Legg Mason Reports Loss on Market Swings, One-Time Costs

  • Assets fell to $670 billion; down another $4 billion in April
  • CEO Sullivan says results demonstrate 'we can do better'

Legg Mason Inc. reported a fiscal fourth-quarter loss as market turbulence spurred client withdrawals and one-time costs eroded earnings. The shares fell the most in almost three months.

The loss for the period ended March 31 was $45.3 million, or 43 cents a share, the Baltimore-based money manager said in a statement today. Analysts expected a loss of 46 cents. Assets under management slid 4.7 percent to $670 billion from the year earlier and Chief Executive Officer Joseph A. Sullivan said investors pulled another $4 billion in April.

“We are not satisfied with these results, we can do better,” Sullivan said on a conference call today.

Asset managers have reported shrinking earnings for the first three months of 2016 after markets fell in January and February before bouncing back later in the quarter. BlackRock Inc., State Street Corp., Janus Capital Group Inc., Franklin Resources Inc. and Invesco Ltd. are among peers that missed analyst estimates in the volatile market.

Legg Mason fell 4.7 percent to $32.11 in New York, the biggest one-day drop since Feb. 2. The shares are down 18 percent this year, compared with a loss of 1.9 percent for the S&P Global Ratings index of asset managers and custody banks.

Investors pulled $8.2 billion from Legg Mason’s bond portfolios, $5 billion from stock funds and $3.3 billion from liquidity products in the quarter, the company said. Legg Mason boosted its quarterly dividend by 10 percent to 22 cents.

Under Sullivan, 58, Legg Mason has diversified into alternative investments such as real estate, hedge funds and infrastructure, seeking to supplement its fixed-income and equity management businesses.

One-time charges in the latest quarter included the acquisition of EnTrust Capital and its merger with in-house hedge fund Permal Group; an impairment charge related to management contracts at Permal; and a management equity plan at Legg Mason’s Royce & Associates unit, according to company presentations before the results were released.

Activist investor Trian Fund Management this month ended a six-year push to lift Legg Mason’s share price, agreeing to sell its 9.9 percent stake in the company to Shanda Group, according to a statement.

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