BlackRock Profit and Revenue Misses, Assets Drop

US financial giant BlackRock Inc. was unable to meet analysts’ expectations on Wednesday, after quarterly profit and revenue at the world’s largest asset manager fell short as market volatility late last year hits its asset base.

Investors pulled out $34.6 billion from the firm’s more actively traded and higher cost institutional equity index accounts and focused more on low-risk, low-cost exchange traded funds.

In the quarter ended December 31, BlackRock’s earnings dropped to $927 million or $5.78 per share, shedding nearly 60 percent from $2.30 billion or $14.01 per share generated in 2018, when it received a one-time boost from changes in the US tax law.

On an adjusted basis, earnings per share (EPS) were $6.08, missing analysts’ average EPS estimate of $6.27. The company‘s adjusted reported bottom line represents 2 percent fall from last year’s period.

Sales at the New York-based company totaled $3.434 billion, also falling short of analysts’ expectations of $3.516 billion and dropping 9 percent from the same quarter in 2017.

Revenue from its advisory, administration, and lending division shed $118 million over the past year to $2.8 billion.

BlackRock also reported record quarterly inflows of $81 billion in its iShares business as the exchange-traded fund business continues to grow. Net inflows in the fourth quarter reached $50 billion, while full-year inflows totaled $124 billion.

In the reported quarter, BlackRock also took a $60 million charge related to jobs cuts in 2018. Approximately 500 employees or 3 percent of its global workforce are due to be dismissed in the coming weeks.

BlackRock President Rob Kapito stated that the layoffs are part of a company-wide effort to reallocate resources to their most critical growth companies.

Market Downturn Drags Assets Below $6 Trillion

BlackRock’s closely-monitored assets under management reached $5.98 trillion in the fourth quarter, slipping 5 percent in the past twelve months and shrinking 7 percent from the previous quarter.

However, since the end of the quarter the company’s assets under management had returned above $6 trillion, according to BlackRock Chief Executive Larry Fink.

Fink said they had about 5 percent decay in their asset base, not because of outflow, but because the market fell.

Market downturn towards the end of 2018 urged investors to pull out $34.6 billion from the firm’s more actively traded and higher cost institutional equity index accounts and focused more on low-risk, low-cost exchange traded funds.

Fink added that they all know the fourth quarter was a pretty severe down graph in the equity markets and that reflects in their net asset value, but they had organic growth unlike the majority of the industry.

Shares of BlackRock gained 4.3 percent to $418.01 on Wednesday following the earnings report.

The asset manager returned $3.6 billion to shareholders in 2018, including $1.7 billion of full year share repurchases, but the firm’s stock still plummeted 6.1 percent in the last three months and 27.8 percent in the last twelve months.

Shares of BlackRock tumbled by about 23 percent in prior year, under performing the bigger market. The S&P 500 lost 6.23 percent in 2018.

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