BlackRock assets fall below $8 billion, earnings outpace strong ETF demand

Oct 13 (Reuters) – BlackRock Inc (BLK.N) posted a smaller-than-expected decline in quarterly profit on Thursday as strong demand for exchange-traded funds and other low-risk products cushioned the impact of revenue commissions in a global market. rout, but its assets under management fell short of expectations.

The threat of a recession, soaring interest rates and the Ukraine crisis have hit both bonds and equities this year, keeping investors on the back foot against companies such as BlackRock. Global market uncertainty has increased in recent weeks as the UK Government’s fiscal plans have thrown UK markets into chaos; BlackRock customers have significant exposure in the retirement vehicles at the center of the drama.

The company’s assets under management (AUM) fell to $7.96 trillion in the third quarter, down 16% year-on-year as the stronger dollar reduced the value of investments in Europe and the United States. Asia.

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“The speed with which central banks are raising rates to contain inflation alongside slowing economic growth is creating extraordinary uncertainty, heightened volatility and lower levels of market liquidity,” said BlackRock’s chief executive, Larry Fink, during a conference call.

The world’s largest asset manager, which makes most of its money from fees charged for investment advisory and administration services, posted a 16% drop in adjusted profit to $9.55 per month. stock.

That beat analysts’ expectations of $7.07 per share, according to IBES data from Refinitiv.

Shares of the company, down 42% so far this year, fell on Thursday, hitting a nearly 2.5-year low amid broader market weakness after a lofty US inflation reading .

Assets under management fell below analysts’ expectations, falling to around $8.5 trillion at the end of the second quarter. “Given the lower-than-expected AUM result, this sets the bar lower for revenue generation in the fourth quarter,” said Edward Jones analyst Kyle Sanders.

Overall net inflows were positive in the quarter, with long-term net inflows of $65 billion, as ETF momentum offset retail client outflows of around $5 billion. Since the beginning of the year, admissions amounted to 248 billion dollars.

“We expect revenue to decline 6% to 8% in 2022 in weak market conditions, but note that long-term asset inflows remain positive,” said Cathy Seifert, vice president of CFRA Research, in a rating. The CFRA maintains a “strong buy” view on BlackRock shares.

Net inflows into ETFs were around $22 billion in the quarter, boosted by $37 billion of inflows into bond ETFs.

BlackRock Chairman Robert Kapito said the company is helping clients adjust portfolios in light of higher fixed income yields. “We saw $37 billion of net inflows into bond ETFs, which is the second best quarter we’ve had in history…I think we’re going to see dramatic and large inflows into fixed income. over the next year as interest rates rise,” he said.

BlackRock’s third-quarter revenue fell 15% to $4.31 billion. Net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier .

The benchmark S&P 500 index (.SPX) has lost nearly 25% so far this year, with analysts expecting more pain as the US Federal Reserve remains aggressive.

BlackRock plans to suspend discretionary hiring plans for the rest of the year as a recovery in market conditions could take longer than in previous economic downturns.

“While we continue to have a deep belief in our strategy and the long-term growth of global financial markets, we have begun to manage the pace of certain discretionary spending more aggressively,” Chief Financial Officer Gary Shedlin said.

BlackRock is a leading provider of liability-driven investment (LDI) strategies for UK pension schemes, which are rushing to sell assets – including UK government bonds or gilts – to raise funds and consolidate derivative positions before the Bank of England calls time. support to keep them afloat.

Fink said BlackRock has around 20% of the UK LDI market, or around $250 billion. On Wednesday, he said he had private conversations with the government there.

“As of this morning, the gilt market was flat, so it looks like a lot of the rebuilding of these commodities could have been done and the market should be a bit more normalized,” Fink said Thursday.

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Reporting by Manya Saini in Bengaluru and Davide Barbuscia in New York; Editing by Devika Syamnath, Megan Davies, Mark Potter and David Gregorio

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