Bloomberg News

Invesco Profit Rises 15% on Deposits, Litigation Settlement

January 26, 2012

(Updates shares in fifth paragraph.)

Jan. 26 (Bloomberg) -- Invesco Ltd., owner of the Invesco, Van Kampen and PowerShares funds, said fourth-quarter profit rose 15 percent as investor deposits lifted assets under management and the company benefited from a legal settlement.

Net income increased to $202.3 million, or 44 cents a share, from $175.2 million, or 37 cents, a year earlier, Atlanta-based Invesco said in a statement today. Excluding some items, 19 analysts surveyed by Bloomberg estimated earnings of 40 cents a share on average.

“Earnings really highlight the importance of having a diversified asset-management base to the extent that they can offset weaknesses in one part of the business with another part of the business,” Shannon Stemm, an analyst at Edward Jones & Co. in St. Louis, said in a telephone interview.

Invesco, led by Chief Executive Officer Martin L. Flanagan, has aimed to improve sales to individual investors since adding $115 billion in assets through its purchase of Morgan Stanley’s fund business in June 2010. The $1.37 billion deal included a distribution agreement with broker-dealer Morgan Stanley Smith Barney LLC.

Invesco rose 2.7 percent to $22.78 at 4:00 p.m. in New York trading. The stock declined 4.2 percent in the past 12 months, compared with an 18 percent drop by Standard & Poor’s 20-company index for asset managers and custody banks. The firm repurchased 5.3 million shares, valued at $105 million, in the fourth quarter, according to the statement.

Deutsche Lawsuit

Revenue declined 3.1 percent to $997 million as investment management fees dropped 3.4 percent to $748 million. Operating expenses declined 5.3 percent to $786 million.

Invesco’s earnings benefited by $45 million, or about 5.4 cents a share, from the settlement of litigation connected to the 2007 departure of investment professionals to a competitor, according to the statement. Invesco sued Deutsche Bank AG’s U.S. investment unit in 2007, saying it improperly hired four of Invesco’s six senior members of its fixed-income investment unit.

Excluding that benefit and certain other items, Invesco said it earned 42 cents a share.

The amount of money Invesco manages for clients rose 1.4 percent to $625 billion as of Dec. 31 from a year earlier, even as the MSCI ACWI Index of global stocks fell 9.4 percent and the Standard & Poor’s 500 Index of U.S. equities was almost unchanged. Clients added $6 billion in net new money during the quarter.

‘Risk Averse’

Chief Financial Officer Loren M. Starr said customers put money into exchange-traded funds, bond funds and asset- allocation products, while withdrawing from active stock investments. The $3.8 billion Invesco Balanced-Risk Allocation Fund has attracted deposits of about $400 million a month, he said.

“Investors are continuing to be a little risk averse, moving out of equities and into fixed-income and asset allocation,” he said.

BlackRock Inc., the world’s largest money manager, said Jan. 19 that fourth-quarter net income fell 16 percent to $555 million and the firm cut 3.4 percent of its workforce.

--With assistance from Steven Crabill in New York. Editors: Steven Crabill, Sree Vidya Bhaktavatsalam

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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