BlackRock’s Earnings Sink but Inflows Surge in Second Quarter

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Investors poured money into BlackRock’s funds during the second quarter.

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Jeenah Moon/Bloomberg

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BlackRock BlackRock ‘s second-quarter earnings plunged 30% to $7.36 a share, hurt by high inflation, rising rates, and the worst start to the year for stocks and bonds in half a century. But despite the gloomy outlook for financial markets, investors continued to pour money into the company’s funds.

BlackRock (ticker: BLK) said total assets slid to $8.49 trillion, down 11% from $9.5 trillion a year earlier. But quarterly net inflows rose to $90 billion from $81 billion a year ago, a strong sign that the world’s largest investment management company is creating products that clients want and that investors have confidence in BlackRock’s strategies.

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In a statementBlackRock said the inflows reflect “continued strength of broad-based platform with positive flows across all product types and regions.”

Asset managers are facing brutal headwinds: Global stock indexes have fallen around 20% this year while bond indexes have fallen about 10%. At the same time, the US dollar is having a banner year. The exchange rate between the euro and the dollar this week hit parity, in which the two currencies were worth the same amount, for the first time in 20 years.

For the second quarter, adjusted profit fell to $1.12 billion, or $7.36 a share, from $1.61 billion, or $10.45 a share, a year earlier.

Revenue in the quarter slipped 6% to $4.53 billion.

Analysts, on average, had expected BlackRock to report earnings of $1.23 billion, or $7.87 a share, on revenue of $4.55 billion, according to FactSet.

“I cannot think of a time when BlackRock’s strategic focus has been more aligned with the needs of our clients than it is today,” CEO Larry Fink said in a statement.

“Over the course of BlackRock’s 34-year history, we have experienced numerous periods of volatility and uncertainty, and BlackRock has always come through stronger. It is during periods like these that we differentiate ourselves even more with clients and further deepen those relationships. I see more opportunities for BlackRock today than ever before, and remain confident in our ability to deliver long-term growth for our clients, shareholders and employees.”

In a note, Edward D. Jones analyst Kyle Sanders said revenue and earnings per share were soft compared with recent quarters, as expected, proving that even BlackRock is not immune to a market downturn.

Still, he added: “We were impressed with BlackRock’s ability to sustain robust asset inflows in choppy markets and we believe BlackRock’s inflow growth will once again far outpace the asset management industry this quarter. In our view, difficult markets highlight the resiliency of BlackRock’s business model and its ability to remain ahead of the pack in key high-growth categories.”

Fink has been a vocal supporter of the transition to net zero carbon emissions, an area that is attracting greater interest among investors. “BlackRock manages nearly 475 billion and dedicated sustainable AUM on behalf of our clients” and brought in $20 billion in net inflows across active, index ,and cash management in the quarter, he said.

There has been a lot of push back this year on environment, social, and governance, or ESG, investing. But Fink noted that sustainable investing “is now one of the fastest-growing segments of the asset management industry and one of the topics our clients are asking more questions than in any part of our business.” He added that “we are in the early days of this trend…there are a lot of questions.”

BlackRock is “focused on leveraging and creating better ESG data and analytics to help our clients better understand risks and opportunities in their portfolio, including those related to global transition to a low carbon economy,” Fink said.

He warned the energy transition won’t happen immediately or all at once. “It isn’t going to be a straight line,” Fink said. “It can only work if the energy transition is fair, and just to ensure the continuity of affordable energy during the transition, companies will need to invest in both fossil fuels like natural gas and renewable sources of energy. That is why we are working with energy companies throughout the world who are essential in meeting society’s energy needs and we will play a critical role in helping any successful transition.”

BlackRock’s stock has fallen more than 35% this year. In midmorning trading, shares were up 1.5% at $597.42.

Write to Lauren Foster at [email protected]

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Credit: www.marketwatch.com /

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