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BlackRock Beats Expectations with Strong Profit Growth
BlackRock, the world’s largest asset manager, exceeded expectations by reporting a 13% increase in profits compared to the previous year. However, volatile markets led to a decline in assets under management and the company’s first quarterly net long-term outflows since the early days of the Covid-19 pandemic.
The impressive profit growth of BlackRock was driven by the faster-than-expected growth of its Aladdin risk management platform and other technology. The company achieved a revenue of $4.5bn and adjusted earnings of $10.91 per share.
The outflows were primarily caused by a single overseas institutional client redeeming $19bn from its index funds. On the other hand, money continued to flow into exchange-traded funds, resulting in net long-term outflows of $13bn from the end of June. However, cautious investors still increased their investments in cash. Consequently, the overall flows remained mildly positive at $2.57bn.
Despite the soft flow numbers, BlackRock’s CEO Larry Fink expressed his disappointment while remaining optimistic about the future. He emphasized the group’s positioning to capture the money in motion and highlighted the accelerating trend of clients consolidating their portfolios with BlackRock. Fink further assured that the underlying business momentum remains strong.
Although BlackRock’s assets under management fell to $9.1tn in the quarter, they were still higher on a YoY basis.
The company’s shares closed 1.3% lower on Friday, resulting in a decline of more than 15% since late July.
Analysts polled by Bloomberg had anticipated net long-term inflows of $50bn and net income of $1.2bn for the quarter, making BlackRock’s performance comparatively better than its competitors. However, Kyle Saunders at Edward Jones calculated that the quarterly long-term flows were at their lowest level since the beginning of the pandemic.
Despite this, Saunders remained bullish on the stock, confident that investors would return in larger numbers soon. He stated that with considerable amounts of money sitting in money market funds, it is only a matter of time.
According to data from the Investment Company Institute, assets in US money market funds remain near all-time highs of $5.7tn.
Daniel Fannon, an analyst at Jefferies, described the results as “modestly worse” and attributed much of the unexpectedly high earnings to a lower tax rate.
Fink reiterated his enthusiasm for pursuing another “transformational” deal to capitalize on ecosystem changes. He identified opportunities in private markets and technology, stressing the company’s focus on adding value in terms of revenues, client technology, and reach.
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