BlackRock to restructure after 'tough' first quarter

Thu Apr 14, 2016 3:31pm EDT
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By Trevor Hunnicutt and Sudarshan Varadhan

(Reuters) - BlackRock Inc (BLK.N: Quote) said on Thursday it will cut 400 jobs and take a $76 million restructuring charge after posting a 20 percent drop in first-quarter profit amid a dramatic reversal in financial markets.

The world's largest asset manager's investment performance stumbled and its net inflows, albeit still tens of billions of dollars last quarter, fell as U.S. markets marked a rough start to the year.

"We did have a tough quarter," BlackRock Chief Executive Officer Larry Fink told Reuters. U.S. stocks, corporate bonds and energy all fell sharply in the beginning of 2016 but regained their footing in February. "The entire industry had a tough quarter in active management and we were no different."

Investors took the disappointing earnings in stride, initially selling, then bidding up shares by 1.7 percent to $354.32 by midafternoon.

Fink attributed a portion of the earnings shortfall to lower fees collected on so-called "active" investments, including hedge funds and many mutual funds, in which managers study companies and financial markets, making bets on future performance.

The businesses produce higher profit margins than BlackRock's popular index-tracking funds, which took in $27.5 billion despite the stormy markets.

Net income fell to $657 million, or $3.92 per share, in the quarter, from $822 million, or $4.84 per share, a year earlier. Overall revenue of $2.6 billion was offset by expenses and taxes of nearly $2 billion.

With results adjusted to exclude the restructuring charges, BlackRock earned $4.25 per share, short of the average analyst estimate of $4.29, according to Thomson Reuters I/B/E/S.   Continued...

The BlackRock sign is pictured in the Manhattan borough of New York, in this October 11, 2015 file photo. REUTERS/Eduardo Munoz/Files