Beta

Fink has been expanding offerings including ETFs and seeking to improve performance of actively managed funds, which typically command higher fees than index products. The firm views fixed-income ETFs and smart-beta funds, which are built around factors such as low volatility and momentum, as top priorities.

"We believe the utilization of fixed-income ETFs are going to be larger in the coming years," said Fink during the call.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE