BlackRock profit slips but inflows rise amid Q4 market rebound

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By Davide Barbuscia and Mehnaz Yasmin

(Reuters) -BlackRock Inc reported an 18% drop in fourth-quarter profit on Friday, hit by a global market rout that squeezed fee income, but registered $146 billion of long-term net inflows in the quarter as stocks and bonds rebounded.

Financial markets were thrown into turmoil last year by a swift rise in interest rates and recession fears, hitting businesses such as BlackRock (NYSE:BLK), which makes most of its money from fees on investment advisory and administration services.

But stocks and bonds rallied in the fourth quarter on expectations of a slowdown in global central banks' monetary tightening actions as inflation started to ease.

"We ended the year with strong momentum, generating $114 billion of fourth-quarter net inflows, representing 3% annualized organic base fee growth, reflecting continued strength in ETFs and significant outsourcing mandates," Larry Fink, BlackRock chairman and chief executive, said in a statement.

The world's largest asset manager's adjusted earnings were $1.36 billion, or $8.93 per share, in the three months to Dec. 31, down from $1.65 billion, or $10.68 per share, a year earlier.

Analysts on average had expected a profit of $8.11 per share, based on IBES data from Refinitiv.

Assets under management (AUM) stood at $8.59 trillion at the end of the fourth quarter, down from a little more than $10 trillion a year earlier but up from $7.96 trillion in the third quarter.

Full-year revenue declined by 8% "primarily driven by the impact of significantly lower markets and dollar appreciation on average AUM and lower performance fees", BlackRock said.

The company registered $146 billion in long-term inflows in the fourth quarter, up from $65 billion in the previous quarter. Total net inflows amounted to $114 billion when accounting for outflows from cash management.

The majority of inflows was from fixed income products, with net flows into bond funds and exchange traded funds (ETFs) amounting to $115 billion in the quarter.

"We believe the strength in fixed income is just the beginning of a multi-year trend of money flowing back into bond products," said Kyle Sanders, senior equity research analyst at Edward Jones.

"Given the rise in interest rates during 2022, fixed income products are now offering investors the most attractive yields in over a decade," he said.

In the whole of 2022 BlackRock generated $393 billion in long-term net inflows.

BlackRock plans to cut 500 jobs after staff grew in recent years, a source familiar with the matter told Reuters this week. That is about 2.5% of its workforce.

The cuts come a month after Chief Financial Officer Gary Shedlin said the company was freezing most hiring and reducing expenses due to short-term performance challenges.

On Friday, BlackRock said it had registered a restructuring charge of $91 million in the fourth quarter which was related to "an initiative to modify the size and shape of the workforce to align more closely with strategic priorities."

Revenue from technology services, reflecting demand for the Aladdin investment management platform, increased $14 million year on year and $15 million when compared to the previous quarter, it said.