BlackRock falls short of expectations due to low pound and wary investors

 
Billy Bambrough
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BlackRock chief executive Larry Fink, pictured shortly after dropping the hottest rap album of the year
BlackRock chief executive Larry Fink, pictured shortly after dropping the hottest rap album of the year (Source: Getty)

The world’s largest asset manager BlackRock has missed expectations in its second quarter.

Revenue is down three per cent to $2.8bn (£2bn), net income declined four per cent to $789m, while assets under management also fell four per cent on last year to $4.89 trillion.

BlackRock’s adjusted earnings per share for the quarter were $4.78, falling short of an analyst consensus of $4.81.

The New York based firm laid blame for the poor performance upon global economic and political uncertainty that caused investors to leave their cash in the bank rather than put it to work on the markets. A weaker pound for a company that makes 10 per cent of its earnings in the UK was also not helpful.

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BlackRock boss Larry Fink said in a statement:

Political and macroeconomic uncertainty, historically low yields and elevated market volatility are leading clients to pause, as evidenced by more than $55 trillion in bank deposits in the US, China and Japan alone.

Base fees fell by two per cent over the course of the year, as more investors shifted money out of stocks and into fixed income and cash.

However, fixed-income net inflows pushed iShares long-term inflows up from the $10.9bn last year to $15.7bn in the second quarter.

Shares in BlackRock were flat in the pre-market following the results announcement. Its stock is up 17 per cent in the last six months.

Fink added:

We are seeing increasing evidence that our recent strategic investments are driving growth. iShares generated $16bn of net new business during the quarter, with significant strength in fixed income and ‘smart-beta’ ETFs, as clients utilise these tools to manage risk and minimise volatility.

We saw another strong quarter of capital raising in infrastructure, bringing total invested and committed capital to $8bn, providing clients access to attractive long-term returns and stimulating needed economic growth.

Finally, Aladdin revenue grew 13 per cent year-over-year. The increasing impact of technology on our industry continues to drive demand, as we signed one of our largest ever institutional clients during the quarter, and we remain focused on meeting the growing need for technology solutions in the retail sector.

In the first quarter BlackRock posted adjusted earnings per share of $4.25 – also falling short of estimates –due to the global market volatility that struck in the first few months of the year.

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In March BlackRock revealed plans to cut 400 jobs within weeks in the firm's biggest layoff to date.

The reductions at the money managing firm would be equal to around three per cent of the firm's total workforce of 13,000 employees.

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