T. Rowe Price Group Inc. (TROW:US), the asset manager that has posted a profit every quarter since going public in 1986, said third-quarter earnings rose 33 percent, beating analysts’ estimates, as global stock markets rallied and investors made net deposits.
Net income (TROW:US) increased to $245.7 million, or 94 cents a share, from $184.6 million, or 71 cents, a year earlier, the Baltimore-based company said today in a statement. The average estimate of 12 analysts surveyed (TROW:US) by Bloomberg was a profit of 84 cents a share. Earnings were also boosted by 7 cents a share from the sale of investments in sponsored mutual funds.
“The key is the market is up for the quarter, it’s up for the year, our cash flows are positive and our performance continues to be very good,” Chief Executive Officer James Kennedy said in a telephone interview today.
The company has benefited as investment performance at funds beat rivals and retirement-oriented offerings drew investors. Clients added $4.3 billion in new money to T. Rowe Price funds in the three months ended Sept. 30, including $2.2 billion in target-date retirement portfolios. Assets rose 6 percent to $574.4 billion during the quarter as market appreciation added $28.4 billion.
T. Rowe Price fell 0.8 percent to close at $64.16 in New York. The shares (TROW:US) have gained 13 percent this year, compared with the 18 percent increase for Standard & Poor’s 20-company index of asset managers and custody banks.
The S&P 500 Index, a benchmark for U.S. stocks, gained 5.8 percent last quarter and global stocks, as measured by the MSCI AC World Index, rose 6.2 percent.
T. Rowe Price has gathered deposits even as investors withdrew $82.6 billion from U.S. funds that buy domestic stocks this year through September, data compiled by Morningstar Inc. (MORN:US) show.
BlackRock Inc. (BLK:US), the world’s largest asset manager, said clients redeemed a net $55 billion in the third quarter, despite deposits of $20.5 billion into equity exchange-traded funds. BlackRock said a single institutional investor pulled more than $72 billion from a fixed-income portfolio, after the firm didn’t want to rebid for the business at lower fees. Assets rose 3.2 percent during the three months to $3.67 trillion, the company said last week, fueled by market gains of $134 billion.
At T. Rowe, 72 percent of the firm’s mutual funds beat the average return of their peers in this year’s first nine months, according to data compiled by Chicago-based Morningstar. About three quarters of T. Rowe’s assets are invested in equities.
Investors deposited $4.5 billion into T. Rowe Price’s mutual funds, including $2.2 billion into stock and blended asset funds and $2.1 billion into bond funds.
The firm’s revenue rose 13 percent compared with a year earlier to $769.7 million. Operating expenses increased 7 percent to $410.8 million because of increased compensation costs. T. Rowe Price has increased its average staff size by 1.4 percent from a year earlier and will continue to hire, Kennedy said.
The sale of investments generated a $31.2 million gain for T. Rowe Price and resulted from the firm moving about $170 million in its U.S. equity and bond portfolios to two of its European investment vehicles, Kennedy said. The firm, which shifted the money to increase assets in the European portfolios and attract more investors, is close to getting an “attractive mandate,” he said.
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