BlackRock Profits Rise, Inflows Slow on Investor Uncertainty

Investment firm BlackRock Inc.’s earnings and revenue came out better than expected in the second quarter, although industry-wide slowdown in flows associated with investor uncertainty took a toll on its inflows.

Data released on Monday showed the world’s largest asset manager gained more than 25 percent from 2017’s $854 million to $1.07 billion in net income.

On a per-share basis, BlackRock’s earnings per share (EPS) were at $6.62, compared with $5.20 per share in the same quarter last year. Excluding items, BlackRock acquired $6.66 per share, surpassing analysts’ EPS forecast of $6.55.

Revenue came in 11 percent higher than the prior year’s $3.24 billion to $3.61 billion, which also beat expectations of $3.59 billion.

Base fees, performance fees, and technology services revenue became the drivers for BlackRock’s overall revenue, while lower corporate tax rate bolstered its profits in the second quarter.

The company’s effective tax rate was down 23.7 percent, compared to 30.4 percent in 2017.

Investor Uncertainty Hits BlackRock Inflows

BlackRock’s asset under management increased 11 percent year-on-year, although it failed to meet analysts’ estimates, as inflows hit the brakes on investor uncertainty.

With the asset-management industry absorbing the impact of a slowdown in flows, the New York-based firm net inflows totaled to $20 billion for the quarter, compared to the $100 billion it attracted in the fourth quarter in the previous year.  

BlackRock had to take on the sluggish demand for its exchange-traded funds (ETFs), its hottest product that follows markets, in the second quarter.

The company’s iShares-branded ETFs took in $17.8 billion in the second quarter, ending lower than the $34.6 billion registered in the first quarter. It also reduced fees on some ETFs to raise its market share.

Long-term inflows generated $14.5 billion, which was largely below expectations of $38 billion. Institutional investors had an outflow of $8.8 billion, while retail investors got $5.5 billion in long-term inflows.

Still, BlackRock Chief Executive Larry Fink stated that despite an industry-wide slowdown in flows associated with investor uncertainty in the current market environment, their dialogue with clients and opportunities to provide long-term solution are stronger than ever before.

Investors have grown more cautious lately, as the trade war between the US and China escalates, with Washington revealing last week a list of potential targets of the 10 percent tariff. The list amounted to $200 billion worth in Chinese goods.

The announcement came just days after the two countries levied tariffs on $34 billion worth of each other’s products.   

Fink added that they have seen markets like this before, and BlackRock’s product breadth, unparalleled portfolio construction capabilities, digital tools, and technology uniquely positions them to deliver long-term value to clients and shareholders.

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